International Financial Law Prof Blog

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

Tuesday, October 20, 2020

Private Equity CEO Enters into Non-prosecution Agreement on International Tax Fraud Scheme and Agrees to Pay $139 Million, to Abandon $182 Million in Charitable Contribution Deductions, and to Cooperate with Government Investigations

Robert F. Smith, the Chairman and Chief Executive Officer of a San Francisco based private equity company, entered into a Non-Prosecution Agreement (the agreement) with the Department of Justice, for his involvement from 2000 through 2015 in an illegal scheme to conceal income and evade millions in taxes by using an offshore trust structure and offshore bank accounts, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Tax Division, U.S. Attorney David L. Anderson for the Northern District of California, and Chief of Internal Revenue Service (IRS) Criminal Investigation Jim Lee. In that agreement, Smith admits his involvement in the illegal scheme and agrees to cooperate with ongoing investigations and to pay back taxes and penalties in full. 

“It is never too late to do the right thing,” said U.S. Attorney Anderson. “It is never too late to tell the truth. Smith committed serious crimes, but he also agreed to cooperate. Smith’s agreement to cooperate has put him on a path away from indictment.”

According to the agreement, Smith, a resident of Austin, Texas, formed the Excelsior Trust in Belize, and a shell company, Flash Holdings, in Nevis in 2000. Smith used third-parties to conceal his beneficial ownership and control of the Excelsior Trust and Flash Holdings. In reality, Smith controlled both offshore structures and made all substantive decisions regarding Flash Holdings’ operations, transactions, income, investments and assets. Smith used the Excelsior Trust to conceal his ultimate ownership and control over Flash Holdings. He further used Flash Holdings to hide his interest in private equity investments. Smith admits that he formed these foreign entities in order to use them to avoid the payment of U.S. taxes.

Furthermore, Smith admits that he knowingly and intentionally used the Excelsior Trust and Flash Holdings and their associated foreign bank accounts in the British Virgin Islands and Switzerland to conceal from the IRS, and the U.S. Treasury Department, income earned and distributed to Flash Holdings from private equity funds. As a result of the overall scheme, Smith willfully did not report to the IRS over $200 million of partnership income. Smith also failed to report his ownership of his foreign bank accounts in BVI and Switzerland as required by law.

Over the years, Smith used millions of this unreported income to acquire and make improvements to real estate used for his personal benefit. Smith admits that, in 2005, he used approximately $2.5 million in untaxed funds to purchase and renovate a vacation home in Sonoma, California. In 2010, Smith again used untaxed funds to purchase two ski properties and a piece of commercial property in France. In 2011 and 2012, Smith used approximately $13 million of untaxed funds to build and make improvement to a residence in Colorado and to fund charitable activities at the property.

Under the terms of the agreement, Smith has agreed to continue cooperating with the Department of Justice in other related investigations. Further, Smith has agreed to pay approximately $56 million in taxes and penalties stemming from the unreported income and another $82 million in penalties stemming from his concealment of his offshore bank accounts. Taken altogether, Smith will pay more than $139 million in taxes and penalties.

Additionally, Smith agrees to abandon his protective claims for a refund totaling approximately $182 million that were filed with the IRS. The protective refund claims consisted, in part, of claims filed with the IRS for charitable contribution deductions on Sept. 21, 2018, and Oct. 11, 2019. As a result of the agreement, Smith shall take no further direct or indirect tax benefit from such claims.

October 20, 2020 in AML | Permalink | Comments (0)

Monday, October 19, 2020

Robert Brockman, CEO of Multibillion-dollar Software Company Indicted for $2 Billion Decades-long Tax Evasion and Wire Fraud Schemes

Allegedly Used Secret Swiss and Bermudian Bank Accounts in Scheme to Conceal Approximately Two Billion Dollars of Capital Gains Income

A federal grand jury in San Francisco, California, returned a 39 count indictment charging Robert T. Brockman, the Chief Executive Officer of an Ohio-based software company, with tax evasion, wire fraud, money laundering, and other offenses, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Tax Division, U.S. Attorney David L. Anderson for the Northern District of California, and Chief of Internal Revenue Service (IRS) Criminal Investigation Jim Lee. The charges stem from an alleged decades-long scheme to conceal approximately $2 billion in income from the IRS as well as a scheme to defraud investors in the software company’s debt securities.

“Today’s indictment reflects the Department of Justice’s commitment to finding and prosecuting the costliest and most sophisticated tax crimes in the United States,” said Principal Deputy Assistant Attorney General of the Tax Division Richard E. Zuckerman.

“Complexity will not hide crime from law enforcement,” said U.S. Attorney Anderson. “Sophistication is not a defense to federal criminal charges. We will not hesitate to prosecute the smartest guys in the room.”

“As alleged, Mr. Brockman is responsible for carrying out an approximately two billion dollar tax evasion scheme,” said Jim Lee, Chief of IRS Criminal Investigation. “IRS Criminal Investigation aggressively pursues tax cheats domestically and abroad. No scheme is too complex or sophisticated for our investigators. Those hiding income or assets offshore are encouraged to come forward and voluntarily disclose their holdings.”

According to the indictment, Brockman, a resident of Houston, Texas, and Pitkin County, Colorado, used a web of offshore entities based in Bermuda and Nevis to hide from the IRS income earned on his investments in private equity funds which were managed by a San Francisco-based investment firm. As part of the alleged scheme, Brockman directed untaxed capital gains income to secret bank accounts in Bermuda and Switzerland. The indictment further alleges that to execute the fraud, between 1999 and 2019, Brockman took measures such as backdating records and using encrypted communications and code words to communicate with a co-conspirator, among other alleged actions.

In addition to the tax offenses, the indictment alleges that, between 2008 and 2010, Brockman engaged in a fraudulent scheme to obtain approximately $67.8 million in the software company’s debt securities. As CEO, Brockman was contractually restricted from purchasing any of the software company’s debt securities without prior notice, full disclosure, and amending the associated credit agreements. The indictment alleges that Brockman used a third-party to circumvent those requirements, to acquire the debt securities, and to conceal from the sellers valuable economic information. The indictment further alleges that Brockman used material, non-public information about the software company to make decisions about purchasing the debt. In addition, Brockman allegedly persuaded another individual to alter, destroy, and mutilate documents and computer evidence with the intent to impair the use of such evidence in a grand jury investigation.

Brockman is charged with conspiracy, in violation of 18 U.S.C. § 371; seven counts of tax evasion, in violation of 26 U.S.C. § 7201; six counts of failing to file foreign bank account reports, in violation of 31 U.S.C. §§ 5314 & 5322(b); 20 counts of wire fraud affecting a financial institution, in violation of 18 U.S.C. § 1343; two counts of concealment money laundering, in violation of 18 U.S.C. § 1956(a)(1)(B)(i)), and tax evasion money laundering, in violation of 18 U.S.C. § 1956(a)(1)(A)(ii)); and one count each of international concealment money laundering, in violation of 18 U.S.C. § 1956(a)(2)(B)(i)); evidence tampering, in violation of 18 U.S.C. § 1512(b)(2)(B), and destruction of evidence, in violation of 18 U.S.C. § 1512(c)(1).

October 19, 2020 in AML | Permalink | Comments (0)

Friday, October 16, 2020

Officials Announce International Operation Targeting Transnational Criminal Organization QQAAZZ that Provided Money Laundering Services to High-Level Cybercriminals

U.S. Victims of Various Cybercriminal Malware Schemes throughout the United States Had Stolen Multi-Million Dollar Funds Laundered by QQAAZZ
 

Fourteen members of the transnational criminal organization, QQAAZZ, were charged by a federal grand jury in the Western District of Pennsylvania in an indictment unsealed today.  A related indictment unsealed in October 2019 charged five members of QQAAZZ.  One additional conspirator, a Russian national, was arrested by criminal complaint in late March 2020 while visiting the United States, bringing the total number of charged defendants to 20.  Acting Assistant Attorney General Brian C. Rabbitt of the U.S. Department of Justice’s Criminal Division and U.S. Attorney Scott W. Brady for the Western District of Pennsylvania, made the announcement today.

The QQAAZZ members, acting in concert with cybercriminals across the world, are accused of conspiring to launder money stolen from victims of computer fraud in the United States and elsewhere.  More than 40 house searches were conducted in Latvia, Bulgaria, the United Kingdom, Spain and Italy, with criminal prosecutions initiated in the United States, Portugal, Spain and the United Kingdom.  The largest number of searches and arrests were carried out in Latvia by the Latvian State Police (Latvijas Valsts Policija), and an extensive bitcoin mining operation associated with the group was seized in Bulgaria.  Today’s announcement is in coordination with announcements by Europol and several law enforcement agencies across Europe who collaborated with the United States to develop parallel investigations and prosecutions of the QQAAZZ members in their own countries. 

“Today’s charges, brought in coordination with our European law enforcement partners, reflect the Criminal Division’s steadfast efforts to work with authorities worldwide to protect the public from fraudsters and the money launderers who help them hide their stolen money,” said Acting Assistant Attorney General Brian C. Rabbitt.  “Our message to money laundering organizations like QQAAZZ is simple: international borders will not stop the dedicated efforts of law enforcement across the globe to bring you to justice.  In addition to the Criminal Division team, I would like to recognize the outstanding efforts of the team led by U.S. Attorney Scott BradyFBI Pittsburgh, and our European partners.”

“Cybercrime victimizes individuals and companies all over the world, so our work to identify and disrupt cybercriminals requires global collaboration,” said U.S. Attorney Scott W. Brady for the Western District of Pennsylvania.  “For the past several years, law enforcement from 16 countries has been conducting coordinated investigations of this criminal gang, and now parallel prosecutions will commence in the United States, Portugal, United Kingdom and Spain.  As this case demonstrates, we will be relentless in our pursuit of cybercriminals regardless of where they reside.”

