International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Tuesday, June 19, 2018

Texas A&M University Law Announces New Dean Robert (“Bobby”) Ahdieh

Sent on behalf of Michael K. Young, president, and Carol A. Fierke, provost & executive vice president

Upon the recommendation of the Search Advisory Committee and with the approval of the Chancellor and the Board of Regents of The Texas A&M University System, we are pleased Ahdieh-squareto announce the appointment of Robert (“Bobby”) Ahdieh as the next dean of the Texas A&M University School of Law and holder of the Anthony G. Buzbee Endowed Dean’s Chair, beginning on July 15.

Currently, Professor Ahdieh is the K.H. Gyr Professor of Private International Law and Director of the Center on Federalism and Intersystemic Governance at Emory University School of Law in Atlanta, Georgia. He holds a Bachelor of Arts degree from Princeton University’s Woodrow Wilson School of Public & International Affairs and a Juris Doctor degree from Yale Law School. He served as law clerk to Judge James R. Browning of the U.S. Court of Appeals for the Ninth Circuit before his selection for the Attorney General’s Honors Program of the Civil Division of the U.S. Department of Justice.

Professor Ahdieh’s scholarly interests revolve around questions of regulatory and institutional design, especially in the business and financial arena. In addition to a monograph on legal transition in the former Soviet Union, published while he was still in law school, Professor Ahdieh’s work has appeared in leading journals, including the NYU Law Review, the Michigan Law Review, the Minnesota Law Review, the Boston University Law Review, and the Southern California Law Review.

Professor Ahdieh also brings significant administrative experience to his new position, having served as Vice Dean and Associate Dean of Faculty at Emory for seven years. In those positions, his responsibilities variously extended to admissions, alumni relations and development, career development, curriculum design, faculty appointments and development, finance and administration, interdisciplinary initiatives, marketing and communications, non-J.D. programs, strategic and international initiatives, student affairs, and student records.

His appointment signals the next era in the evolution of the Texas A&M University School of Law, building on the successful transition of the last five years. Since joining Texas A&M in 2013, the School of Law has increased its entering class profile; hired a cohort of nationally recognized scholars, who have subsequently built on research strengths of existing faculty; and enhanced its academic programs – allowing it to offer an incredibly rich educational experience to its students and achieve national recognition.

We wish to thank the members of the search advisory committee chaired by Dean Mark Welsh, the faculty, staff, and students of the Texas A&M School of Law, and the outstanding candidates whom we were able to attract. 

Finally, we would especially like to thank Professor Thomas W. Mitchell for his service as interim dean over the last year. Through his leadership and diligence, he has helped continue the law school’s transition during a period of impressive growth and development.

Please join us in welcoming Professor Ahdieh to Texas A&M University.

June 19, 2018 in Academia | Permalink | Comments (0)

Treasury Sanctions Fourteen Entities Affiliated with Corrupt Businessman Dan Gertler Under Global Magnitsky

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned 14 entities pursuant to Executive Order (E.O.) 13818, which targets serious human rights abuse and corruption, for being affiliated with designated Israeli businessman and billionaire Dan Gertler.  As previously noted in the December 2017 action, Gertler is an international businessman and billionaire who has amassed his fortune through hundreds of millions of dollars’ worth of opaque and corrupt mining and oil deals in the Democratic Republic of the Congo (DRC).  Gertler has used his close friendship with DRC President Joseph Kabila to act as a middleman for mining asset sales in the DRC, requiring some multinational companies to go through Gertler to do business with the Congolese state.  Gertler and his company Fleurette Properties have used offshore companies to facilitate such deals.  As a result, between 2010 and 2012 alone, the DRC reportedly lost over $1.36 billion in revenues from the underpricing of mining assets that were sold to offshore companies linked to Gertler.  In late December, the President included Gertler in the Annex to E.O. 13818, while OFAC simultaneously designated 19 companies and one associate for their ties to him.  With today’s action, the number of sanctioned entities and individuals in Gertler’s network now totals 34.

“Treasury is sanctioning companies that have enabled Dan Gertler to access the international financial system and profit from corruption and misconduct. We are using our tools to change the behavior of those engaged in the looting of natural resources and the humanitarian consequences that follow,” said Sigal Mandelker, Under Secretary of the Treasury for Terrorism and Financial Intelligence. “A financial toll will be imposed on individuals and companies that exploit innocent people and vulnerable jurisdictions for their own personal gain.”


Building upon the Global Magnitsky Human Rights Accountability Act, in E.O. 13818 the President found that the prevalence of human rights abuse and corruption had reached such scope and gravity to threaten the stability of international political and economic systems.  The United States seeks to impose tangible and significant consequences on those who commit serious human rights abuse and corruption, which undermine the values that form an essential foundation of stable, secure, and functioning societies; have devastating impacts on individuals; weaken democratic institutions; degrade the rule of law; perpetuate violent conflicts; facilitate the activities of dangerous persons; and undermine economic markets.  To that end, as of today, 73 individuals and entities have had their assets blocked under E.O. 13818.  The United States will continue to take appropriate actions, including designating persons for sanctions, to respond to serious human rights abuse and corruption around the globe.


The 14 Gertler-affiliated entities OFAC designated today are: Moku Mines D’or SA, Moku Goldmines AG, Fleurette Energy I B.V., Fleurette Africa Resources I B.V., African Trans International Holdings B.V., Fleurette African Transport B.V., Oriental Iron Company SPRL, Iron Mountain Enterprises Limited, Sanzetta Investments Limited, Almerina Properties Limited, Interlog DRC, Kitoko Food Farm, Karibu Africa Services SA, and Ventora Development Sasu.

This list of 14 companies owned or controlled by Gertler or his companies, and those previously designated, should not be viewed as exhaustive.  The regulated community remains responsible for compliance with OFAC’s 50 percent rule.

For more information on the connection between corrupt senior foreign political figures and their enabling of human rights abuses, descriptions of a number of typologies used by them to access the U.S. financial system and obscure and further their illicit activity, and red flags that may assist financial institutions in identifying the methods used by corrupt senior foreign political figures, see FinCEN Advisory FIN-2018-A003, Advisory on Human Rights Abuses Enabled by Corrupt Senior Foreign Political Figures and their Financial Facilitators.

As a result of FinCEN's action, any property, or interest in property, of those designated by OFAC within U.S. jurisdiction is blocked.  Additionally, U.S. persons are generally prohibited from engaging in transactions with blocked persons, including entities 50 percent or more owned by designated persons.

Identifying information on the individuals and entities designated today.

June 19, 2018 in AML | Permalink | Comments (0)

Former Executives at Publicly Traded Transportation Company Charged with $245 Million Accounting and Securities Fraud Scheme

Two former executives of Roadrunner Transportation Systems Inc., a publicly traded transportation and trucking company formerly headquartered in Cudahy, Wisconsin, were charged in an indictment unsealed today for their alleged participation in a complex accounting and securities fraud scheme that resulted in a loss of more than $245 million in shareholder value.  Download Naggs and Wogsland Indictment

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Matthew D. Krueger of the Eastern District of Wisconsin, Regional Special Agent in Charge Thomas J. Ullom of the U.S. Department of Transportation Office of Inspector General (DOT-OIG) and Special Agent in Charge R. Justin Tolomeo of the FBI’s Milwaukee Field Office made the announcement.

Mark R. Wogsland, 53, and Bret S. Naggs, 52, both of Cedarburg, Wisconsin, were charged in an indictment filed in the Eastern District of Wisconsin with one count of conspiracy to make false statements to a public company’s accountants and to falsify a public company’s books, records and accounts; one count of conspiracy to commit securities fraud and wire fraud; three counts of securities fraud; and four counts of wire fraud.  Naggs, the former  controller for Roadrunner’s Truckload operating segment, and Wogsland, the former controller and director of accounting for Roadrunner’s Truckload operating segment, both worked out of Roadrunner’s corporate headquarters in Cudahy. Roadrunner Transportation Systems Inc. is currently headquartered in Downers Grove, Illinois. 

“According to the allegations in the indictment, Mark Wogsland and Bret Naggs engaged in a massive securities and accounting fraud scheme that misled shareholders, regulators, and the investing public, and ultimately caused a loss of more than $245 million in shareholder value,” said Acting Assistant Attorney General Cronan.   “The Criminal Division is committed to protecting investors and the integrity of U.S. securities exchanges, and we will vigorously pursue corporate executives who engage in deceptive and fraudulent accounting practices.”

“The stability our financial markets depends upon public companies issuing accurate financial statements,” said U.S. Attorney Matthew D. Krueger.  “We commend the FBI and the Department of Transportation Office of Inspector General for its excellent efforts in investigating this case.”

“Working with our law enforcement and prosecutorial partners, the U.S. Department of Transportation Office of Inspector General is committed to preventing and detecting corporate fraud and corruption schemes within transportation-related companies intent on providing false or misleading information to the federal government,” said DOT-OIG Regional Special Agent Ullom.  “Today’s indictment helps reinforce the message that executives involved in all modes of transportation must uphold the public’s trust and maintain the highest levels of integrity.”

“Corporate fraud remains a high priority for the FBI,” said Special Agent in Charge Tolomeo. “Perpetrators who mislead investors and manipulate financial data to falsely inflate business performance will face justice for their crimes.”

“This indictment makes it clear that the FBI, its fellow field offices, and federal partners are committed to working together to hold those accountable who would attempt to manipulate the market,” said J.C. Hacker, Acting Special Agent in Charge of FBI Atlanta. “This alleged fraud caused significant harm to Roadrunner and its shareholders for personal profit.” 