“This was an extensive investigation that had implications around the world,” said FBI Pittsburgh Special Agent in Charge Michael Christman. “Partnerships are essential, as no one agency can combat cybercrime alone. This case highlights the FBI’s strategy to target and dismantle the most significant cybercriminal enterprises through a global task force approach. I can assure everyone that the FBI and our partners will continue to work tirelessly to combat these cyber threats.”

“Cybercriminals are constantly exploring new possibilities to abuse technology and financial frameworks to victimize millions of users in a moment from anywhere in the world,” said Fernando Ruiz, Head of Europol’s European Cybercrime Centre.  “Today’s operation shows how through a proper law enforcement international coordination we can turn the table on these criminals and bring them to justice.”

The indictment alleges that the QQAAZZ network laundered, or attempted to launder, tens of millions of dollars’ worth of stolen funds from victims of cybercrimes since 2016.

Comprised of several layers of members from Latvia, Georgia, Bulgaria, Romania, and Belgium, among other countries, the QQAAZZ network opened and maintained hundreds of corporate and personal bank accounts at financial institutions throughout the world to receive money from cybercriminals who stole it from bank accounts of victims.  The funds were then transferred to other QQAAZZ-controlled bank accounts and sometimes converted to cryptocurrency using “tumbling” services designed to hide the original source of the funds.  After taking a fee of up to 40 to 50 percent, QQAAZZ returned the balance of the stolen funds to their cybercriminal clientele.  

The QQAAZZ members secured these bank accounts by using both legitimate and fraudulent Polish and Bulgarian identification documents to create and register dozens of shell companies which conducted no legitimate business activity. Using these registration documents, the QQAAZZ members then opened corporate bank accounts in the names of the shell companies at numerous financial institutions around the world, thereby generating hundreds of QQAAZZ-controlled bank accounts available to receive stolen funds from cyber thieves.

QQAAZZ advertised its services as a “global, complicit bank drops service” on Russian-speaking online cybercriminal forums where cybercriminals gather to offer or seek specialized skills or services needed to engage in a variety of cybercriminal activities. The criminal gangs behind some of the world’s most harmful malware families (e.g.: Dridex, Trickbot, GozNym, etc.) are among those cybercriminal groups that benefited from the services provided by QQAAZZ. 

The 14 defendants named in the indictment unsealed today are:

  1. Nika Nazarovi, aka “Nika Utiashvili,” aka “Mihail Atansov,” aka “Stefan Trifonov Zhelyazkov,” 32, of Georgia;
  2. Martins Ignatjevs, aka “Yordan Angelov Stoyanov,” aka “Aleksander Tihomirov,” aka “Svetlin Iliyanov Asenov,” 33, of Latvia;
  3. Aleksandre Kobiashvili, aka “Antonios Nastas,” aka “Ognyan Krasimirov Trifonov,” 32, of Georgia;
  4. Dmitrijs Kuzminovs, aka “Parush Gospodinov Genchev,” 35, of Latvia;
  5. Valentins Sevecs, aka “Marek Jaswilko,” aka “Rafal Szczytko,” 32, of Latvia;
  6. Dmitrijs Slapins, 35, of Latvia;
  7. Armens Vecels, 24, of Latvia;
  8. Artiom Capacli, 31, of Bulgaria;
  9. Ion Cebanu, 26, of Romania;
  10. Tomass Trescinkas, 25, of Latvia;
  11. Ruslans Sarapovs, 19, of Latvia;
  12. Silvestrs Tamenieks, 21, of Latvia;
  13. Abdelhak Hamdaoui, 48, of Belgium; and
  14. Petar Iliev, 37, of Bulgaria.

The five defendants charged in the indictment unsealed in October 2019 are:

  1. Aleksejs Trofimovics, aka “Aleksejs Trofimovich,” aka “Alexey Trofimovich,” aka “Aleko Stoyanov Angelov,” 24, of Latvia;
  2. Ruslans Nikitenko, aka “Krzysztof Wojciech Lewko,” aka “Milen Nikolchev Nikolov,” aka “Rafal Zimnoch,” 41, of Latvia;  
  3. Arturs Zaharevics, aka “Piotr Ginelli,” aka “Arkadiusz Szuberski,” 33, of Latvia;
  4. Deniss Ruseckis, aka “Denis Rusetsky,” aka “Sevdelin Sevdalinov Atanasov,” 24, of Latvia; and
  5. Deinis Gorenko, 25, of Latvia.                

The Russian national charged by criminal complaint and arrested in late March 2020 while visiting the United States is Maksim Boiko, aka “Maxim Boyko” aka “gangass,” 30, of Russia.

The U.S. victims who had funds stolen, or attempted to be stolen, from their online bank accounts (including from banks headquartered in Pittsburgh, Pennsylvania) and destined for QQAAZZ-controlled bank accounts overseas include:

  • a technology company in Windsor, Connecticut;
  • a Jewish Orthodox Synagogue in Brooklyn, New York;
  • a medical device manufacturer in York, Pennsylvania;
  • an individual in Montclair, New Jersey;
  • an architecture firm in Miami, Florida;
  • an individual in Acworth, Georgia;
  • an automotive parts manufacturer in Livonia, Michigan;
  • a homebuilder in Skokie, Illinois;
  • an individual in Carrollton, Texas; and
  • an individual in Villa Park, California.  

Acting Assistant Attorney General Rabbitt and U.S. Attorney Brady praised the outstanding investigative work of the FBI’s Pittsburgh Field Office and their law enforcement partners from Portugal, Spain, the United Kingdom, Latvia, Bulgaria, Georgia, Italy, Switzerland, Poland, Czech Republic, Australia, Sweden, Austria, Germany and Belgium.  Acting Assistant Attorney General Rabbitt and U.S. Attorney Brady also thanked Europol in The Hague, Netherlands for coordinating the investigative efforts of the law enforcement agencies from the 15 participating countries.  The Justice Department’s Office of International Affairs of the Department’s Criminal Division provided significant assistance by coordinating requests to foreign countries for searches, arrests, extraditions and evidence sharing.  Assistance was also provided by the National Cyber-Forensics and Training Alliance (NCFTA) in Pittsburgh.   

The case is being prosecuted by Assistant U.S. Attorney Charles A. “Tod” Eberle, Chief of the National Security and Cybercrime Section for the Western District of Pennsylvania, Assistant U.S. Attorney Brian Czarnecki of the Western District of Pennsylvania, and Trial Attorney Michael Parker of the Money Laundering and Asset Recovery Section of the U.S. Department of Justice’s Criminal Division.

October 16, 2020 in AML | Permalink | Comments (0)

Monday, October 12, 2020

Africa could gain $89 billion annually by curbing illicit financial flows

UNCTAD’s Economic Development in Africa Report 2020 says stopping illicit capital flight could almost cut in half the annual financing gap of $200 billion that the continent faces to achieve the Sustainable Development Goals.

Every year, an estimated $88.6 billion, equivalent to 3.7% of Africa’s GDP, leaves the continent as illicit capital flight, according to UNCTAD’s Economic Development in Africa Report 2020.

Illicit financial flows (IFFs) are movements of money and assets across borders which are illegal in source, transfer or use, according to the report entitled “Tackling illicit financial flows for sustainable development in Africa.”

It shows that these outflows are nearly as much as the combined total annual inflows of official development assistance, valued at $48 billion, and yearly foreign direct investment, pegged at $54 billion, received by African countries – the average for 2013 to 2015.

“Illicit financial flows rob Africa and its people of their prospects, undermining transparency and accountability and eroding trust in African institutions,” said UNCTAD Secretary-General Mukhisa Kituyi.

These outflows include illicit capital flight, tax and commercial practices like mis-invoicing of trade shipments and criminal activities such as illegal markets, corruption or theft. 

From 2000 to 2015, the total illicit capital flight from Africa amounted to $836 billion. Compared to Africa’s total external debt stock of $770 billion in 2018, this makes Africa a “net creditor to the world”, the report says.

IFFs are concentrated in high-value, low-weight commodities, especially gold

The report’s analysis also demonstrates that IFFs in Africa are not endemic to specific countries, but rather to certain high-value, low-weight commodities.

Of the estimated $40 billion of IFFs derived from extractive commodities in 2015, 77% were concentrated in the gold supply chain, followed by diamonds (12%) and platinum (6%).

This finding offers new insights for researchers and policymakers studying how to identify and curb IFFs and is relevant to all gold-exporting countries in Africa, for example, despite their differing local conditions.

The report aims to equip African governments with knowledge on how to identify and evaluate risks associated with IFFs, as well as solutions to curb IFFs and redirect the proceeds towards the achievement of national priorities and the SDGs.

It calls for global efforts to promote international cooperation to combat IFFs. It also advocates for strengthening good practices on the return of assets to foster sustainable development and the achievement of the 2030 Agenda for Sustainable Development.

Need to collect better trade data to detect risks related to IFFs

Specific data limitations affected efforts to estimate IFFs. Only 45 out of 53 African countries provide data to the UN International Trade Statistics Database (UN Comtrade) in a continuous manner allowing trade statistics to be compared over time.  

The report highlights the importance of collecting more and better trade data to detect risks related to IFFs, increase transparency in extractive industries and tax collection.

The UNCTAD Automated System for Customs Data (ASYCUDA), including its new module for mineral production and export, called MOSES (Mineral Output Statistical Evaluation System), are potential available solutions.

African countries also need to enter automatic exchange of tax information agreements to effectively tackle IFFs.

Africa should improve regional cooperation on IFFs and tax

Although IFFs are a major constraint to domestic resource mobilization in Africa, African governments are not yet sufficiently engaging in the reform of the international taxation system.

Transparency and cooperation between tax administrations globally and within the continent is key to the fight against tax evasion and tax avoidance.

Regarding regional cooperation on taxation within the continent, the African Tax Administration Forum can provide a platform for regional cooperation among African countries.

Regional knowledge networks to enhance national capacities to tackle proceeds of money laundering and recover stolen assets, including within the context of the African Continental Free Trade Area (AfCFTA), are crucial in the fight against corruption and crime-related IFFs, the report says.

Tackling IFFs requires international action

Tax revenues lost to IFFs are especially costly for Africa, where public investments and spending on the SDGs are most lacking. In 2014, Africa lost an estimated $9.6 billion to tax havens, equivalent to 2.5% of total tax revenue.

Tax evasion is at the core of the world's shadow financial system. Commercial IFFs are often linked to tax avoidance or evasion strategies, designed to shift profits to lower-tax jurisdictions.

Due to the lack of domestic transfer pricing rules in most African countries, local judicial authorities lack the tools to challenge tax evasion by multinational enterprises.

But IFFs are not just a national concern in Africa. Nigeria’s President Muhammadu Buhari said: “Illicit financial flows are multidimensional and transnational in character. Like the concept of migration, they have countries of origin and destination, and there are several transit locations. The whole process of mitigating illicit financial flows, therefore, cuts across several jurisdictions.”

Solutions to the problem must involve international tax cooperation and anti-corruption measures. The international community should devote more resources to tackle IFFs, including capacity-building for tax and customs authorities in developing countries.

African countries need to strengthen engagement in international taxation reform, make tax competition consistent with protocols of the AfCFTA and aim for more taxing rights.

October 12, 2020 in AML | Permalink | Comments (0)

Thursday, October 8, 2020

United States Obtains Final Judgement Confiscating Proceeds of Edward Snowden's Book

On Sept. 29, 2020, the U.S. District Court for the Eastern District of Virginia entered a final judgement and permanent injunction against Edward Snowden, a former employee of the Central Intelligence Agency (CIA) and contractor for the National Security Agency (NSA).

In September 2019, the United States filed a lawsuit against Snowden, who published a book entitled Permanent Record in violation of the non-disclosure agreements he signed with both CIA and NSA. The lawsuit alleged that Snowden published his book without submitting it to the agencies for pre-publication review, in violation of his express obligations under the agreements he signed. Additionally, the lawsuit alleges that Snowden has given public speeches on intelligence-related matters, also in violation of his non-disclosure agreements.

The United States’ lawsuit did not seek to stop or restrict the publication or distribution of Permanent Record. Rather, under well-established Supreme Court precedent, Snepp v. United States, the government sought to recover all proceeds earned by Snowden because of his failure to submit his publication for pre-publication review in violation of his alleged contractual and fiduciary obligations.

In December 2019, the U.S. District Court for the Eastern District of Virginia, found in favor of the United States in the suit against Snowden on the issue of liability and held that Snowden breached his contractual and fiduciary obligations to the CIA and NSA by publishing Permanent Record and giving prepared remarks within the scope of his pre-publication review obligations, but reserved judgment on the scope of these violations or the remedies due to the government.  On Tuesday, the court entered judgment in the government’s favor in an amount exceeding $5.2 million and imposed a constructive trust for the benefit of the United States over those sums and any further monies, royalties, or other financial advantages derived by Snowden from Permanent Record and 56 specific speeches. 

“Edward Snowden violated his legal obligations to the United States, and therefore, his unlawful financial gains must be relinquished to the government,” said Deputy Attorney General Jeffrey A. Rosen.  “As this case demonstrates, the Department of Justice will not overlook the wrongful actions of those who seek to betray the trust reposed in them and to personally profit from their access to classified national security information.”

“Intelligence information should protect our nation, not provide personal profit,” said G. Zachary Terwilliger, U.S. Attorney for the Eastern District of Virginia. “This judgment will ensure that Edward Snowden receives no monetary benefits from breaching the trust placed in him.”

“We will pursue those who take advantage of sensitive positions in government to profit from the classified information learned during their government service,” said Jeffrey Bossert Clark, Acting Assistant Attorney General of the Civil Division.

This lawsuit is separate from the criminal charges brought against Snowden for his alleged disclosures of classified information. This lawsuit is a civil action, and based solely on Snowden’s failure to comply with the clear pre-publication review obligations included in his signed non-disclosure agreements.

October 8, 2020 in AML | Permalink | Comments (0)

Tuesday, October 6, 2020

Chinese National Sentenced for Laundering Millions for Mexican Drug Cartels

A Chinese national was sentenced today to five years in prison and ordered to forfeit more than $4.2 million for laundering drug proceeds generated by large-scale cocaine trafficking in the United States.

Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division; U.S. Attorney G. Zachary Terwilliger for the Eastern District of Virginia; Special Agent in Charge Wendy C. Woolcock for the U.S. Drug Enforcement Administration’s (DEA) Special Operations Division; Special Agent in Charge Jeffrey T. Scott of DEA's Louisville, Kentucky Field Division; Chief Jason Crosby of the Criminal Investigations Division of the U.S. Department of State’s Diplomatic Security Service (DSS); and Special Agent in Charge James Gibbons of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) Chicago, Illinois made the announcement after sentencing by U.S. District Judge Leonie M. Brinkema for the Eastern District of Virginia.

According to court documents, Xueyong Wu, 40, cultivated relationships with Latin American drug trafficking organizations to transport and launder their United States-based drug proceeds. Much of this money was repatriated to Mexico through a complex series of international financial transactions. Wu received a percentage of the money involved in these transactions as compensation for organizing these laundering activities. Much of this money was generated through movement of cocaine or payment for cocaine that took place within the Eastern District of Virginia.

October 6, 2020 in AML | Permalink | Comments (0)

Monday, October 5, 2020

China's progress in strengthening measures to tackle money laundering and terrorist financing

 Since the 2019 assessment of the People’s Republic of China’s (China) measures to tackle money laundering and terrorist financing, the country has taken a number of actions to strengthen its framework. Follow-Up Report China - 2020 

China has been in an enhanced follow-up process following the adoption of its mutual evaluation in 2019. In line with the FATF Procedures for mutual evaluations, the country has reported back to the FATF on the actions it has taken since then.
To reflect China' progress, the FATF has re-rated the country on the following Recommendation:

  • Recommendation 26 (Regulation and supervision of financial institutions) - from partially compliant to largely compliant
  • Recommendation 34 (Guidance and feedback) – from partially compliant to largely compliant

The report also looks at whether China’s measures meet the requirements of FATF Recommendations that have changed since the 2019 mutual evaluation. The FATF agreed to maintain the rating of Compliant for Recommendation 2 (National cooperation and coordination). The FATF upgraded the rating for Recommendation 15 (New technologies) from partially compliant to largely compliant.

China is now compliant on 7 of the 40 Recommendations and largely compliant on 18 of them. It remains partially compliant on 9 of the 40 Recommendations and not compliant on 6 of them. China remains in enhanced follow-up and will report back to the FATF on progress to strengthen its implementation of Anti-Money Laundering / Countering the Financing of Terrorism measures in October 2021.

October 5, 2020 in AML | Permalink | Comments (0)

South Florida Lawyer Andrew Dale Ledbetter Charged with $100 Million Fraud Related to 1 Global Capital Investment Scheme

A Florida attorney and former outside counsel for 1 Global Capital LLC (1 Global), has been charged today with conspiring to commit wire fraud and securities fraud in connection with an investment fraud scheme that as alleged impacted more than 3,600 investors in 42 different states, and involved him personally and fraudulently raising more than $100 million from investors. 

Andrew Dale Ledbetter, 78, of Fort Lauderdale, Florida, is charged in an information with conspiracy to commit wire fraud and securities fraud.  The case is assigned to U.S. District Judge Darrin P. Gayles of the Southern District of Florida.  Download Ledbetter Information

According to the allegations in the information, 1 Global was a commercial lending business based in Hallandale Beach, Florida, that made the equivalent of “pay day” loans with high interest rates to small businesses, termed merchant cash advance loans (MCAs).  To fund these loans, 1 Global obtained funds from investors nationwide, offering short-term investment contracts that promised to “place” the investors’ money onto MCAs.  The investors would supposedly receive a proportionate share of the principal and interest payments as the loans were repaid.  1 Global raised money using investment advisors and other intermediaries, with promises to these advisors of significant commissions.  In many cases, according to court documents, the commissions were not fully disclosed to investors.  Ledbetter was an attorney licensed in the State of Florida who worked at Law Firm #1 and acted in a fundraising capacity at 1 Global beginning in or around 2015.

Substantial questions arose during the operation of the business as to whether 1 Global was offering or selling a security and whether the investment offering was required to be registered with the U.S. Securities and Exchange Commission.  These questions were raised by investors, investment advisors, and regulators.  Ledbetter and Jan Douglas Atlas, a partner at Law Firm #1 who also acted as outside counsel for 1 Global, knew that if 1 Global’s investment offering were determined to be a security, it would undermine the ability of 1 Global to raise funds from retail investors and to continue to operate without substantial additional expenses and reporting requirements.  Such a classification would undermine the profits and fees that Ledbetter and other principals at 1 Global would be able to obtain from 1 Global’s operations.

The information alleges that at the request of 1 Global’s principals, Atlas authored two opinion letters in 2016 containing false information that Atlas knew would be used by 1 Global to operate the business unlawfully.  The opinion letters falsely described the duration of the investment, among other things, omitting the automatic renewal aspect and that the investment was being targeted toward retail, non-sophisticated investors (such as IRA account holders).   According to the information, Ledbetter used and relied on Atlas’s opinion letters to continue to raise money illegally, knowing that the opinion letters falsely described the investment opportunity and were thus misleading.  Ledbetter cited and used the false letters in numerous pitches and communications to investment advisors and investors.