The indictment alleges that between 2014 and 2017, Naggs, Wogsland and their co-conspirators carried out a complex scheme to mislead Roadrunner’s shareholders, independent auditors, regulators and the investing public about Roadrunner’s true financial condition. According to the indictment, beginning in 2014, Naggs, Wogsland and their co-conspirators identified at least $7 million in overstated accounts on the balance sheet of one of Roadrunner’s largest operating companies, Roadrunner Intermodal Services Inc. (RRIS), which included old, uncollectable customer debts with static balances; understated and increasing liabilities for historic debt owed by terminated drivers; and overstated accounts for licenses and other “prepaid assets” that no longer had any actual value.   Instead of addressing the misstated accounts by writing them off, the indictment alleges, Naggs, Wogsland and their co-conspirators purposefully left the vast majority of the misstated accounts on Roadrunner’s books in order to fraudulently boost Roadrunner’s financial performance and mislead Roadrunner’s shareholders, independent auditors, regulators and the investing public about Roadrunner’s true financial condition.

According to the indictment, by late 2014, Naggs, Wogsland and their co-conspirators developed a plan to write off a portion of the misstated accounts.  However, instead of immediately writing off the full amount, Naggs, Wogsland and their co-conspirators directed RRIS finance employees to adjust the balance sheet by a small amount each month, in order to conceal from Roadrunner’s shareholders, independent auditors, regulators and the investing public the true nature and extent of the misstated accounts.  However, after learning that Roadrunner’s performance at other operating companies had deteriorated, the indictment alleges, Naggs, Wogsland and their co-conspirators abandoned the plan and, in some cases, reversed write-offs that had already been booked.  The indictment further alleges that beginning in May 2015, Naggs and other Roadrunner employees received monthly financial reports from RRIS, which included profit and loss figures both with and without the planned monthly write-off.  

The indictment alleges that as a result of the scheme, nearly all of the misstated accounts remained on RRIS’s balance sheet from 2014 until early 2017, when Roadrunner announced for the first time that it would be restating its previously reported financial results.  Three trading days following the announcement, the price of Roadrunner’s shares dropped from $11.74 to $7.54 per share, causing a loss in shareholder value of more than $160 million.  In early 2018, Roadrunner issued restated financial results for 2014 through the third quarter of 2016, acknowledging that it had identified material accounting errors resulting from material weaknesses and management override of internal controls.  Three trading days after announcing the restated financial results, Roadrunner’s share price further dropped from $7.14 to $4.90, causing an additional loss in shareholder value of more than $85 million.

An indictment is merely an allegation and the defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law. 

June 19, 2018 in Financial Regulation | Permalink | Comments (0)

Monday, June 18, 2018

40% of wealth firms leaving London to EU locations because of BREXIT: Ireland and Luxembourg Winners

Read the complete EY Brexit Tracker Wealth and Asset Management update here

  • 39% (22 out of 57) of wealth and asset management firms have said publicly that they are considering or have confirmed that they are moving some of their operations and/or staff out of the UK
  • 25% (14 out of 57) of firms have confirmed at least one location; 10 firms have confirmed Dublin, and 4 have confirmed Luxembourg
  • 28% (16 out of 57) of firms have made, or announced their intention to make, regulatory or structural changes to their products because of Brexit. These changes include:
    • Shifting client assets from the UK into European vehicles
    • Launching new funds abroad / creating overseas fund ranges, for example OEIC / Sicav
  • 23% (13 out of 57) of firms have announced that they are hiring or have hired new staff since the Referendum, either in Europe or in the UK as a direct result of Brexit


June 18, 2018 in Economics | Permalink | Comments (0)

Société Générale S.A. Agrees to Pay $860 Million in Criminal Penalties for Bribing Gaddafi-Era Libyan Officials and Manipulating LIBOR Rate

Bank admits to making over $90 million in corrupt payments; Acknowledges manipulation of global benchmark interest rate, impacting financial products traded worldwide

Société Générale S.A. (Société Générale), a global financial services institution based in Paris, France, and its wholly owned subsidiary, SGA Société Générale Acceptance N.V., have agreed to pay a combined total penalty of more than $860 million to resolve charges with criminal authorities in the United States and France, including $585 million relating to a multi-year scheme to pay bribes to officials in Libya and $275 million for violations arising from its manipulation of the London InterBank Offered Rate (LIBOR), one of the world’s leading benchmark interest rates.  SGA Société Générale Acceptance N.V. will plead guilty in the Eastern District of New York in connection with the resolution of the foreign bribery case.  Together with approximately $475 million in regulatory penalties and disgorgement that Société Générale has agreed to pay to the Commodity Futures Trading Commission (CFTC) in connection with the LIBOR scheme, the total penalties to be paid by the bank exceed $1 billion. 

In related proceedings, Société Générale reached a settlement with the Parquet National Financier (PNF) in Paris relating to the Libya corruption scheme.  The United States will credit $292,776,444 that Société Générale will pay to the PNF under its agreement, equal to 50 percent of the total criminal penalty otherwise payable to the United States.  This is the first coordinated resolution with French authorities in a foreign bribery case.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Richard P. Donoghue of the Eastern District of New York, Special Agent in Charge Matthew J. DeSarno of the FBI Washington Field Office's Criminal Division, Assistant Director in Charge William F. Sweeney Jr. of the FBI New York Field Office and Deputy Chief Eric Hylton of IRS Criminal Investigation made the announcement.

“For years, Société Générale undermined the integrity of global markets and foreign institutions by issuing false financial data and by fraudulently securing contracts through bribery,” said Acting Assistant Attorney General Cronan.  “Today’s resolution – which marks the first coordinated resolution with France in a foreign bribery case – sends a strong message that transnational corruption and manipulation of our markets will be met with a global and coordinated law enforcement response.”

“The resolution announced today by the Department with Societe Generale and a subsidiary, which includes a guilty plea, admissions of wrongdoing, significant corrective measures and hundreds of millions of dollars in penalties, sends a powerful message to financial institutions that engage in corruption and manipulation in the financial markets that they will be held accountable,” said U.S. Attorney Donoghue.  “The United States will vigorously protect the integrity of financial markets by holding responsible to the full extent of the law those banks, corporations and individuals who seek to corrupt government officials to enrich themselves.” 

“Today’s resolution demonstrates that fraudulently manipulating LIBOR and deceiving the financial market has severe consequences, and the FBI will not tolerate this type of criminal activity,” said FBI Special Agent in Charge DeSarno. “The FBI remains committed to holding institutions accountable for their actions in breaking the law and manipulating the global benchmark interest rate. The personnel of the FBI Washington Field Office have dedicated significant time and resources to investigating complex financial fraud schemes such as this one, and I want to thank them for their tireless efforts as well as our colleagues at the Department of Justice Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York for their hard work.”

“When financial institutions convince foreign officials to accept bribes in return for lucrative business deals, their actions directly threaten the international free market system, not to mention our national security," said FBI Assistant Director in Charge Sweeney. "But being geographically out of sight doesn’t mean you’re out of reach from prosecution. No matter who you are, where you are, or how much money you have, the FBI will continue to use all resources at our disposal to find you, uncover your crimes, and reveal them for what they really are. Many thanks to the hardworking men and women of the FBI’s New York Field Office for leading the effort to expose this scheme and bring its perpetrators to justice.”

“Today’s announcement resulted from the unraveling of international financial transactions orchestrated by Société Générale and its agents to facilitate illegal payments to foreign government officials in Libya,” said IRS-CI Deputy Chief Hylton. “IRS-CI is a trusted partner in pursuit of those who use pervasive bribery schemes to circumvent the law. We are committed to maintaining fair competition, free of corrupt practices, through global teamwork and our robust financial investigative talents.”                                             

The FCPA Case

According to the companies’ admissions, between 2004 and 2009, Société Générale paid bribes through a Libyan “broker” in connection with 14 investments made by Libyan state-owned financial institutions.  For each transaction, Société Générale paid the Libyan broker a commission of between one and a half and three percent of the nominal amount of the investments made by the Libyan state institutions.  In total, Société Générale paid the Libyan Intermediary over $90 million, portions of which the Libyan broker paid to high-level Libyan officials in order to secure the investments from various Libyan state institutions for Société Générale.  As a result of the corrupt scheme, Société Générale obtained 13 investments and one restructuring from the Libyan state institutions worth a total of approximately $3.66 billion, and earned profits of approximately $523 million.

Société Générale will enter into a deferred prosecution agreement in connection with a criminal information charging the company with one count of conspiracy to violate the anti-bribery provisions of the FCPA and one count of transmitting false commodities reports.  Additionally, Société Générale’s subsidiary, SGA Société Générale Acceptance N.V., will plead guilty to a one-count criminal information filed today in the Eastern District of New York charging the company with a conspiracy to violate the anti-bribery provisions of the FCPA.  Pursuant to its agreement with the Department, Société Générale agreed to pay a total criminal penalty of $585 million to the Department.  Société Générale also agreed to continue to cooperate with the Department’s investigation and adopt and maintain enhanced compliance procedures.  The guilty plea is scheduled to take place on Tuesday, June 5, before U.S. District Judge Dora L. Irizarry of the Eastern District of New York.                                                                                                                  

The Department entered into this resolution in part due to Société Générale’s failure to voluntarily self-disclose the companies’ misconduct to the Department; the seriousness of the companies’ conduct, including the high value of the bribes paid to foreign officials; the company’s substantial, though not full, cooperation with the Department; and the company’s significant remediation which, together with the company’s risk profile and ongoing monitoring by L’Agence Française Anticorruption, resulted in the Department determining that a monitor was not necessary in this case.