According to the information, Ledbetter was personally involved in raising more than $100 million in investor funds that went to 1 Global, through his own pitches as well as through investment advisors he attracted to 1 Global.  Over the years, Ledbetter received approximately $3 million from 1 Global, the majority of which was for commissions.  Ledbetter routinely held himself out to investors and investment advisers as outside counsel to 1 Global, and also personally vouched for 1 Global in pitches and marketing materials.  However, Ledbetter did not disclose the commissions that he received from 1 Global to investors, according to the information.  Ledbetter also made misrepresentations to investors regarding the involvement of an outside auditing firm. 

A number of individuals have entered guilty pleas in connection with the 1 Global fraud scheme.  Alan G. Heide, the former 1 Global chief financial officer, was charged via information and sentenced to 60 months, in Case No. 19-60231-CR-RKA.  Atlas, former outside counsel for 1 Global, was charged via information, pleaded guilty, and is awaiting sentencing in Case No. 19-60258-RKA, currently scheduled for Nov. 17, 2020.  Steven Schwartz, a former director of 1 Global, was charged via information, pleaded guilty, and is awaiting sentencing in Case No. 20-60003-RKA, currently scheduled for Nov. 13, 2020.  Information about the related cases can be found here:  https://www.justice.gov/criminal-vns/case/1Global-Capital.

In connection with a parallel civil enforcement action, the SEC today announced the filing of civil fraud charges against Ledbetter.  In related cases, the SEC previously has filed civil fraud actions, SEC v. 1 Global Capital LLC and Carl C. Ruderman, Case No. 18-61991-CV-BB (Sothern District of Florida) SEC v. Alan G. Heide, Case No. 19-62047-CV-FAM (Southern District of Florida), and SEC v. Jan Atlas, Case No. 19-62303-WPD (Southern District of Florida).  The bankruptcy case, In re: 1 Global Capital LLC, et al., No. 18-19121-RBR (Southern District of Florida), remains pending.

October 5, 2020 in AML | Permalink | Comments (0)

Friday, October 2, 2020

Owner of Bitcoin Exchange Convicted of Racketeering Conspiracy for Laundering Millions of Dollars in International Cyber Fraud Scheme

A Bulgarian national was found guilty for his role in a transnational and multi-million dollar scheme to defraud American victims through online auction fraud.

Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division, U.S. Attorney Robert M. Duncan Jr. of the Eastern District of Kentucky, Assistant Director Michael D’Ambrosio of U.S. Secret Service’s Office of Investigations and Kentucky State Police Commissioner Rodney Brewer made the announcement.  

Rossen Iossifov, 53, formerly of Bulgaria, was convicted by a federal jury in Frankfort, Kentucky of one count of conspiracy to commit racketeering and one count of conspiracy to commit money laundering after a two-week trial in front of U.S. District Judge Robert E. Wier.  Sentencing has been set for Jan. 12, 2021.

According to court documents and evidence presented at trial, Iossifov and his co-conspirators participated in a criminal conspiracy that engaged in a large-scale scheme of online auction fraud that victimized at least 900 Americans.  Specifically, Romania-based members of the conspiracy posted false advertisements to popular online auction and sales websites—such as Craigslist and eBay—for high-cost goods (typically vehicles) that did not actually exist.  Members of the conspiracy would convince American victims to send money for the advertised goods by crafting persuasive narratives, for example, by impersonating a military member who needed to sell the advertised item before deployment.

According to court documents, members of the conspiracy created fictitious online accounts to post these advertisements and communicate with victims, often using the stolen identities of Americans to do so.  They also delivered invoices to the victims bearing trademarks of reputable companies in order to make the transaction appear legitimate.  Members of the conspiracy also set up call centers, impersonating customer support, to address questions and alleviate concerns over the advertisements.

According to court documents, once victims were convinced to send payment, the conspiracy participants engaged in a complicated money laundering scheme wherein domestic associates would accept victim funds, convert these funds to cryptocurrency, and transfer proceeds in the form of cryptocurrency to foreign-based money launderers.

According to evidence presented at trial, Iossifov was the owner of RG Coins, a Bulgaria-based Bitcoin exchange.  From at least September 2015 to at least December 2018, he exchanged cryptocurrency into local fiat currency on behalf of the Romania-based members of the conspiracy, knowing that the Bitcoin represented the proceeds of illegal activity.  According to trial testimony, for example, in just the span of about two and a half years, Iossifov exchanged over $4.9 million worth of Bitcoin for just four other members of the criminal enterprise. 

Seventeen total defendants have been convicted in this case.  Three others are fugitives.

October 2, 2020 in AML | Permalink | Comments (0)

Thursday, October 1, 2020

Linde Engineering To Pay $22 Million To Settle False Claims Act Allegations Relating to Evaded U.S. Customs Duties, Whistleblower Earns $3.7 Million

Linde GmbH and its U.S. subsidiary Linde Engineering North America LLC (LENA) (together, “Linde”) have agreed to pay the United States more than $22.2 million to resolve allegations that Linde violated the False Claims Act by knowingly making false statements on customs declarations to avoid paying duties owed on the companies’ imports, the Justice Department announced today. 

“This settlement reflects our commitment to hold accountable those who evade duties owed on imported goods, including antidumping and countervailing duties that level the playing field for U.S. manufacturers,” said Acting Assistant Attorney General Jeffrey Bossert Clark for the Department of Justice’s Civil Division.  “The Department of Justice will zealously pursue those who seek an unfair advantage in U.S. markets by bringing underpriced goods into this country.”    

“Trade policy is a critical part of our nation’s economic stability and security,” said First Assistant U.S. Attorney for the Eastern District of Pennsylvania Jennifer Arbittier Williams.  “Anti-dumping and countervailing duties ensure that American manufacturers are protected from unfair trade practices, and valuation requirements help to ensure that importers do not have an incentive to use foreign engineers instead of hiring in the United States.”

“U.S. Customs and Border Protection is proud to work with the Department of Justice to enforce our trade laws. Collecting revenue on behalf of the American people is something we take very seriously,”  said Brenda Smith, Executive Assistant Commissioner, CBP Office of Trade.  “We are glad to have come to an equitable and productive solution.” 

Linde GmbH is a multinational corporation headquartered in Germany that, among other things, imports materials into the United States for use in the construction of natural gas and chemical manufacturing plants.  Houston-based LENA managed procurement and logistics for Linde, which imported more than $500 million in goods into the United States between 2011 and 2017.

To enter goods into the United States, an importer must declare, among other things, the country of origin of the goods, the value of the goods, whether the goods are covered by antidumping or countervailing duties, and the amount of duties owed.  U.S. Customs and Border Protection (CBP) relies on these representations to determine the correct amount of any duties owed.  It is the importer’s affirmative duty to use “reasonable care” to make sure that such information is accurate so that CBP can assess the proper duties.

The United States alleged that, between 2011 and 2017, Linde avoided duties owed to the United States, including in some instances antidumping and countervailing duties, by misrepresenting the nature, classification, and valuation of imported merchandise, as well as the applicability of free trade agreements.  

Prior to the United States’ disclosure to Linde of its investigation, Linde made a partial disclosure to CBP regarding its importing practices.  In the settlement, the United States acknowledged Linde’s cooperation.

The settlement with Linde resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery.  The civil lawsuit was filed in the Eastern District of Pennsylvania and is captioned United States ex rel. Johnson v. Linde AG, et al., No. 17-cv-1012.  As part of today’s resolution, Ms. Johnson will receive approximately $3.7 million.

October 1, 2020 in AML | Permalink | Comments (0)

Tuesday, September 29, 2020

JPMorgan Chase Pays $920 Million in Deferred Prosecution Agreement from Criminal Sanctions for Fraud in Precious Metals and U.S. Treasuries Markets

JPMorgan Chase & Co. (JPMorgan), a New York, New York-based global banking and financial services firm, has entered into a resolution with the Department of Justice to resolve criminal charges related to two distinct schemes to defraud: the first involving tens of thousands of episodes of unlawful trading in the markets for precious metals futures contracts, and the second involving thousands of episodes of unlawful trading in the markets for U.S. Treasury futures contracts and in the secondary (cash) market for U.S. Treasury notes and bonds.

JPMorgan entered into a deferred prosecution agreement (DPA) in connection with a criminal information filed today in the District of Connecticut charging the company with two counts of wire fraud.  Under the terms of the DPA, JPMorgan will pay over $920 million in a criminal monetary penalty, criminal disgorgement, and victim compensation, with the criminal monetary penalty credited against payments made to the Commodity Futures Trading Commission (CFTC) under a separate agreement with the CFTC being announced today and with part of the criminal disgorgement credited against payments made to the Securities Exchange Commission (SEC) under a separate agreement with the SEC being announced today.

“For over eight years, traders on JP Morgan’s precious metals and U.S. Treasuries desks engaged in separate schemes to defraud other market participants that involved thousands of instances of unlawful trading meant to enhance profits and avoid losses,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division.  “Today’s resolution — which includes a significant criminal monetary penalty, compensation for victims, and requires JP Morgan to disgorge its unlawful gains — reflects the nature and seriousness of the bank’s offenses and represents a milestone in the department’s ongoing efforts to ensure the integrity of public markets critical to our financial system.”    

“JPMorgan engaged in two separate years-long market manipulation schemes,” said U.S. Attorney John H. Durham of the District of Connecticut.  “Not only will the company pay a substantial financial penalty and return money to victims, but this agreement requires JPMorgan to self-report violations of the federal anti-fraud laws and cooperate in any future criminal investigations.  I thank the FBI for its dedication in investigating these deceptive trading practices and other sophisticated financial crimes.”

“For nearly a decade, a significant number of JP Morgan traders and sales personnel openly disregarded U.S. laws that serve to protect against illegal activity in the marketplace,” said Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office.  “Today's deferred prosecution agreement, in which JP Morgan Chase and Co. agreed to pay nearly one billion dollars in penalties and victim compensation, is a stark reminder to others that allegations of this nature will be aggressively investigated and pursued.”

According to admissions and court documents, between approximately March 2008 and August 2016, numerous traders and sales personnel on JPMorgan’s precious metals desk located in New York, London, and Singapore engaged in a scheme to defraud in connection with the purchase and sale of gold, silver, platinum, and palladium futures contracts (collectively, precious metals futures contracts) that traded on the New York Mercantile Exchange Inc. and Commodity Exchange Inc., which are commodities exchanges operated by the CME Group Inc.  In tens of thousands of instances, traders on the precious metals desk placed orders to buy and sell precious metals futures contracts with the intent to cancel those orders before execution, including in an attempt to profit by deceiving other market participants through injecting false and misleading information concerning the existence of genuine supply and demand for precious metals futures contracts.  In addition, on certain occasions, traders on the precious metals desk engaged in trading activity that was intended to deliberately trigger or defend barrier options held by JPMorgan and thereby avoid losses.

One of the traders on the precious metals desk, John Edmonds, 38, of Brooklyn, New York, pleaded guilty on Oct. 9, 2018, to one count of commodities fraud and one count of conspiracy to commit wire fraud, commodities fraud, commodities price manipulation, and spoofing, and his sentencing, at this time, has not been scheduled before U.S. District Judge Robert N. Chatigny of the District of Connecticut.  Another one of the traders on the precious metals desk, Christian Trunz, 35, of New York, New York, pleaded guilty on Aug. 20, 2019, to one count of conspiracy to engage in spoofing and one count of spoofing in connection with his precious metals futures contracts trading at JPMorgan and another financial services firm, and his sentencing is scheduled for Jan. 28, 2021, before U.S. District Judge Sterling Johnson of the Eastern District of New York. 

Finally, as part of the investigation, the department obtained a superseding indictment on Nov. 15, 2019 against three former JPMorgan traders, Gregg Smith, Michael Nowak, and Christopher Jordan, and one former salesperson, Jeffrey Ruffo, in the Northern District of Illinois that charged them for their alleged participation in a racketeering conspiracy and other federal crimes in connection with the manipulation of the precious metals futures contracts markets.  An indictment is merely an allegation and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Also according to admissions and court documents, between approximately April 2008 and January 2016, traders on JPMorgan’s U.S. Treasuries desk located in New York and London engaged in a scheme to defraud in connection with the purchase and sale of U.S. Treasury futures contracts that traded on the Chicago Board of Trade, which is a commodities exchange operated by the CME Group Inc., and of U.S. Treasury notes and bonds traded in the secondary cash market (the U.S. Treasury futures, notes, and bonds, collectively, U.S. Treasury Products).  In thousands of instances, traders on the U.S. Treasuries desk placed orders to buy and sell U.S. Treasury Products with the intent to cancel those orders before execution, including in an attempt to profit by deceiving other market participants through injecting false and misleading information concerning the existence of genuine supply and demand for U.S. Treasury Products.

As part of the DPA, JPMorgan, and its subsidiaries JPMorgan Chase Bank, N.A. (JPMC) and J.P. Morgan Securities LLC (JPMS) have agreed to, among other things, continue to cooperate with the Fraud Section and the U.S. Attorney’s Office for the District of Connecticut in any ongoing or future investigations and prosecutions concerning JPMorgan, JPMC, JPMS, and their subsidiaries and affiliates, and their officers, directors, employees and agents.  As part of its cooperation,  JPMorgan, JPMC, and JPMS are required to report evidence or allegations of conduct which may constitute a violation of the wire fraud statute, the anti-fraud, anti-spoofing and/or anti-manipulation provisions of the Commodity Exchange Act, the securities and commodities fraud statute, and federal securities laws prohibiting manipulative and deceptive devices.  In addition, JPMorgan, JPMC, and JPMS have also agreed to enhance their compliance program where necessary and appropriate, and to report to the government regarding remediation and implementation of their enhanced compliance program.

The department reached this resolution with JPMorgan based on a number of factors, including the nature and seriousness of the offense conduct, which spanned eight years and involved tens of thousands of instances of unlawful trading activity; JPMorgan’s failure to fully and voluntarily self‑disclose the offense conduct to the department; JPMorgan’s prior criminal history, including a guilty plea on May 20, 2015, for similar misconduct involving manipulative and deceptive trading practices in the foreign currency exchange spot market (FX Guilty Plea); and the fact that substantially all of the offense conduct occurred prior to the FX Guilty Plea. 

JPMorgan received credit for its cooperation with the department’s investigation and for the remedial measures taken by JPMorgan, JPMC, and JPMS, including suspending and ultimately terminating individuals involved in the offense conduct, adopting heightened internal controls, and substantially increasing the resources devoted to compliance.  Significantly, since the time of the offense conduct, and following the FX Guilty Plea, JPMorgan, JPMC, and JPMS engaged in a systematic effort to reassess and enhance their market conduct compliance program and internal controls.  These enhancements included hiring hundreds of new compliance officers, improving their anti-fraud and manipulation training and policies, revising their trade and electronic communications surveillance programs, implementing tools and processes to facilitate closer supervision of traders, taking into account employees’ commitment to compliance in promotion and compensation decisions, and implementing independent quality assurance testing of non-escalated and escalated surveillance alerts.  Based on JPMorgan’s, JPMC’s and JPMS’ remediation and the state of their compliance program, the department determined that an independent compliance monitor was unnecessary. 

Today, the CFTC announced a separate settlement with JPMorgan, JPMC, and JPMS in connection with a related, parallel proceeding.  Under the terms of that resolution, JPMorgan agreed to pay approximately $920 million, which includes a civil monetary penalty of approximately $436 million, as well as restitution and disgorgement that will be credited to any such payments made to the department under the DPA.  Also, the SEC announced today a separate settlement with JPMS in connection with a related, parallel proceeding regarding trading activity in the secondary cash market for U.S. Treasury notes and bonds.  Under the terms of that resolution, JPMS agreed to pay $10 million in disgorgement and a civil monetary penalty of $25 million.

The FBI’s New York Field Office investigated this case.  Assistant Chief Avi Perry and Trial Attorney Matthew F. Sullivan of the Fraud Section and Assistant U.S. Attorney Jonathan Francis of the District of Connecticut prosecuted the case.  

September 29, 2020 in AML | Permalink | Comments (0)

Department of Justice Begins Second Distribution of Funds Recovered Through Asset Forfeiture to Compensate Victims of Western Union Fraud Scheme, Bringing Total to Over $300 Million

The Department of Justice announced today that the Western Union Remission Fund began its second distribution of approximately $148 million in funds forfeited to the U.S. government from the Western Union Company (Western Union) to approximately 33,000 victims located in the United States and abroad. These victims, many of whom were elderly victims of consumer fraud and abuse, will be recovering the full amount of their losses.

This is the second in a series of payment distributions to occur in the Western Union remission.  The first distribution paid approximately $153 million to over 109,000 victims in March of this year.  The Department of Justice anticipates authorizing compensation for many more victims in the coming months.  The department is accepting petitions on an ongoing basis and will be providing potential victims who have not applied for remission the opportunity to apply.

“Through the tireless work of the Department of Justice, today 33,000 more individuals, including many elderly victims of the criminals who exploited Western Union’s deficient anti-money laundering controls, are being made whole through this distribution of an additional $148 million,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division.  “Together with the first distribution, the department has now remitted more than $300 million to over 142,000 victims of this fraud.  These results reinforce the department’s commitment to compensating victims whenever possible.”

“After the first distribution of funds to victims of these nefarious scammers, I said that it was a good start,” said U.S. Attorney David J. Freed. “Today’s announcement marks another important event in this lengthy and complicated case.  While ensuring fair business practices and anti-fraud programs is certainly a worthy goal, our aim is always to compensate our victims. We credit the innovative and industrious efforts of our investigative partners and thank them for their sustained efforts to make the victims whole.”

“We are very pleased to deliver $148 million to provide financial justice for these thousands of victims,” said Damon E Wood, Inspector in Charge of the U.S. Postal Inspection Service’s (USPIS) Philadelphia Division.  “This brings the total returned to victims to over $300 million.  Especially in these difficult times, the monies will hopefully provide relief for those who were scammed.  The Postal Inspection Service will continue to be at the forefront of protecting Americans from the scams that harm our most vulnerable citizens and delivering justice for all.”

In 2017, Western Union entered into a deferred prosecution agreement (DPA) with the United States.  Pursuant to the DPA, Western Union acknowledged responsibility for its criminal conduct, which included violations of the Bank Secrecy Act and aiding and abetting wire fraud, and agreed to forfeit $586 million, which has been made available to compensate victims of the international consumer fraud scheme through the remission process. Western Union simultaneously resolved a parallel civil investigation with the Federal Trade Commission.

In this scheme, fraudsters targeted consumers, including seniors, through multiple scams.  Three specific scams directed towards seniors include the grandparent scam, where the fraudster would pose as the victim’s relative in need of immediate money to avoid personal harm, lottery or sweepstakes scams, where the fraudster would tell the victim that they had won a large cash prize but had to pay fees such as taxes to claim the prize, and romance scams, where the fraudster would pose as an online love interest and request funds for a visit or for another purpose.  In each of these scams the fraudsters convinced their victims to send money through Western Union.