The LIBOR Case

As admitted by the company, between May 2010 and at least October 2011, Société Générale promulgated falsely deflated U.S. Dollar (USD) LIBOR submissions to make it look as though Société Générale was able to borrow money at more favorable interest rates than it was actually able to do.  This downward manipulation allowed Société Générale to create the appearance that it was stronger and more creditworthy than it was. 

The USD LIBOR manipulation scheme was ordered by senior executives of Société Générale, who tasked the managers of the company’s Treasury Department with overseeing the execution of the deflation effort.  Several employees within Société Générale’s Treasury Department ensured that the company’s USD LIBOR submissions were altered in accordance with the deflation directive.  Société Générale’s misconduct frequently altered the daily rate at which USD LIBOR was set, which affected financial products worldwide, including interest rate swaps, futures contracts and other derivative financial products.

Further, in 2006, certain Société Générale employees in London and Tokyo worked together to manipulate Société Générale’s Japan Yen (JPY) LIBOR submissions.  These employees endeavored to manipulate JPY LIBOR in order to benefit the trading positions of a Société Générale employee.  This employee had numerous deals tied to JPY LIBOR, and manipulation of JPY LIBOR improved the profitability of the employee’s trading book.

By the terms of the agreement, Société Générale will pay a fine of $275 million to resolve the LIBOR misconduct matter.  Additionally, in August 2017, two individuals—former Société Générale Global Treasury Head Danielle Sindzingre and former Paris Treasury Head Muriel Bescond—were indicted for their roles in the scheme.  Both individuals remain at large.  An indictment is merely an allegation and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law. 

The deferred prosecution agreement and the plea agreement are subject to court approval.

The FBI’s Washington and New York Field Offices and IRS-Criminal Investigation’s New York office are investigating the case.  Trial Attorneys Gerald M. Moody Jr. and Dennis R. Kihm of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys David C. Pitluck and James P. McDonald of the Eastern District of New York are prosecuting the FCPA case.  Assistant Chief Carol Sipperly, Trial Attorneys Timothy A. Duree and Gary A. Winters of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Matthew S. Amatruda of the Eastern District of New York are prosecuting the LIBOR case.  The Criminal Division’s Office of International Affairs provided significant assistance in this matter.

The Department appreciates the significant cooperation and assistance provided by the U.S. Securities and Exchange Commission and the CFTC in this matter.  The PNF, the United Kingdom’s Serious Fraud Office, the Federal Office of Justice in Switzerland and the Office of the Attorney General in Switzerland also provided significant cooperation.

The Criminal Division’s Fraud Section is responsible for investigating and prosecuting all FCPA matters.  Additional information about the Justice Department’s Fraud Section FCPA enforcement efforts can be found at

June 18, 2018 in AML | Permalink | Comments (0)

Sunday, June 17, 2018

More than 2 million ITINs to expire this year; Renew soon to avoid refund delays

With more than 2 million Individual Taxpayer Identification Numbers (ITINs) set to expire at the end of 2018, the Internal Revenue Service today urged affected taxpayers to submit their renewal applications soon to beat the rush and avoid refund delays next year.

In the third year of the renewal program, the IRS has increased staffing to handle the anticipated influx of W-7 applications for renewal. This third wave of expiring ITINs is expected to affect as many as 2.7 million taxpayers. To help taxpayers, the renewal process for 2019 is beginning earlier than last year.

“Even though the April tax deadline has passed, the IRS encourages people affected by these ITIN changes to take steps as soon as possible to prepare for next year’s tax returns,” said Acting IRS Commissioner David Kautter. “Acting now to renew ITIN numbers will help taxpayers avoid delays that could affect their tax filing and refunds in 2019. The IRS appreciates the help from partner groups across the nation sharing this information with those with expiring ITIN numbers.”

Under the Protecting Americans from Tax Hikes (PATH) Act, ITINs that have not been used on a federal tax return at least once in the last three consecutive years will expire Dec. 31, 2018. In addition, ITINs with middle digits 73, 74, 75, 76, 77, 81 or 82 will also expire at the end of the year. These affected taxpayers who expect to file a tax return in 2019 must submit a renewal application as soon as possible.

ITINs are used by people who have tax filing or payment obligations under U.S. law but who are not eligible for a Social Security number. ITIN holders who have questions should visit the ITIN information page on and take a few minutes to understand the guidelines.

Once again, the IRS is launching a nationwide education effort to share information with ITIN holders. To help taxpayers, the IRS offers a variety of informational materials, including flyers and fact sheets, available in several languages on

The IRS will continue to work with partner groups and others in the ITIN community to share information widely about these important changes.   

Who should renew an ITIN

  • Taxpayers whose ITIN is expiring and who need to file a tax return in 2019 must submit a renewal application. Others do not need to take any action. ITINs with the middle digits 73, 74, 75, 76, 77, 81 or 82 (For example: 9NN-73-NNNN) need to be renewed even if the taxpayer has used it in the last three years. The IRS will begin sending the CP-48 Notice, You must renew your Individual Taxpayer Identification Number (ITIN) to file your U.S. tax return, in early summer to affected taxpayers. The notice explains the steps to take to renew the ITIN if it will be included on a U.S. tax return filed in 2019. Taxpayers who receive the notice after taking action to renew their ITIN do not need to take further action unless another family member is affected.
  • ITINs with middle digits of 70, 71, 72, 78, 79 or 80 have previously expired. Taxpayers with these ITINs can still renew at any time.
  • Spouses or dependents residing inside the United States should renew their ITINs. However, spouses and dependents residing outside the United States do not need to renew their ITINs unless they anticipate being claimed for a tax benefit (for example, after they move to the United States) or if they file their own tax return. That’s because the deduction for personal exemptions is suspended for tax years 2018 through 2025 by the Tax Cuts and Jobs Act. Consequently, spouses or dependents outside the United States who would have been claimed for this personal exemption benefit and no other benefit do not need to renew their ITINs this year.

Family option remains available

Taxpayers with an ITIN that has middle digits 73, 74, 75, 76, 77, 81 or 82, as well as all previously expired ITINs, have the option to renew ITINs for their entire family at the same time. Those who have received a renewal letter from the IRS can choose to renew the family’s ITINs together, even if family members have an ITIN with middle digits that have not been identified for expiration. Family members include the tax filer, spouse and any dependents claimed on the tax return.

How to renew an ITIN

To renew an ITIN, a taxpayer must complete a Form W-7 and submit all required documentation. Taxpayers submitting a Form W-7 to renew their ITIN are not required to attach a federal tax return. However, taxpayers must still note a reason for needing an ITIN on the Form W-7. See the Form W-7 instructions for detailed information.

There are three ways to submit the W-7 application package. Taxpayers can:

  • Mail the Form W-7, along with original identification documents or copies certified by the agency that issued them, to the IRS address listed on the Form W-7 instructions. The IRS will review the identification documents and return them within 60 days.
  • Work with Certified Acceptance Agents (CAAs) authorized by the IRS to help taxpayers apply for an ITIN. CAAs can authenticate all identification documents for primary and secondary taxpayers, verify that an ITIN application is correct before submitting it to the IRS for processing and authenticate the passports and birth certificates for dependents. This saves taxpayers from mailing original documents to the IRS.
  • In advance, call and make an appointment at a designated IRS Taxpayer Assistance Center to have each applicant’s identity authenticated in person instead of mailing original identification documents to the IRS. Applicants should bring a completed Form W-7 along with all required identification documents. See the TAC ITIN authentication page for more details.

Avoid common errors now and prevent delays next year

Federal tax returns that are submitted in 2019 with an expired ITIN will be processed. However, certain tax credits and any exemptions will be disallowed. Taxpayers will receive a notice in the mail advising them of the change to their tax return and their need to renew their ITIN. Once the ITIN is renewed, applicable credits and exemptions will be restored and any refunds will be issued.

Additionally, several common errors can slow down and hold some ITIN renewal applications. These mistakes generally center on missing information or insufficient supporting documentation, such as name changes. The IRS urges any applicant to check over their form carefully before sending it to the IRS.

As a reminder, the IRS no longer accepts passports that do not have a date of entry into the U.S. as a stand-alone identification document for dependents from a country other than Canada or Mexico, or dependents of U.S. military personnel overseas. The dependent’s passport must have a date of entry stamp, otherwise the following additional documents to prove U.S. residency are required:

  • U.S. medical records for dependents under age 6,
  • U.S. school records for dependents under age 18, and
  • U.S. school records (if a student), rental statements, bank statements or utility bills listing the applicant’s name and U.S. address, if over age 18.

IRS continues to encourage more applicants for the Acceptance Agent Program to expand ITIN services

To increase the availability of ITIN services nationwide, particularly in communities with high ITIN usage, the IRS is actively recruiting Certified Acceptance Agents and accepting applications year-round. Interested individuals are encouraged to review all CAA program changes and requirements and submit an application to become a Certified Acceptance Agent.

June 17, 2018 in Tax Compliance | Permalink | Comments (0)

Saturday, June 16, 2018

Fugitive Lawyer Pleads Guilty for His Escape and Role in $550 Million Social Security Fraud Scheme

A former fugitive and social security disability lawyer pleaded guilty for his role in scheming to defraud the Social Security Administration (SSA) of more than $550 million, retaliating against an informant and fleeing from the United States.