Certain owners, operators or employees of Western Union agent locations were complicit in the schemes.  Western Union aided and abetted the fraud scheme by failing to suspend or terminate complicit agents and by allowing them to continue to process fraud-induced monetary transactions.  Western Union fulfilled its obligations under the DPA and the court granted the motion to dismiss the information this year.

September 29, 2020 in AML | Permalink | Comments (0)

FinCEN Files: Bernie Sanders and Elizabeth Warren join watchdog groups in calling for banking reforms

An ICIJ investigation reveals the role of global banks in industrial-scale money laundering — and the bloodshed and suffering that flow in its wake. 

FINCEN 2Obtained and shared by BuzzFeed News, the stolen FinCEN documents include more than 2,100 suspicious activity reports, or SARs, filed by global banks to the United States Treasury Department’s intelligence unit, the Financial Crimes Enforcement Network, known as FinCEN.  A former U.S. Treasury Department official, Natalie Mayflower Sours Edwards, from Virginia, pleaded guilty in January to conspiring to unlawfully disclose documents to BuzzFeed News.

Read the full story on ICIJ here

explore the data, transactions, reported persons, crimes here

 

September 29, 2020 in AML | Permalink | Comments (0)

Saturday, September 26, 2020

U.S. Taxpayer in Panama Papers Investigation Sentenced to 4 years in Prison

A former U.S. resident and taxpayer was sentenced in the Southern District of New York to four years in prison for wire fraud, tax fraud, money laundering, false statements, and other charges. 

Harald Joachim von der Goltz, aka H.J von der Goltz, Johan von der Goltz, Jochen von der Goltz, Tica, and Tika, 83, of Needham, Massachusetts, and Key Biscayne, Florida, pleaded guilty to one count of conspiracy to commit tax evasion; one count of wire fraud; one count of money laundering conspiracy; four counts of willful failure to file Reports of Foreign Bank and Financial Accounts, FinCEN Reports 114; and two counts of false statements before U.S. District Judge Richard M. Berman.  In addition to the prison term, Judge Berman ordered von der Goltz to serve three years of supervised release, to pay forfeiture in the amount of $5,373,609 and restitution in the amount of $3,448,848, and to pay a fine in the amount of $30,000.

Von der Goltz was charged along with Ramses Owens, Dirk Brauer, and Richard Gaffey, aka Dick Gaffey, in connection with a decades-long criminal scheme perpetrated by Mossack Fonseca & Co. (Mossack Fonseca), a Panamanian-based global law firm, and its related entities.  Von der Goltz previously pleaded guilty to the charges, and was sentenced today by U.S. District Judge Richard M. Berman.

“Harald Joachim von der Goltz sought to conceal his considerable wealth through a sham foreign foundation and various shell companies.  But his decades-long scheme to evade his tax obligations and defraud the U.S. government came to an end today thanks to the tireless efforts of U.S. law enforcement,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division.  “No matter how complicated the scheme, the U.S. government will bring to justice those who attempt to evade their tax obligations under the law.   In particular, I would like to recognize the outstanding work of the Internal Revenue Service in this case.”

“Harald Joachim von der Goltz, a one-time U.S. resident, previously admitted to an elaborate scheme to evade millions in taxes owed to the IRS,” said Acting U.S. Attorney Audrey Strauss of the Southern District of New York.  “Von der Goltz was abetted by the specialized criminal services of the law firm Mossack Fonseca to conceal income and assets in shell companies and off-shore bank accounts.  Now von der Goltz has been sentenced to four years in federal prison for his conduct.”

According to the allegations contained in the indictments, other filings in this case, and statements during court proceedings, including von der Goltz’s guilty plea and sentencing hearings:

Since at least 2000 through 2017, von der Goltz conspired with others to conceal his assets and investments, and the income generated by those assets and investments, from the IRS through fraudulent, deceitful, and dishonest means.  During all relevant times, von der Goltz was a U.S. resident and was subject to U.S. tax laws, which required him to report and pay income tax on worldwide income, including income and capital gains generated in domestic and foreign bank accounts.  Nevertheless, von der Goltz evaded his tax reporting obligations by setting up a series of shell companies and bank accounts, and hiding his beneficial ownership of the shell companies and bank accounts from the IRS.  These shell companies and bank accounts made investments totaling tens of millions of dollars. 

Von der Goltz was assisted in this scheme through the use of Mossack Fonseca, including Owens, a Panamanian lawyer who previously worked at Mossack Fonseca, and by Gaffey, a partner at a U.S.-based accounting firm.  Specifically, in furtherance of von der Goltz’s efforts to conceal his assets and income from the IRS, von der Goltz engaged the services of Mossack Fonseca, including Owens, to create a sham foundation and shell companies formed under the laws of Panama and the British Virgin Islands to conceal from the IRS and others the ownership by von der Goltz of accounts established at overseas banks, as well as the income generated in those accounts.  Von der Goltz, Gaffey, and Owens also falsely claimed that von der Goltz’s elderly mother was the sole beneficial owner of the shell companies and bank accounts at issue because, at all relevant times, she was a Guatemalan citizen and resident, and – unlike von der Goltz – was not a U.S. taxpayer. 

Gaffey previously pled guilty and is scheduled to be sentenced by Judge Berman on Sept. 24, 2020, at 10:30 a.m. EDT.  Owens and Brauer remain at large. 

The Justice Department praised the outstanding investigative work of IRS-Criminal Investigation and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, and thanked the Justice Department’s Tax Division and the FBI for their significant assistance in the investigation.  The Justice Department’s Office of International Affairs and law enforcement partners in France, the United Kingdom, and Germany provided significant assistance.                                             

This case is being prosecuted by Trial Attorney Michael Parker of the Criminal Division’s Money Laundering and Asset Recovery Section of the Justice Department and Assistant U.S. Attorneys Eun Young Choi and Thane Rehn of the Manhattan U.S. Attorney’s Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Transnational Criminal Enterprises Unit, with substantial support from previous co-counsel, Trial Attorney Parker Tobin of the Tax Division. 

September 26, 2020 in AML | Permalink | Comments (0)

Friday, September 25, 2020

Oil Trader Indicted in International Bribery and Money Laundering Conspiracy Involving Corrupt Payments to Ecuadorian Officials

A federal grand jury in the Eastern District of New York returned an indictment 22 Sept 2020 against a trader at the U.S. subsidiary of a multinational oil distributor and trading company (Trading Company), for his alleged participation in a five-year international bribery and money laundering scheme involving corrupt payments to Ecuadorian officials. 

Acting Attorney General Brian C. Rabbitt, Acting U.S. Attorney Seth D. DuCharme for the Eastern District of New York, and Special Agent in Charge George L. Piro of the FBI’s Miami Field Office made the announcement.

The two-count indictment charges Javier Aguilar, 46, a citizen of Mexico and resident of the United States, with conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and conspiracy to commit money laundering. 

As alleged in court documents, including the criminal complaint that was unsealed today, between approximately 2015 and July 2020, Aguilar and others participated in a conspiracy to pay and conceal bribes to then-Ecuadorian officials, including at Empresa Publica de Hidrocarburos del Ecuador (Petroecuador) in order to obtain and retain business for Trading Company, in particular, a $300 million contract to purchase fuel oil that was awarded to a state-owned entity for the benefit of Trading Company.   

To promote the bribery scheme and conceal its proceeds, Aguilar and his co-conspirators allegedly agreed to use sham consulting agreements between bribe paying intermediaries and offshore shell companies, into whose accounts Trading Company paid funds while knowing that they would be used to pay bribes to the Ecuadorian government officials. 

According to the allegations, during the scheme, Aguilar and his co-conspirators caused the payment of approximately $870,000 in bribes that they had promised to then-Ecuadorian officials on behalf of Trading Company.

September 25, 2020 in AML | Permalink | Comments (0)

Thursday, September 24, 2020

U.S. Accountant in Panama Papers Investigation Sentenced to Prison

A U.S. accountant was sentenced in the Southern District of New York to 39 months in prison for wire fraud, tax fraud, money laundering, aggravated identity theft, and other charges, announced Acting Assistant Attorney General Brian C. Rabbitt and Acting U.S. Attorney Audrey Strauss of the Southern District of New York. 

Richard Gaffey, aka Dick Gaffey, 76, a U.S. citizen and resident of Medfield, Massachusetts, pleaded guilty to one count of conspiracy to commit tax evasion and to defraud the United States; one count of wire fraud; one count of money laundering conspiracy; four counts of willful failure to file Reports of Foreign Bank and Financial Accounts, FinCEN Reports 114; and one count of aggravated identity theft.  In addition to 39 months’ imprisonment, U.S. District Judge Richard M. Berman ordered Gaffey to serve three years of supervised release, to pay forfeiture in the amount of a sum of $5,373,609 and restitution in the amount of $3,459,315, and to pay a fine in the amount of $ 25,000.

Gaffey was charged along with Harald Joachim von der Goltz, Ramses Owens, and Dirk Brauer in connection with a decades-long criminal scheme perpetrated by Mossack Fonseca & Co. (Mossack Fonseca), a Panama-based global law firm, and its related entities.  Gaffey previously pled guilty to the charges, and was sentenced today by U.S. District Judge Richard M. Berman.

According to the allegations contained in the indictments, other filings in this case, and statements during court proceedings, including Gaffey’s guilty plea and sentencing hearings:

Since at least 2000 through 2018, Gaffey conspired with others to defraud the United States by concealing his clients’ assets and investments, and the income generated by those assets and investments, from the IRS through fraudulent, deceitful, and dishonest means.  During all relevant times, Gaffey assisted U.S. taxpayers who were required to report and pay income tax on worldwide income, including income and capital gains generated in domestic and foreign bank accounts. 

Gaffey helped those U.S. taxpayers evade their tax reporting obligations in a variety of ways, including by hiding the beneficial ownership of his clients’ offshore shell companies and setting up bank accounts for those shell companies.  These shell companies and bank accounts made investments totaling tens of millions of dollars.  For one U.S. taxpayer, Gaffey advised how to covertly repatriate approximately $3 million to the United States by reporting to the IRS a fictitious company sale that never actually occurred to evade paying the full U.S. tax amount.  Gaffey was assisted in this scheme through the use of Mossack Fonseca, including Ramses Owens, a Panamanian lawyer who previously worked at Mossack Fonseca.

Gaffey was the U.S. accountant for Harald Joachim von der Goltz.  From 2000 until 2017, von der Goltz was a U.S. resident and was subject to U.S. tax laws, which required him to report and pay income tax on worldwide income.  In furtherance of von der Goltz’s efforts to conceal his assets and income from the IRS, Gaffey falsely claimed that von der Goltz’s elderly mother was the sole beneficial owner of the shell companies and bank accounts at issue because, at all relevant times, she was a Guatemalan citizen and resident, and – unlike von der Goltz – was not a U.S. taxpayer.  In support of this fraudulent scheme, Gaffey submitted the name, date of birth, government passport number, address, and other means of identification of von der Goltz’s elderly mother to a U.S. bank in Manhattan.

Von der Goltz was previously sentenced by Judge Berman principally to 48 months’ imprisonment.  Owens and Brauer remain at large. 

The Justice Department praised the outstanding investigative work of IRS-Criminal Investigation and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.  The Justice Department’s Tax Division and Office of International Affairs, the FBI, and law enforcement partners in France, the United Kingdom, and Germany provided significant assistance.

This case is being prosecuted by Trial Attorney Michael Parker of the Criminal Division’s Money Laundering and Asset Recovery Section of the Justice Department and Assistant U.S. Attorneys Eun Young Choi and Thane Rehn of the Manhattan U.S. Attorney’s Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Transnational Criminal Enterprises Unit, with substantial support from previous co-counsel, Trial Attorney Parker Tobin of the Tax Division.

September 24, 2020 in AML | Permalink | Comments (0)

Sargeant Marine Inc. Pleads Guilty and Agrees to Pay $16.6 Million to Resolve Charges Related to Foreign Bribery Schemes in Brazil, Venezuela, and Ecuador

Sargeant Marine Inc., an asphalt company formerly based in Boca Raton, Florida, pleaded guilty Sept 22, 2020, to conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA) and agreed to pay a criminal fine of $16.6 million to resolve charges stemming from a scheme to pay bribes to foreign officials in three South American countries. 

According to its admissions, between 2010 and 2018, the company paid millions of dollars in bribes to foreign officials in Brazil, Venezuela, and Ecuador to obtain contracts to purchase or sell asphalt to the countries’ state-owned and state-controlled oil companies, in violation of the FCPA. 

“With today’s guilty plea, Sargeant Marine has admitted to engaging in a long-running pattern of paying bribes to corrupt officials in three South American countries to obtain lucrative business,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division.  “Today’s resolution, together with charges the department has brought against individuals involved in Sargeant Marine’s illegal schemes, demonstrates the department’s continuing commitment to holding companies and their executives responsible for international corruption.” 

“Today’s resolution is the result of a multi-year, multi-national, collaborative effort to root out corruption perpetrated by an American company in three countries,” said Acting U.S. Attorney Seth DuCharme of the Eastern District of New York.  “We will continue to investigate and prosecute any company that corrupts foreign government officials in order to gain a competitive edge, as well as any of their executives and employees who participate in those efforts.”

“The FBI is dedicated to rooting corruption out of our market, keeping the United States fair for vendors and consumers alike,” said Assistant Director Calvin Shivers of the FBI’s Criminal Investigative Division. “Sargeant Marine Inc. attempted to get ahead of competitors by paying bribes to foreign officials in violation of the Foreign Corrupt Practices Act.  As today's guilty pleas demonstrate, the FBI will relentlessly investigate those attempting to cheat the market, and we will bring them to justice.”

According to the company’s admissions, Sargeant Marine Inc. and its affiliated companies (Sargeant Marine) engaged in an eight-year scheme to bribe foreign officials in Brazil, Venezuela, and Ecuador.  In Brazil, Sargeant Marine admitted to bribing a Minister in the Brazilian government, a high-ranking member of the Brazilian Congress, and senior executives at Petróleo Brasileiro S.A.-Petrobras to obtain valuable contracts to sell asphalt.  To execute the scheme and conceal the bribe payments, Sargeant Marine entered into fake consulting agreements with bribe intermediaries.  After receiving fake invoices, it then sent international wires from Sargeant Marine bank accounts to offshore bank accounts held in the names of shell companies controlled by the bribe intermediaries.  The bribe intermediaries used a portion of the commissions to pay bribes to Brazilian government officials on Sargeant Marine’s behalf, either by wire to the officials’ offshore shell companies, or in cash in Brazil.

Sargeant Marine also admitted that between approximately 2012 and 2018, it bribed four Petróleos de Venezuela, S.A. (PDVSA) officials in Venezuela in exchange for inside information, and for their assistance in steering contracts to purchase asphalt from PDVSA to a Sargeant Marine nominee.  The Sargeant Marine co-conspirators used code names to hide the identities of some of the PDVSA officials receiving the bribes, referring to them simply as “Oiltrader,” “Tony,” and “Tony 2” in emails and texts.  The inside information was called “Chocolates.”  Similar to Brazil, Sargeant Marine covered up the bribes by entering into fake consulting agreements with a bribe intermediary and wiring commission payments into U.S. and offshore bank accounts he controlled.  The bribe intermediary then paid the PDVSA officials on behalf of Sargeant Marine.  

Sargeant Marine also admitted that it bribed an official at Ecuador’s state-owned oil company EP Petroecuador (Petroecuador) to secure a 2014 contract to supply asphalt.  The company used the same tactics as in Brazil and Venezuela to conceal the bribe payments.  In particular, it engaged a bribe intermediary with close ties to a decisionmaker at Petroecuador and then paid commissions to the bribe intermediary pursuant to a sham consulting agreement.  The intermediary used the commission payments to pay the bribes to the Petroecuador official on Sargeant Marine’s behalf.

The department recently unsealed charges against, and the guilty pleas of, five of the individuals who played a major role in the bribery scheme, including Daniel Sargeant, a senior executive of the company; Jose Tomas Meneses, a Sargeant Marine trader; Luiz Eduardo Andrade and David Diaz, consultants who acted as bribe intermediaries in Brazil and Venezuela, respectively; and Hector Nuñez Troyano, a former PDVSA official who received bribes in connection with the Venezuela contracts.  A sixth individual, Roberto Finocchi, also a Sargeant Marine trader, pleaded guilty in November 2017 for his role in the Brazil scheme. 

On Sept. 10, 2020, a criminal complaint was unsealed in federal court in Brooklyn charging another former PDVSA official with conspiracy to commit money laundering, in part, for his alleged role in the Sargeant Marine Venezuela scheme.

The investigation is being conducted by the FBI’s International Corruption Unit.  The government’s case is being handled by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York.  Fraud Section Trial Attorney Derek J. Ettinger and Assistant U.S. Attorneys Whitman Knapp, Mark E. Bini, and Andrey Spektor are prosecuting the case. 

The Justice Department’s Office of International Affairs provided substantial assistance.  The Ministerio Publico Federal in Brazil provided significant cooperation. 

September 24, 2020 in AML | Permalink | Comments (0)

Tuesday, September 15, 2020

New York Brothers Charged With COVID-Relief Fraud

Two New York brothers were charged in a criminal complaint unsealed for their alleged participation in a scheme to file fraudulent loan applications seeking nearly $7 million in forgivable Paycheck Protection Program (PPP) loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, announced Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division and U.S. Attorney James P. Kennedy, Jr. of the U.S. Attorney’s Office for the Western District of New York.

Larry Jordan, 42, Lancaster, New York, and Sutukh El, aka Curtis Jordan and Hugo Hurt, 38, of Buffalo, New York, were charged in a complaint filed in the Western District of New York with wire fraud conspiracy.  Both individuals were arrested this morning and are scheduled to appear today before U.S. Magistrate Judge H. Kenneth Schroeder, Jr. in the Western District of New York.

The complaint alleges that Jordan and El conspired to, and did, submit at least eight fraudulent loan applications in an attempt to obtain nearly $7 million.  The complaint also alleges that, in support of the fraudulent loan applications, Jordan and El made numerous false and misleading statements about the companies’ respective business operations and payroll expenses.

The complaint further alleges that the fraudulent loan applications were supported by fake documents, including falsified federal tax filings.  For example, included in one application for 5 Stems Inc was a fraudulent IRS filing that appeared to be the company’s 2019 federal unemployment tax return showing that the company paid nearly $3.3 million in employee wages that year.  In reality, the IRS has no record of such a filing.  

The complaint further alleges that Jordan and El used fraudulently obtained loan proceeds on what appear to be personal expenses, including the purchase of securities, home improvements, and a vehicle.  To date, the government has seized more than $400,000 of the more than $600,000 that Jordan and El obtained in their alleged fraud. 

September 15, 2020 in AML | Permalink | Comments (0)

Monday, September 14, 2020

Seven Charged in Connection with a $2.1 Million Money Laundering Scheme that Involved Money from the Paycheck Protection Program

Seven individuals were charged in an indictment in the District of South Carolina with laundering over $750,000 of fraudulently obtained funds, including over $390,000 obtained from a fraudulent Paycheck Protection Program (PPP) loan. The seven individuals used a variety of methods to launder the money, including laundering the money through a casino. The indictment also identifies over $2.1 million in funds from twelve different bank accounts allegedly associated with the fraud scheme as subject to forfeiture which agents seized.

Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division; U.S. Attorney Peter M. McCoy Jr. of the District of South Carolina; Special Agent in Charge Jody Norris of the FBI’s Columbia Field Office; Robert J. Murphy, the Special Agent in Charge of the DEA Atlanta Field Division, and Special Agent in Charge Kevin Kupperbusch of the Small Business Administration Office of Inspector General (SBA OIG) Eastern Region made the announcement.

Lauren Marcel Duhart, 34 of Stonecrest, Georgia, Joshua Bernard Smith, 39 of McDonough, Georgia, Steve Ronald Lewis, 43 of Snellville, Georgia, Christopher J. Agard, 41 of Marietta, Georgia, Henry Duffield, 58 of Belton, South Carolina, Jeremy Brandon Latourneau, 43 of Spartanburg, South Carolina, and Derick Keane, 43 of Spartanburg, South Carolina, were charged in an indictment filed in the District of South Carolina with conspiracy to commit wire fraud and conspiracy to commit money laundering. Duhart, Smith, and Agard were arrested this morning and appeared this afternoon before U.S. Magistrate Judge Kevin F. McDonald of the District of South Carolina. 

In May 2020, Agard submitted a fraudulent PPP loan application for his business, Wild Stylz Entertainment, LLC,  to a financial institution.  In support of the application, Agard submitted fraudulent supporting documents that made numerous false and misleading statements about Wild Stylz’s number of employees and payroll expenses.  The financial institution approved and funded a loan of over $395,000.  Agard disseminated the fraudulently obtained funds to other members of the conspiracy to conceal the true nature of their fraudulently obtained funds.  On May 27, 2020, Agard made $200,000 counter withdrawal at a bank branch.  On May 28, 2020, Agard withdrew $50,000 in cash and made a $96,000 counter withdrawal.  In June 2020, Duhart, Smith, and Lewis requested that Hunt provide Duhart, Smith, and Lewis with bank accounts in which to deposit fraudulently obtained PPP funds.  Hunt had previously participated in drug trafficking and financial fraud with two South Carolina business owners. The two South Carolina business owners agreed to let Lewis use their business bank accounts in return for a percentage of the fraudulent funds deposited in their account. Hunt provided the two South Carolina business owner’s banking information and additional account access information to Lewis.  During multiple recorded calls in early June 2020 Duhart, Lewis, Smith, and Hunt discussed the bank and wire fraud conspiracies. In one call, Lewis informed Hunt that the scheme involved fraudulent bank applications and that they needed to submit as many applications to the bank as possible by June 30th.

The indictment alleges that Agard also utilized his business, Wild Stylz, to launder the proceeds of other fraud schemes.  In October of 2019, Lewis recruited Duffield to participate in a fraud scheme.  As part of the scheme, Duffield allowed Agard to transfer $378,000 of fraud proceeds from the Wild Stylz business account to be deposited into Duffield’s business account in return for a portion of the proceeds. After the proceeds were deposited, Roosevelt Hunt (who has pled guilty to related charges), Latourneau, and Keane withdrew the funds from Duffield’s account by depositing checks totaling $200,000 at a casino. After gambling for less than two hours, Hunt, Keane, and Latourneau cashed out from the casino and left with approximately $198,750 in cash. Lewis met with Hunt to retrieve the cash which had been withdrawn from Duffield’s account. Lewis delivered a portion of the cash he picked up from Hunt to Duhart. 

The Coronavirus Aid, Relief, and Economic Security (CARES) Act is a federal law enacted March 29, 2020.  It is designed to provide emergency financial assistance to millions of Americans who are suffering the economic effects resulting from the COVID-19 pandemic.  One source of relief provided by the CARES Act is the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses through the PPP.  In April 2020, Congress authorized over $300 billion in additional PPP funding.

The PPP allows qualifying small businesses and other organizations to receive loans with a maturity of two years and an interest rate of one percent.  Businesses must use PPP loan proceeds for payroll costs, interest on mortgages, rent and utilities.  The PPP allows the interest and principal to be forgiven if businesses spend the proceeds on these expenses within a set time period and use at least a certain percentage of the loan towards payroll expenses.

September 14, 2020 in AML | Permalink | Comments (0)

Friday, September 11, 2020

NFL Player Charged for Role in $24 Million COVID-Relief Fraud Scheme

A National Football League (NFL) player has been charged for his alleged participation in a scheme to file fraudulent loan applications seeking more than $24 million in forgivable Paycheck Protection Program (PPP) loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division, U.S. Attorney Ariana Fajardo Orshan of the Southern District of Florida, Special Agent in Charge Michael J. De Palma of the IRS-Criminal Investigation (CI) Miami Field Office, Special Agent in Charge George L. Piro of FBI’s Miami Field Office, and Special Agent in Charge Kevin A. Kupperbusch of the U.S. SBA-Office of Inspector General (OIG), Investigations Division, Eastern Regional Office, made the announcement.

Joshua J. Bellamy, 31, of St. Petersburg, Florida, a player in the NFL, was charged in a federal criminal complaint filed in the Southern District of Florida with wire fraud, bank fraud, and conspiracy to commit wire fraud and bank fraud.  Bellamy was arrested this morning and will appear today before U.S. Magistrate Judge Christopher Tuite of the Middle District of Florida.

The complaint alleges that Bellamy conspired with others to obtain millions of dollars in fraudulent PPP loans.  Early in the scheme, Phillip J. Augustin allegedly obtained a fraudulent PPP loan for his talent management company using falsified documents.  After submitting that application, Augustin then began to work with other co-conspirators, including Bellamy, on a scheme to submit numerous fraudulent PPP loan applications for confederate loan applicants, in order to receive kickbacks for obtaining the forgivable loans for them. 

Bellamy is alleged to have obtained a PPP loan of $1,246,565 for his own company, Drip Entertainment LLC.  Bellamy allegedly purchased over $104,000 in luxury goods using proceeds of his PPP loan, including purchases at Dior, Gucci, and jewelers.  He is also alleged to have spent approximately $62,774 in PPP loan proceeds at the Seminole Hard Rock Hotel and Casino, and to have withdrawn over $302,000.  Bellamy also allegedly sought PPP loans on behalf of his family members and close associates.

The complaint alleges that the scheme involved the preparation of at least 90 fraudulent applications, most of which were submitted.  Augustin, Bellamy, and other conspirators in the scheme are alleged to have applied for PPP loans that are together worth more than $24 million dollars.  Many of those loan applications were approved and funded by financial institutions, paying out at least $17.4 million.

The other 10 defendants allegedly involved in this scheme whose complaints were previously unsealed are the following:

  • Tiara Walker, 37, of Miami Gardens, Florida, was charged in a federal criminal complaint filed on Sept. 3, 2020, in the Southern District of Florida, with wire fraud, bank fraud, and conspiracy to commit wire fraud and bank fraud; 
     
  • Damion O. Mckenzie, 38, of Miami Gardens, Florida, was charged in a federal criminal complaint filed on Aug. 3, 2020, in the Southern District of Florida with wire fraud, bank fraud, and conspiracy to commit wire fraud and bank fraud;
     
  • Andre M. Clark, 46, of Miramar, Florida, was charged in a federal criminal complaint filed on Aug. 3, 2020, in the Southern District of Florida with wire fraud, bank fraud, and conspiracy to commit wire fraud and bank fraud;
     
  • Keyaira Bostic, 31, of Pembroke Pines, Florida, was charged in a federal criminal complaint filed on Aug. 3, 2020, in the Southern District of Florida with wire fraud, bank fraud, and conspiracy to commit wire fraud and bank fraud;
     
  • Phillip J. Augustin, 51, of Coral Springs, Florida, was charged in a federal criminal complaint filed on July 28, 2020, in the Northern District of Ohio with wire fraud, bank fraud, conspiracy to commit wire fraud and bank fraud, and obstruction;
     
  • Wyleia Nashon Williams, 44, of Ft. Lauderdale, Florida, was charged in a federal criminal complaint filed on July 28, 2020, in the Northern District of Ohio with wire fraud, bank fraud, and conspiracy to commit wire fraud and bank fraud;
     
  • James R. Stote, 54, of Hollywood, Florida, was charged in a federal criminal complaint filed on June 24, 2020, in the Northern District of Ohio with wire fraud, bank fraud, and conspiracy to commit wire fraud and bank fraud;
     
  • Ross Charno, 46, of Ft. Lauderdale, Florida, was charged in a federal criminal complaint filed on June 24, 2020, in the Northern District of Ohio with wire fraud, bank fraud, and conspiracy to commit wire fraud and bank fraud;
     
  • Deon D. Levy, 50, of Bedford, Ohio, was charged in a federal complaint filed on June 8, 2020, in the Northern District of Ohio with wire fraud and conspiracy to commit wire fraud; and
     
  • Abdul-Azeem Levy, 22, of Cleveland, Ohio was charged in a federal complaint filed on June 8, 2020, in the Northern District of Ohio with wire fraud and conspiracy to commit wire fraud.

The CARES Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic.  One source of relief provided by the CARES Act was the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses, through the PPP.  In April 2020, Congress authorized over $300 billion in additional PPP funding.

The PPP allows qualifying small businesses and other organizations to receive loans with a maturity of two years and an interest rate of one percent.  PPP loan proceeds must be used by businesses on payroll costs, interest on mortgages, rent, and utilities.  The PPP allows the interest and principal to be entirely forgiven if the business spends the loan proceeds on these expense items within a designated period of time after receiving the proceeds and uses a certain amount of the PPP loan proceeds on payroll expenses. 

September 11, 2020 in AML | Permalink | Comments (0)