Eric Christopher Conn, 58, of Pikeville, Kentucky, pleaded guilty before U.S. District Judge Danny C. Reeves of the Eastern District of Kentucky to one count of conspiracy to defraud the United States, one count of conspiracy to escape and one count of conspiracy to retaliate against an informant.  Sentencing is set for Sept. 7 at 1 p.m. ET. 

“At the Department of Justice, a key mission is protecting the federal treasury on behalf of the American people,” said Attorney General Sessions.  “In this case, the defendant’s scheme fraudulently obligated the Social Security Administration to pay over half a billion dollars in lifetime disability benefits, and then he fled the country.  Thanks to the hard work of the FBI, DOJ lawyers, and our partners with the Social Security Administration, the IRS-CI, HHS-OIG, and our allies in Honduras, this criminal plot did not fully succeed. This case shows yet again that to track down criminals and hold them to account, this Department will cross continents and work with authorities around the globe.”

“The SSA-OIG thanks all of our law enforcement partners for their assistance during the investigation of Mr. Conn’s fraud scheme and subsequent efforts to locate and apprehend Mr. Conn,” said SSA-OIG Special Agent in Charge McGill. “Despite his best efforts to escape justice, Mr. Conn is ultimately being held accountable for defrauding SSA and U.S. taxpayers.”

“Eric Conn preyed upon the sick and vulnerable for his personal gain,” said FBI Special Agent in Charge Hess.  “Rather than face the consequences of his crimes, he chose to flee and attempted to hide from those he had betrayed.  Today’s plea will ensure he is now held accountable.”

When individuals are approved for certain social security benefits, they automatically became entitled to Medicare and Medicaid,” said HHS-OIG Special Agent in Charge Jackson.  “As a result, a large portion of Conn’s fraudulent scheme drained federal health care plans and cheated needy patients out of the limited dollars available for these vital taxpayer-funded programs.”

According to the plea, from October 2004 to December 2017, Conn participated in a scheme with former SSA administrative law judge David Black Daugherty, multiple doctors, including clinical psychologist Alfred Bradley Adkins, and others to submit thousands of falsified medical documents to the SSA to fraudulently obtain disability benefits totaling more than $550 million for thousands of individuals. According to the plea, upon a former SSA employee discovering and providing information about the scheme to federal agents, Conn and former SSA administrative law judge Charlie Paul Andrusconspired and acted to have the former SSA employee terminated in an effort to discredit the employee.  Finally, Conn admitted that after pleading guilty in March 2017, and prior to being sentenced on June 2, 2017, he fled the country with the help of Curtis Lee Wyatt by severing the electronic monitoring device from his ankle and fleeing across the Mexican border.    

Conn was originally charged in April 2016, along with Daugherty and Adkins, in an 18-count indictment with conspiracy to commit mail and wire fraud and other related offenses in connection with the disability fraud scheme.  Conn subsequently pleaded guilty on March 24, 2017, to a two-count information charging him with theft of government money and paying illegal gratuities, and he was sentenced in absentia on July 14, 2017 to 12 years in prison on those charges.  After his flight from the United States, Conn was charged, along with Wyatt, in September 2017, in a seven-count indictment with conspiracy to escape, escape and other related offenses.  On Dec. 5, 2017, Conn was returned to the United States from Honduras after being apprehended by Honduran authorities.  Conn’s plea today is expected to resolve the outstanding charges against him.  In addition to the 12 years in prison Conn is currently serving, he now faces an additional 15 years in prison.  As part of the plea agreement, Conn agreed to recommend to the Court at sentencing that the Court sentence him to the maximum possible sentence, a 15-year sentence, and run that sentence consecutive to the 12-year sentence previously imposed, for a total of 27 years in prison.

Andrus pleaded guilty in June 2016 to a one-count information charging him with conspiracy to retaliate against an informant, and was sentenced Aug. 7, 2017 to six months in prison.  Daugherty pleaded guilty in May 2017 to a two-count information charging him with receiving illegal gratuities, and was sentenced on Aug. 25, 2017, to four years in prison.  Adkins was found guilty following a six-day trial in June 2017 of one count of conspiracy to commit mail fraud and wire fraud, one count of mail fraud, one count of wire fraud and one count of making false statements, and was sentenced on Sept. 22, 2017, to 25 years in prison.  Wyatt pleaded guilty in March 2018, and is scheduled to be sentenced on June 29.

June 16, 2018 in AML | Permalink | Comments (0)

Friday, June 15, 2018

Legg Mason, Inc. Agrees to Pay $64 Million in Criminal Penalties and Disgorgement to Resolve FCPA Charges Related to Bribery of Gaddafi-Era Libyan Officials

Legg Mason, Inc. (Legg Mason), a Maryland-based investment management firm, has entered into a non-prosecution agreement with the Department of Justice and agreed to pay $64.2 million to resolve the Department’s investigation into violations of the Foreign Corrupt Practices Act (FCPA) in connection with Legg Mason’s participation, through a subsidiary, in a Libyan bribery scheme.

Richard P. Donoghue, United States Attorney for the Eastern District of New York, John P. Cronan, Acting Assistant Attorney General of the Justice Department’s Criminal Division, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Eric Hylton, Deputy Chief, Internal Revenue Service Criminal Investigation (IRS-CI), made the announcement.

According to Legg Mason’s admissions, between 2004 and 2010, a Legg Mason subsidiary, Permal Group Ltd. (Permal), partnered with Société Générale S.A. (Société Générale), a multinational bank headquartered in Paris, France, to solicit business from state-owned financial institutions in Libya.  During this time, Société Générale paid bribes through a Libyan “broker” in connection with 14 investments made by Libyan state-owned financial institutions.  For each transaction, Société Générale paid the Libyan broker a commission of between one and a half and three percent of the nominal amount of the investments made by the Libyan state institutions.  In connection with seven of the transactions, Société Générale paid commissions to the Libyan broker to benefit Legg Mason, through its subsidiary Permal, which managed funds invested by the Libyan state institutions.  In total, Société Générale paid the Libyan Intermediary over $90 million, portions of which the Libyan broker paid to high-level Libyan officials in order to secure the investments from various Libyan state institutions for Société Générale.  As a result of the corrupt scheme, Société Générale obtained 13 investments and one restructuring from the Libyan state institutions worth a total of approximately $3.66 billion, and earned profits of approximately $523 million.  Legg Mason, through Permal, managed seven of these investments and earned profits of approximately $31.6 million.

Legg Mason entered into a non-prosecution agreement and agreed to pay $64.2 million to resolve the matter.  This payment includes a penalty of $32.625 million to be paid to the U.S. Treasury within five days of the agreement, and disgorgement of $31.617 million, which will be credited against disgorgement paid to other law enforcement authorities within the first year of the agreement.  As part of the non-prosecution agreement, Legg Mason has agreed to continue to cooperate with the Department in any ongoing investigations and prosecutions relating to the conduct, including of individuals, to enhance its compliance program and to report to the Department on the implementation of its enhanced compliance program. 

The Department reached this resolution based on a number of factors, including that Legg Mason did not voluntarily and timely disclose the conduct at issue, but fully cooperated in the investigation and fully remediated.  Moreover, Legg Mason’s misconduct involved only mid-to-lower level employees of Permal, a subsidiary company, and was not pervasive throughout Legg Mason or Permal; Société Générale – and not Legg Mason or Permal – maintained the relationship with the Libyan broker and was responsible for originating and leading the scheme; the profits earned by Legg Mason and Permal were less than one-tenth of the profits earned by Société Générale; and neither Legg Mason nor Permal has a history of similar misconduct. 

The FBI’s New York Field Office and IRS-CI’s New York office are investigating the case. 

Assistant U.S. Attorneys David C. Pitluck and James P. McDonald of the Eastern District of New York, and Trial Attorneys Dennis R. Kihm and Gerald M. Moody, Jr. of the Criminal Division’s Fraud Section are prosecuting the case.  The Criminal Division’s Office of International Affairs provided significant assistance in this investigation.

June 15, 2018 in AML | Permalink | Comments (0)

Thursday, June 14, 2018

13,162 victims paid IRS impersonators more than $65.6 million

TIGTA reports that the largest and most pervasive IRS impersonation scam in the history of this agency continues to rank near the top of the IRS’s “Dirty Dozen” tax scams.

As of March 31, 2018, more than 13,162 victims have reported that they have paid IRS impersonators a total of more than $65.6 million. As of March 31, 2018, because of TIGTA’s relentless commitment to protecting taxpayers, a total of 111 individuals have been charged in Federal court for their roles in this nationwide scam.

See pages 33 - 40 of Download TIGTA's semiannual_mar2018


June 14, 2018 in Tax Compliance | Permalink | Comments (0)

Wednesday, June 13, 2018

Dark Web Vendor Pleads Guilty to Narcotics Trafficking and Money Laundering Charges

A French national who was serving at times as an administrator and senior moderator on one of the largest dark web criminal marketplaces pleaded guilty to conspiracy to possess with the intent to distribute controlled substances and conspiracy to launder money.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Benjamin G. Greenberg for the Southern District of Florida and Special Agent in Charge Adolphus P. Wright of the U.S. Drug Enforcement Administration (DEA) Miami Field Office made the announcement. 

Gal Vallerius, aka “Oxymonster,” 36, pleaded guilty before U.S. District Court Judge Robert N. Scola Jr. in the Southern District of Florida.  According to the court record, including the agreed upon factual proffer, beginning in or around November 2013 a criminal online marketplace known as Dream Market began operating on the Tor “dark web” network.  Dream Market was designed to promote and facilitate the anonymous sale of illegal items.  In time, the Dream Market website became one of the largest dark web criminal marketplaces.  All of the items and services on Dream Market were offered for sale in exchange for Bitcoin and other peer-to-peer crypto-currencies. 

According to the agreed upon factual proffer, Vallerius first participated in the conspiracy by becoming a vendor on Dream Market.  As a vendor, he sold Oxycodone and Ritalin under the moniker “Oxymonster.”  Shortly thereafter, Dream Market employed the defendant who acted at times as an administrator and senior moderator.  In these positions, he played a role supporting the daily illicit transactions between buyers and vendors on Dream Market, such as the trafficking in narcotics, and the laundering of illicit proceeds using virtual currencies, Dream Market’s tumblers and the dark web.  Vallerius is scheduled to be sentenced by Judge Scola on Sept. 25 at 8:30 a.m. 

This investigation and prosecution was carried out by members of the South Florida High Intensity Drug Trafficking Area (HIDTA) Task Force.  The South Florida HIDTA, established in 1990, is made up of federal, state and local law enforcement agencies that, cooperatively, target the region’s drug trafficking and money laundering organizations.  The South Florida HIDTA is funded by the Office of National Drug Control Policy which sponsors a variety of initiatives focused on combatting the nation’s illicit drug trafficking threats. 

The prosecution is a result of the ongoing efforts by the Organized Crime Drug Enforcement Task Force (OCDETF), a partnership between federal, state, and local law enforcement agencies.  The OCDETF mission is to identify, investigate, and prosecute high-level members of drug trafficking enterprises, bringing together the combined expertise and unique abilities of federal, state, and local law enforcement.   

The investigation was conducted by the DEA Miami Field Office and Paris Country Office, FBI Miami, IRS Criminal Investigation Miami Field Office, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations Miami and Atlanta Field Offices, U.S. Customs and Border Protection’s Field Operations Atlanta, U.S. Postal Inspection Service Miami Field Office, the Department of Justice’s Office of International Affairs, Europol, Special Operations Division (SOD), Finnish National Police, Finnish International Judicial Administration of the Ministry of Justice, Dutch National Police, French Ministry of Justice and the Direction Interregionale de la Police Judiciaire as well as the U.S. Attorney’s Office for the Northern District of Georgia.  The case is being prosecuted by Assistant U.S. Attorneys Juan A. Gonzalez and Frank R. Maderal of the Southern District of Florida and Trial Attorney C. Alden Pelker of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS).  

June 13, 2018 in AML | Permalink | Comments (0)

Tuesday, June 12, 2018

Russian and Syrian Nationals Charged With Laundering Millions of U.S. Dollars for Designated Russian Company That Shipped Jet Fuel to Syria in Violation of U.S. Sanctions

Eight businessmen, including five Russian nationals and three Syrian nationals, were indicted today on federal charges alleging that they conspired to violate U.S. economic sanctions against Syria and Crimea, by sending jet fuel to Syria and making U.S. dollar wires to Syria and to sanctioned entities in Syria without receiving a license from the U.S. Treasury Department. 

The indictment was returned in the U.S. District Court for the District of Columbia and involves transactions conducted by Joint Stock Company Sovfracht (Sovfracht), a Russian shipping company and freight forwarder.

The five Russian nationals – Ivan Okorokov, Ilya Loginov, Karen Stepanyan, Alexey Konkov and Liudmila Shmelkova – are employees of Sovfracht.  Yaser Naser is a Syrian national who has worked on behalf of Sovfracht in Syria to coordinate its business there.  Farid Bitar and Gabriel Bitar are petroleum inspectors at Port Banias, Syria.  All eight individuals were charged with one count of conspiracy to violate the International Emergency Economic Powers Act (IEEPA) and one count of conspiracy to launder monetary instruments.  A forfeiture allegation was also included in the indictment.

Assistant Attorney General for National Security John C. Demers, U.S. Attorney Jessie K. Liu for the District of Columbia, and Special Agent in Charge Timothy Dunham of the FBI Washington Field Office Counterintelligence Division made the announcement.

“The U.S. sanctions on Syria and Crimea thwart Syria’s support of terrorism and its pursuit and use of weapons of mass destruction, as well as the actions of those who seek to undermine Ukraine’s democratic processes and territorial integrity.  The National Security Division will not tolerate any attempts to evade these important foreign policy and national security tools,” said Assistant Attorney General Demers.  “The defendants allegedly conspired to defy our sanctions against Syria and Crimea, endangering both American interests in the region as well as our foreign policy and national security at home.  I applaud the investigators who helped bring these alleged violations to light and the violators to justice.”

“The indictment in this case demonstrates that we will vigorously investigate and prosecute violations of U.S. economic sanctions, including the use of our financial system to promote and facilitate the activities of sanctioned entities, such as the delivery of jet fuel to Syria,” said U.S. Attorney Liu.  “The charges also reflect the tireless dedication of the FBI to rooting out this illegal activity.”

“The FBI takes sanctions violations extremely seriously and will not hesitate to use our full investigative resources to stop this type of alleged illegal activity,” said Special Agent in Charge Dunham.  “This investigation underscores the determination of the special agents and intelligence analysts who pursue those who violate United States laws, no matter where they reside.”


As noted in the indictment, on May 11, 2004, the President declared a national emergency to deal with the threat to the national security, foreign policy and economy of the United States posed by the actions of the Government of Syria. That and subsequent Executive Orders imposed economic sanctions on Syria, which prohibited, among other things, the exportation, re-exportation, sale, or supply, directly or indirectly, to Syria of any goods, technology, or services from the United States, which includes the processing of U.S. dollar wires for transactions conducted overseas.

According to the indictment, as early as 2011, banks began rejecting U.S. dollar wires by Sovfracht that were destined for Syria.  The alleged conspirators began using front companies and falsifying information in shipping records and the related U.S. dollar wires in order to circumvent the sanctions. In subsequent conversations in 2015, the defendants allegedly sent e-mails warning about the effect of “Western sanctions” and the related prohibition on U.S. dollar transactions. 

The indictment alleges that the defendants used vessels owned by Transpetrochart Co. Ltd. (Transpetrochart), a Russian based company that owned the petroleum tankers Mukhalatka and Yaz, to transship jet fuel and other items surreptitiously to Syria.

The indictment also notes that on May 8, 2014, the Treasury Department, Office of Foreign Assets Control (OFAC), designated the Banias Refinery Company, a Syrian based petroleum processing company owned by the Syrian regime, for processing petroleum that was imported into the Syrian Port of Banias.  According to the indictment, in spite of these sanctions, the defendants engaged in U.S. dollar transactions beginning in 2015 to deliver jet fuel to Syria via the Banias Refinery Company.  On or about Jan. 13, 2016, OFAC blocked two wires from Sovfracht that passed through the United States totaling $2,585,340 for the delivery of jet fuel to Syria.  As a result, the defendants allegedly began to use third party companies to continue making U.S. dollar payments for shipments to Syria.

On Sept. 1, 2016, OFAC designated Sovfracht for Crimean sanctions violations.  Following these sanctions, Sovfracht was prohibited from transacting in U.S. dollars without first receiving a license from OFAC, regardless of whether or not the transaction was for the supply of goods to Syria.  On Sept. 9, 2016, the government sent notice to Sovfracht of a forfeiture action against the blocked $2,585,340. On Dec. 20, 2016, OFAC designated Transpetrochart for working with Sovfracht.

According to the indictment, in October 2016, following Sovfracht’s designation, the defendants utilized Maritime Assistance LLC (Maritime) as a front company for Sovfracht, as part of the scheme to circumvent U.S. sanctions and conduct U.S. dollar transactions.  Maritime was operated by employees, including several of the defendants, of Sovfracht.  The indictment alleges that Sovfracht and Maritime employees acted interchangeably.  Maritime assumed debts previously owed by Sovfracht and paid third parties on contracts previously negotiated by Sovfracht.  The indictment alleges that these activities allowed the defendants to continue engaging in U.S. dollar transactions, which passed through the United States, in spite of Sovfracht’s designation.

According to the indictment, following designation, Sovfracht, acting through Maritime, continued to transact in U.S. dollars for the delivery of jet fuel to Syria, in violation of both the Crimean and Syrian sanctions.  For example, on or about May 11, 2017, OFAC blocked two wires from Sovfracht that passed through the United States totaling $2,957,983 for the delivery of jet fuel to Syria. In response to the blocking, Ilya Loginov allegedly stated to co-conspirators that Maritime “has been burned,” that it was “unadvisable to make further use of it,” and that they had “to create a new … clean company.”

An indictment is merely a formal charge that a defendant has committed a violation of criminal law and is not evidence of guilt. Every defendant is presumed innocent until, and unless, proven guilty.

The maximum statutory penalty for conspiracy to violate IEEPA is five years in prison, and for conspiracy to commit money laundering is 20 years in prison.  The charges also carry potential financial penalties and forfeitures of blocked funds and facilitating property such as the vessels in question.  The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes.  If convicted of any offense, a defendant’s sentence will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.

This case is being investigated by the FBI’s Washington Field Office.

June 12, 2018 in AML | Permalink | Comments (0)

Wednesday, June 6, 2018

Assistant Attorney General for National Security John C. Demers Delivers Remarks at FedScoop’s 5th Annual FireEye Government Forum on Cyber Threat Intelligence

Good afternoon, and thank you for inviting me here to share a few words on the importance of collaboration in confronting the national security cyber threat. 

Protecting the nation from national security threats is the mission of the National Security Division.  Although NSD was created in response to the September 11th terrorist attacks, its mission goes well beyond terrorism.  In the past years it has come increasingly to include a focus on cyber as part of the threat posed by certain foreign nations.  And as we do with respect to terrorism, NSD drives collaboration among prosecutors, law enforcement officials, intelligence attorneys and the Intelligence Community to ensure that we approach the national security cyber threat using every tool and resource available to the federal government.

Some of you in this room come from the private sector — companies both large and small.  Companies that consult and provide advice, and companies that manufacture products.  Others come from federal, state and local governments — or from other countries.  Your work may be diverse, but you all appreciate one thing.  You know that there are countries in this world that want what we have.  They want our sensitive information, our technology, our intellectual property.  And they want to destroy any competitive advantage we enjoy.  Around the world there are people who wake up every morning thinking about how they’re going to destroy it.  And they go to bed at night, much too often, thinking about a job well done.   One thing they’re not spending much time thinking about is our laws and international cyber norms. 

You don’t have to be a defense contractor to be worried about this.  Recently, we prosecuted cases involving the thefts of grains of rice and kernels of corn.  No one is immune.  If you’re in business, if you’re in government, if you’re in medicine or academic research, you have something of value to someone else.  And to get it, foreign countries will use all means, including computer intrusions. 

You are not going to stop these countries on your own.  No private company or institution has the resources of a determined nation state.  Nor is any one part of the federal government going to stop these adversaries on its own.  We’ll only succeed in defending the nation’s firepower and the fruits of its brain power if we’re partnered together. 

In recent years, NSD has furthered the government’s efforts to deter and disrupt malicious national security cyber threats by charging hackers acting on behalf of China, Russia, Iran and Islamic State of Iraq and al-Sham (ISIS).  But not every cyber disruption needs to be a prosecution.  In fact, just last week, the Department announced it obtained a court order to disrupt a global botnet known as the “VPNfilter” that had infected hundreds of thousands of home and office routers controlled by the Sofacy Group, a well-known malicious cyber-hacking organization.  The botnet provided the Sofacy Group ability to undertake all manner of malicious cyber activity, from unlawful surveillance to theft of valuable information to disruptive attacks.  The Department could not have begun to neutralize this threat alone.  We worked closely with the private sector, including private security researchers, and other government partners, such as the Department of Homeland Security.  If we continue to work together, we will do much, much more.

Let me provide two other illustrations of the good that can happen when the private sector and the government work together.

Let’s take the case of Yahoo.  Yahoo was the victim of a breach in 2013, only to discover three years later that it had been subject to a second, massive breach in 2014.  When this information came to light, Yahoo notified the government and provided valuable assistance to the FBI, fully cooperating at every stage of the investigation.

As a result of this effective collaboration, Yahoo and the FBI determined that hackers, working both for financial gain and on behalf of Russian intelligence officers, had stolen information from at least 500 million Yahoo accounts, and used that stolen information to obtain access to the contents of accounts hosted by Yahoo, Google and other providers.  Russian journalists, U.S. and Russian government officials, and private-sector employees of financial, transportation and other companies had all been targeted. 

Thanks to the close cooperation of Yahoo, Google and others, DOJ prosecutors and the FBI were able to identify and expose the hackers without further compromising the privacy of the account holders.  Three of the defendants were Russian nationals residing in Russia — two Federal Security Service or “FSB” agents and a known Russian hacker, an FBI “Most Wanted Cyber Criminal,” Alexsey Belan. 

The fourth defendant was a 22-year-old hacker named Karim Baratov, who resided in Canada.  Following the U.S. indictment, Canada captured and arrested Baratov.  He was brought to the U.S. and pleaded guilty to eight criminal counts, including conspiracy to commit computer fraud and abuse and aggravated identity theft.  Earlier this week, he was sentenced to five years in jail.

The second case demonstrates that cooperating with the government, and benefiting from its knowledge and tools, can help a company that has been hacked, see things for what they really are. 

A few years ago, a Midwestern consumer goods company was the victim of what appeared to be a “run of the mill” intrusion.  An intruder had obtained unauthorized access to their customer database and had obtained personally identifiable information for their customers.  The company’s IT personnel worked diligently to eject the hacker from their network, but he kept coming back.  Eventually, the hacker threatened to expose the company’s customer information unless he was paid a ransom.

Around that time, the company connected with the FBI. 

The FBI determined that Ardit Ferizi, a Kosovo citizen studying computer science in Malaysia, was one of the hackers who had gained unauthorized access to the victim company’s PII.  

Although the hacker had a financial motive in demanding a ransom from the company, the customer PII Ferizi stole was not destined for the black market; that data was of interest because, among the tens of thousands of customer names and email accounts he stole, there were more than a thousand email addresses that ended in “.gov” or “.mil.”

Ultimately, Ferizi used that information to produce a list of PII for approximately 1,300 U.S. government civilian employees and U.S. military personnel.

He provided this information to a Syrian-based ISIS member named Junaid Hussain.

A few months earlier, Hussain, acting in the name of the Islamic State Hacking Division, had posted a “kill list” that purported to include the names and addresses of 100 members of the U.S. military.  Ferizi wanted to help him create and disseminate a second kill list.

And in fact, soon after he received the information from Ferizi, Hussain used Twitter to publish the PII of all 1,300 U.S. government and military customers of the company.  In his tweet, he threatened “the Crusaders” who were conducting a “bombing campaign against the Muslims.”

The Department of Justice charged Ferizi with violations of the Computer Fraud and Abuse Act, and with conspiring to provide material support to ISIS.  We were successful in obtaining his extradition from Malaysia to the United States, and he ultimately pleadded guilty. 

In September 2016, Ferizi was sentenced to 20 years in prison.  He was also ordered to pay $50,000 in restitution to the company.

Even though the prosecution of Ferizi was public, the name of the company was never revealed.   

We are often asked why we would bring a case against foreign nationals located outside the U.S.  Well for one, as the Yahoo and Ferizi cases prove, we may well get one or more of them.  The U.S. government has extradition agreements with more than 100 countries, so it is not enough for these defendants to forego a visit to Disney World.  For the rest of their lives they will be unable to travel to more than half the countries in the world without fear of arrest and extradition to the U.S. 

Second, the investigation and charges can assist other parts of the Government in bringing their authorities to bear.  For instance, Treasury’s Office of Foreign Assets Control can designate the charged individuals or entities under an Executive Order that authorizes blocking the property of persons engaging in significant malicious cyber-enabled activities — ensuring that the perpetrators will be financially isolated from the world.  When we brought charges against the founders and employees of the Iranian Mabna Institute that hacked more than 300 American and foreign universities, and government agencies and institutions around the world, Treasury also designated the Institute and ten Iranian individuals. 

Third, charges raise awareness, both generally and specifically, to this threat.  In some cases there may be additional victims that don’t know they’ve been hacked.  To help the private sector identify malicious activity and better protect itself, the FBI and DHS will often release technical details to the public. FBI did that just last week, when it released a Public Service Announcement about VPNFilter, advising you to reboot your router and including signatures of the botnet’s malware, so network defenders can identify its presence in their network.

And finally, we pursue these cases to strip these hackers of anonymity and call them out.  This prevents nation state actors from hiding behind ritualized denials and feigned ignorance.  The recent indictment of Mabna Institute members and the prior indictment of the Chinese People’s Liberation Army are cases in point.

So that’s what’s in it for the country.  What’s in it for you?  What are the benefits of working with law enforcement — before, during and after a computer intrusion or attack? 

  • We can help you understand what happened when your organization has a cyber-incident. 
  • We can share context and information about related incidents or malware.
  • We can ensure proper investigation and preservation of evidence for eventual. prosecution.
  • We can assist you in dealing with regulators.

At the end of the day, the Government simply has many more tools at its disposal to deal with the problem of national security cyber intrusions.  Tools that, working together, we can use to respond to intrusions and deter future ones.  Although we will always consider criminal charges, pursuing prosecution may not be the best response in all cases.  Accordingly, NSD attorneys work with their interagency partners to determine whether our investigative information may be used to support sanctions, trade pressure, technical alerts, diplomatic options or other responses instead of, or in addition to, prosecution.  All of these tools can impose real costs on malicious activity, depriving hackers and their sponsors of the benefit of their crimes and deterring future misbehavior.

Let me close on this note.  Everyone in this audience understands that we are in this together, and we have an obligation to help one another.  The organization that reports a cyber intrusion doesn’t just help itself, it also helps other targeted companies that may not even know they’ve been victims of a hack, and it helps the country.  It helps other organizations by raising their awareness and sparking a check on their part for similar compromises.  It also enables the government to work to disrupt and deter intrusions of those other organizations. And it helps the country by allowing the Government to piece together and respond to the intentions and actions of antagonistic nations to better defend our nation’s economic and military security.

It is the National Security Division’s job to disrupt and deter national security cyber threats.  We will continue to work with other agencies to use all elements of national power to meet this ever-changing and growing challenge.  And to adequately protect our shared national cyber security against persistent attack, we will need your help as well.

June 6, 2018 in AML | Permalink | Comments (0)

1MDB Investigations to find the missing billions

FCPA blog reports that:

The U.S. Justice Department has alleged in court filings that more than $4.5 billion was looted from 1MDB from 2009 through 2015 "by high-level officials" of the fund and their associates. In 2015, the Wall Street Journal reported that Najib deposited into his personal bank accounts about $700 million from a Malaysia sovereign wealth fund known as 1Malaysia Development Berhad or 1MDB.

Read the full article here.

June 6, 2018 in AML | Permalink | Comments (0)

Tuesday, June 5, 2018

National Income and Product Accounts Gross Domestic Product: First Quarter 2018 (Second Estimate) Corporate Profits: First Quarter 2018 (Preliminary Estimate)

Real gross domestic product (GDP) increased at an annual rate of 2.2 percent in the first quarter of 2018
(table 1), according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth
quarter of 2017, real GDP increased 2.9 percent.

The GDP estimate released today is based on more complete source data than were available for the
"advance" estimate issued last month. In the advance estimate, the increase in real GDP was 2.3
percent. With this second estimate for the first quarter, the general picture of economic growth remains
the same; downward revisions to private inventory investment, residential fixed investment, and
exports were partly offset by an upward revision to nonresidential fixed investment (see "Updates to
GDP" on page 2).

Real GDP: Percent Change from Preceding Quarter
Real gross domestic income (GDI) increased 2.8 percent in the first quarter, compared with an increase
of 1.0 percent (revised) in the fourth quarter. The average of real GDP and real GDI, a supplemental
measure of U.S. economic activity that equally weights GDP and GDI, increased 2.5 percent in the first
quarter, compared with an increase of 2.0 percent in the fourth quarter (table 1).

The increase in real GDP in the first quarter reflected positive contributions from nonresidential fixed
investment, personal consumption expenditures (PCE), exports, private inventory investment, federal
government spending, and state and local government spending that were partly offset by a negative
contribution from residential fixed investment. Imports, which are a subtraction in the calculation of
GDP, increased (table 2).

The deceleration in real GDP growth in the first quarter reflected decelerations in PCE, exports, state
and local government spending, and federal government spending and a downturn in residential fixed
investment. These movements were partly offset by an upturn in private inventory investment and a
larger increase in nonresidential fixed investment. Imports, which are a subtraction in the calculation of
GDP, decelerated.

Current-dollar GDP increased 4.2 percent, or $202.7 billion, in the first quarter to a level of $19.96
trillion. In the fourth quarter, current-dollar GDP increased 5.3 percent, or $253.5 billion (table 1 and
table 3).

The price index for gross domestic purchases increased 2.7 percent in the first quarter, compared with
an increase of 2.5 percent in the fourth quarter (table 4). The PCE price index increased 2.6 percent,
compared with an increase of 2.7 percent. Excluding food and energy prices, the PCE price index
increased 2.3 percent, compared with an increase of 1.9 percent (appendix table A).

Updates to GDP

The percent change in real GDP was revised down 0.1 percentage point from the advance estimate,
primarily reflecting downward revisions to private inventory investment, residential fixed investment,
and exports that were partly offset by an upward revision to nonresidential fixed investment.  For more
information, see the Technical Note. A detailed "Key Source Data and Assumptions" file is also posted
for each release. For information on updates to GDP, see the "Additional Information" section that

                                           Advance Estimate   Second Estimate

                                         (Percent change from preceding quarter)
Real GDP                                          2.3               2.2
Current-dollar GDP                                4.3               4.2
Real GDI                                           …                2.8
Average of Real GDP and Real GDI                   …                2.5
Gross domestic purchases price index              2.8               2.7
PCE price index                                   2.7               2.6

For the fourth quarter of 2017, the percent change in real GDI was revised from 0.9  percent to 1.0
percent based on newly available fourth-quarter wages and salaries data from the BLS Quarterly Census
of Employment and Wages program.

Corporate Profits (table 12)

Profits from current production (corporate profits with inventory valuation adjustment and capital
consumption adjustment) decreased $12.4 billion in the first quarter, compared with a decrease of $1.1
billion in the fourth quarter.

Profits of domestic financial corporations increased $2.2 billion in the first quarter, in contrast to a
decrease of $14.6 billion in the fourth quarter. Profits of domestic nonfinancial corporations decreased
$19.0 billion, in contrast to an increase of $19.4 billion. Rest-of-the-world profits increased $4.4 billion,
in contrast to a decrease of $5.9 billion. In the first quarter, receipts increased $20.0 billion, and
payments increased $15.7 billion.

The 2017 Tax Cuts and Jobs Act includes several provisions that impact the business income statistics in
the national income and product accounts (NIPAs). The provisions do not directly impact corporate
profits from current production or GDI but do impact taxes on corporate income and net dividends in
the first quarter of 2018. For more information, see the Technical Note.

June 5, 2018 in Economics | Permalink | Comments (0)

Monday, June 4, 2018

4th annual Texas Tax Professors Workshop June 2018

4th annual Texas Tax Professors Workshop June 2018 (organized by Bryan Camp of Texas Tech this year) - with my reconstructed ankle and scooter.
Texas Tax Prof Workshop June 2018
The Texas tax professors gathered in Lubbock, Texas, at Texas Tech University School of Law. The papers critiqued included:
Session #1: Paper from Terri Helge (A&M) (tax exempt orgs)
Lead Commentators: Dennis Drapkin (SMU), Alyson Outenreath (TTU)
Session 2: Paper from Jack Manhire (A&M) (tax compliance)
Lead Commentator: Steve Black (TTU)
Session #3: Paper from Brett Wells (UH) (§355)
Lead Commentators: Bruce McGovern (South Texas), Mark Cochran (St. Mary's)
Session #4: Open Discussion of Current Projects
Session #5: Paper from Cal Johnson (UT) (tax and economics)
Lead Commentator: William Byrnes
Session #6: Paper from Andy Morriss (A&M) (English tax rule)
Lead Commentator: Jack Manhire (A&M)
Session #1: Terri Helge’s paper will be a follow-up to her article Rejecting Charity: Why the IRS Denies Tax Exemption to 501(C)(3) Applicants, 14 Pitt. Tax Rev. 1 (2017). This new paper will be an empirical study of IRS revocations of exemptions.
Session #2: Jack Manhire’s paper will be a follow-up to his article Tax Compliance as a Wicked System, 18 Fla. Tax Rev. 235 (2016). Jack’s new paper is tentatively titled Visualizing a Wicked System Theory of Tax Compliance. Jack’s paper will consider whether tax compliance can usefully be considered in terms of compliant vs, non-complaint returns. Jack writes: "The hope is to see, via a heuristic model, how parameters that the tax authority can directly control interact with indirect attributes (including parameters that non-tax regulatory authorities can directly control) to a affect the positive or negative growth of the population of compliant tax returns. In this way, the heuristic hopes to account for the complicatedness" of tax compliance (the \top-down" organization of a structural system), and the iterative \complexity" of the system (the \bottom-up" non-directed and self-organizing attributes of a dynamical system) that are both found in \wicked systems."
Session #3: Brett Well’s paper will be on Section 355. Brett writes: "I would like to present a paper on how to reform Section 355. Section 355 is a hodgepodge of bolt-ons that have not been thought through in a comprehensive way, and at the heart of 355 is a very subject business purpose and device test. The device test was designed under an old bailout of E&P at capital gains rates concerns, but we have had rate parity for a decade yet the device test lives on unchanged. The device test should be refocused for the issues that are relevant today, and the business purpose test should be more objectified, and Section 355(d), Section 355(a)(2)(D), and Section 355(e) should be harmonized into a coherent regime. This is the focus of the paper, and I would greatly benefit from a good discussion from others.”
Session #5: Cal Johnson’s paper will be on the macro effects of the 2017 Tax Bill. Cal writes: “Johnson argues that the $2.5 trillion spent on incentives for capital over ten years in the 2017 Tax Bill are a waste of money because American capital cannot find investments with positive returns, above inflation. The Tax Bill will reduce the returns further into the negative range. Wasting $2.5 trillion on no-growth capital is going to push federal debt to the critical breaking point where our creditors no longer believe us and no longer consider U.S. debt to be risk-free. As that crisis approaches, we will need to undo incentives to no-growth capital.”
Session #6: Andy Morriss’ paper is not a follow up to anything! It concerns the codification of a common law rule called the “Hastings-Bass Rule” by Jersey (old, not new). The rule allows for correction of errors by trustees in some circumstances (mostly tax). After English courts dramatically restricted the common law rule, Jersey codified the broader version. Andy writes: “In this paper, I argue that this represents a positive example of the O’Hara-Ribstein law market in action, with Jersey seeking a competitive advantage in the global competition for trusts by enshrining the Hastings-Bass rule in its statutes and using the opportunity to improve on the common law version the statute replaced.”

June 4, 2018 in Academia | Permalink | Comments (0)

SOI Tax Stats - SOI Bulletin: Spring 2018

The Internal Revenue Service today announced that the Spring 2018 Statistics of Income Bulletin is now available on The Statistics of Income (SOI) Division produces the online Bulletin quarterly, providing the most recent data available from various tax and information returns filed by U.S. taxpayers. This issue includes articles on the following topics:

  • Individual Income Tax Returns, Preliminary Data, Tax Year 2016: For Tax Year 2016, taxpayers filed 150.3 million U.S. individual income tax returns, a decrease of 0.2 percent from the 150.6 million returns filed for Tax Year 2015.  For 2016, adjusted gross income (AGI) only increased 0.1 percent to $10.2 trillion. This small increase in AGI reflected minor increases in salaries and wages (1.5 percent) and taxable pensions and annuities (0.4 percent) along with declines in partnership and S corporation net income less loss (1.1 percent) and net capital gains (11.7 percent).

  • Partnership Returns, Tax Year 2015: The number of partnerships in the United States continued to increase for Tax Year 2015. Partnerships filed more than 3.7 million returns for the year, representing more than 27 million partners. The real estate and leasing sector contained almost half of all partnerships (49.7 percent) and over a quarter of all partners (29.2 percent).

SOI Bulletin articles are available for download at

June 4, 2018 in Economics | Permalink | Comments (0)

Sunday, June 3, 2018

Exempt Organization Financial Data for Calendar Year 2017

Two new extracts of tax-exempt organization financial data for Calendar Year 2017 are now available on IRS's Tax Stats Web page.

These annual extracts contain selected financial data from filers of information returns, Forms 990 and 990-EZ (short form), Return of Organization Exempt from Income Tax, processed for program administrative purposes during Calendar Year 2017.

The data are in ASCII space-delimited format. Supporting documentation is also available.

June 3, 2018 in Economics | Permalink | Comments (0)


Personal income increased $49.5 billion (0.3 percent) in April according to estimates released today by
the Bureau of Economic Analysis. Disposable personal income (DPI) increased $60.9 billion (0.4 percent)
and personal consumption expenditures (PCE) increased $79.8 billion (0.6 percent).

Real DPI increased 0.2 percent in April and Real PCE increased 0.4 percent. The PCE price index increased
0.2 percent. Excluding food and energy, the PCE price index increased 0.2 percent.

                                                2017                  2018
                                                Dec.     Jan.     Feb.     Mar.     Apr.
                                                  Percent change from preceding month
Personal income:
 Current dollars                                0.4      0.4      0.3      0.2      0.3
Disposable personal income:
 Current dollars                                0.4      0.8      0.3      0.2      0.4
 Chained (2009) dollars                         0.3      0.4      0.1      0.2      0.2
Personal consumption expenditures (PCE):
 Current dollars                                0.5      0.1      0.0      0.5      0.6
 Chained (2009) dollars                         0.3     -0.2     -0.1      0.5      0.4
Price indexes:
 PCE                                            0.1      0.4      0.1      0.0      0.2
 PCE, excluding food and energy                 0.2      0.3      0.2      0.2      0.2

Price indexes:                                  Percent change from month one year ago
 PCE                                            1.7      1.6      1.7      2.0      2.0
 PCE, excluding food and energy                 1.5      1.5      1.5      1.8      1.8

                Quarterly Census of Employment and Wage Data Included in the Fourth Quarter of 2017

This news release includes revised estimates of wages and salaries, personal taxes, and contributions for
government social insurance for October through December 2017 (fourth quarter). These estimates reflect the
incorporation of newly available fourth-quarter wage and salary tabulations from the Bureau of Labor Statistics’
Quarterly Census of Employment and Wages (QCEW) program.

The increase in personal income in April primarily reflected increases in wages and salaries, in personal
interest income, and in government social benefit payments to persons, specifically veteran’s benefits and Medicare (table 3).

The $42.8 billion increase in real PCE in April reflected an increase of $15.4 billion in spending for goods
and a $27.5 billion increase in spending for services (table 7). Within goods, spending for gasoline and other
energy goods was a leading contributor to the increase. Within services, the largest contributor to the increase
was spending for household utilities. Detailed information on monthly real PCE spending can be found in Table 2.3.6U.

Personal outlays increased $86.9 billion in April (table 3). Personal saving was $419.6 billion in April and the personal
saving rate, personal saving as a percentage of disposable personal income, was 2.8 percent (table 1).

Updates to Personal Income and Outlays

Estimates have been revised for October through March. The percent change from the preceding month for current-dollar personal
income, and for current-dollar and chained (2009) dollar DPI and PCE -- revised and as published in last month's release -- are
shown below.

                                                        Change from preceding month
                                               February                                    March
                                Previous   Revised   Previous   Revised   Previous   Revised   Previous   Revised
                               (Billions of dollars)      (Percent)      (Billions of dollars)      (Percent)
Personal income:
 Current dollars                    57.1      54.1        0.3       0.3       47.8      40.7        0.3       0.2
Disposable personal income:
 Current dollars                    42.6      41.9        0.3       0.3       39.8      34.0        0.3       0.2
 Chained (2009) dollars             15.9      18.5        0.1       0.1       30.5      25.3        0.2       0.2
Personal consumption expenditures:
 Current dollars                     1.6       5.9        0.0       0.0       61.7      73.9        0.4       0.5
 Chained (2009) dollars            -18.6     -11.8       -0.2      -0.1       50.0      60.5        0.4       0.5

                                Upcoming Annual Update of the National Income and Product Accounts

BEA will release the results of the 15th comprehensive (or benchmark) update of the national income and product accounts (NIPAs)
in conjunction with the second quarter 2018 "advance" estimate on July 27, 2018.  For more information, see the Technical Note.
Details on the planned statistical, definitional, and presentational changes are available in the April Survey of Current Business
article "Preview of the 2018 Comprehensive Update of the National Income and Product Accounts." An article in the September Survey
will describe the estimates in detail.  Revised NIPA table stubs and news release stubs will be available in June.

June 3, 2018 in Economics | Permalink | Comments (0)

Saturday, June 2, 2018

Invest in Hedgefunds through Private Placement Life Insurance to Avoid Paying Taxes Forever, Blackstone Tells UHNW Clients

read the Private Wealth Magazine article here:  With the increased popularity, life insurers have slashed the fees they charge for wealthy clients. A typical cost is now as low as 0.7 percent per year, cut by more than half since the early 2000s, Pauloski said.

The structures effectively lock up your assets, an inconvenient option if you need ready access to your fortune. But there’s still a way to tap the money while alive. You can take loans against the investment’s cash value, tax-free.

Read Bloomberg article here.

June 2, 2018 in Tax Compliance | Permalink | Comments (0)

Friday, June 1, 2018

International Hacker-For-Hire Who Conspired With and Aided Russian FSB Officers Sentenced to 60 Months in Prison

Russian Officers Tasked Prolific Hacker-for-Hire to Target Webmail Accounts

Karim Baratov, aka Kay, aka Karim Taloverov, aka Karim Akehmet Tokbergenov, 23, was sentenced to five years in prison and ordered to pay a fine, which encompasses all of his remaining assets.

Assistant Attorney General for National Security John C. Demers, Acting U.S. Attorney Alex G. Tse for the Northern District of California, and Special Agent in Charge John F. Bennett of the FBI’s San Francisco Field Office made the announcement.  The sentence was handed down today by U.S. District Judge the Honorable Vince Chhabrias.

“Criminal hackers and the countries that sponsor them make a grave mistake when they target American companies and citizens.  We will identify them wherever they are and bring them to justice,” said Assistant Attorney General Demers.  “I would like to thank Canadian law enforcement authorities for their tremendous assistance in bringing Baratov to justice.  We will continue to work with our foreign partners to find and prosecute those who would violate our laws.”

“The sentence imposed reflects the seriousness of hacking for hire,” said Acting U.S. Attorney Tse.  “Hackers such as Baratov ply their trade without regard for the criminal objectives of the people who hire and pay them.  These hackers are not minor players; they are a critical tool used by criminals to obtain and exploit personal information illegally.  In sentencing Baratov to five years in prison, the Court sent a clear message to hackers that participating in cyber attacks sponsored by nation states will result in significant consequences.”

“It's difficult to overstate the unprecedented nature of this conspiracy, in which members of a foreign intelligence service directed and empowered criminal hackers to conduct a massive cyber-attack against 500 million victim user accounts,” said Special Agent in Charge Bennett.  “Today's sentencing demonstrates the FBI's unwavering commitment to disrupt and prosecute malicious cyber actors despite their attempts to conceal their identities and hide from justice.”

Baratov, a Canadian national and resident, and three other defendants, including two officers of the Russian Federal Security Service (FSB), Russia’s domestic law enforcement and intelligence service, were charged with a number of offenses relating to the hacking of webmail accounts at Yahoo and other service providers.  In particular, the defendants were charged in a computer hacking conspiracy in which the two Russian FSB officers hired criminal hackers to collect information through computer intrusions in the United States and abroad, which resulted in the unauthorized access of Yahoo’s network and the spear phishing of webmail accounts at other service providers between January 2014 and December 2016.

Baratov’s role in the charged conspiracy was to hack webmail accounts of individuals of interest to his coconspirator who was working for the FSB and send those accounts’ passwords to Dokuchaev in exchange for money.

The Indictment is available here, and its allegations are summarized in greater detail in the press release that attended the unsealing of the Indictment on March 15, 2017.

Baratov has been detained since his arrest in Canada in March 2017.  Baratov waived extradition to the United States and was transferred to the Northern District of California in August 2017.  In November 2017, Baratov pleaded guilty to Count One and Counts Forty through Forty-Seven of the Indictment.  Count One charged Baratov, Dokuchaev, Sushchin and Belan with conspiring to violate the Computer Fraud and Abuse Act by stealing information from protected computers and causing damage to protected computers.  Counts Forty through Forty-Seven charged Baratov and Dokuchaev with aggravated identity theft.  As part of his plea agreement, Baratov not only admitted to agreeing and attempting to hack at least 80 webmail accounts on behalf of one of his FSB co-conspirators, but also to hacking more than 11,000 webmail accounts in total from in or around 2010 until his March 2017 arrest by Canadian authorities.  In addition to any prison sentence, Baratov agreed to pay restitution to his victims, and to pay a fine up to $2,250,000, at $250,000 per count, with any assets he has remaining after satisfying a restitution award.

The FBI, led by the San Francisco Field Office, conducted the investigation that resulted in the charges in the Indictment.  The case is being prosecuted by the U.S. Attorney’s Office for the Northern District of California and the U.S. Department of Justice National Security Division’s Counterintelligence and Export Control Section, with support from the Justice Department’s Office of International Affairs.

June 1, 2018 in AML | Permalink | Comments (0)