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Two Extradited from Singapore in Connection with Plot to Illegally Export Military Antennas
Two foreign nationals, Hia Soo Gan Benson (Benson Hia) and Lim Kow Seng (Eric Lim), have been extradited from Singapore to stand trial in the District of Columbia in connection with an alleged fraud conspiracy involving the unlawful export of military antennas from the United States to Singapore and Hong Kong. The indictment, originally filed on June 23, 2010, also alleges that the ultimate object of a second conspiracy was to conceal from the U.S. Government that the true destination of another set of antennas was Iran.
According to the indictment both Benson and Seng are charged with 6 criminal counts. Two of the counts are distinct conspiracy charges. The first conspiracy relates to the defendants’ roles in procuring antennas from the United States that were eventually shipped to Iran through Singapore, Malaysia, and Thailand. The second conspiracy relates to the defendants’ roles in procuring a different kind of antenna from the United States without first applying for a license from the State Department’s Directorate of Defense Trade Control (DDTC).
In relation to the above-mentioned conspiracies, the defendants have also been charged with one count of false statements (18 U.S.C. 1001) in connection with license applications filed with the Bureau of Industry and Security (BIS), one count of false statements (18 U.S.C. 1001) in connection with statements made to Customs and Border Protection (CBP) in the second conspiracy, one count of smuggling (18 U.S.C. 554) in connection with the second conspiracy, and one count of illegally exporting controlled products with DDTC licenses (22 U.S.C. 2778) in violation of the Arms Export Control Act (AECA).
With regards to the defendants’ specific cases, it may be important for defense counsel to explore whether the two distinct counts of conspiracy are superfluous, especially given the similar conduct and goals involved with both conspiracies. If a review of discovery actually unveils the two conspiracies to in fact be one large conspiracy, defense counsel may decide to move the court to dismiss one of the conspiracy counts.
More telling however, is the U.S. Government’s continued focus on prosecuting export related crimes. This is also consistent with what many people in this field have been dicussing. For example, in 2008 the Department of Justice formed the Export and Anti-proliferation Global Law Enforcement (EAGLE) Task Force. The goal of this task force was to bring together the different federal agencies focused on counter-proliferation work and allow them to share resources and knowledge in this complex area, as well as increase the number of prosecutions in this area.
This level of coordination of resources and increased focus by the federal government requires defense counsel to be even more vigilant. Protecting a defendant’s Constitutional rights becomes even more important because many of the federal agencies working together in this task force may not be familiar with rights afforded criminal defendants because they are civil administrative bodies, and not law enforcement agencies. Moreover, many foreign nationals may not be familiar with the rights afforded to defendants in the U.S. criminal justice system. As such, advising foreign clients to assert their Fifth Amendment rights at various stages of an investigation (including extradition) becomes even more critical in this new era of federal coordination in export control cases.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrariassociatespc.com.
Arizona State Representative Accused of Bribery, Fraud and Attempted Extortion
A member of the Arizona House of Representatives was charged last Wednesday by a federal grand jury in the District of Arizona with bribery, fraud, attempted extortion and false statements in connection with receiving more than $6,000 in tickets to sporting and special events while serving as a Tempe City Council councilmember and member-elect of the Arizona House.
The indictment charges Paul Ben Arredondo, 63, of Tempe, with one count of federal programs bribery, two counts of honest services mail fraud, one count of attempted Hobbs Act extortion and one count of making false statements. Arredondo will be arraigned on May 30, 2012, in U.S. District Court for the District of Arizona before U.S. Magistrate Judge Lawrence O. Anderson.
Honest services fraud has been an evolving area in federal criminal prosecutions since its addition to 18 U.S.C. 1346, the mail and wire fraud statute, in 1988. The question lower courts have grappled with is what type of specific conduct, in the private and public sector, falls under the purview of “honest services” fraud. Without any indication of Congressional intent in the statute itself, lower courts approached the law broadly, which lead to little limitation as far as federal prosecutors were concerned.
However, in 2010, three cases made their way to the U.S. Supreme Court on this exact issue. The most notable of the three is Skilling v. U.S., where the former CEO of Enron, Jeffrey Skilling, was convicted of honest services fraud. Holding that honest services fraud is limited to bribery and kickback schemes, the Supreme Court overturned Skilling’s conviction under the statute because he did not engage in such behavior. The other two cases were remanded in order for the lower courts to evaluate each case based on the holdings of Skilling.
According to the indictment, Arredondo was a councilmember in Tempe for 16 years, until July 2010. He was elected to the Arizona House of Representatives in November 2010. The indictment alleges that from February 2009 to November 2010, Arredondo accepted, agreed to accept and solicited things of value, mainly sporting tickets, from representatives of a company whose purported business objective was to acquire city-owned property in Tempe for real estate development purposes. Allegedly, in return for those tickets, Arredondo took and agreed to take action in his capacity as a Tempe city councilmember and as a member of the Arizona House of Representatives to facilitate the purported purchase of city-owned property and development project. The representatives were, in fact, undercover agents with the FBI, and no development project actually existed.
Although this case seems to involve a bribery scheme, it was initiated by undercover government agents. Entrapment is a viable defense if Arredondo can raise a reasonable doubt as to whether he had any intent to commit the crime had it not been for inducement or persuasion on the part agents.
In addition to the fraud and bribery charges, Arredondo must also prepare a defense for attempted extortion, which is somewhat of a catchall bribery provision for a public official acting under color of official right. To prove attempted extortion under the Hobbs Act, the government simply has to prove that Arredondo attempted to agree to take some official action in exchange for payment as opportunities arose to do so. Arredondo’s actual intent to follow through with the agreement is irrelevant.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
Four Indicted in Puerto Rico on Bank Fraud Charges
Last week, a federal grand jury indicted Raúl A. Morales-Guanill; Rafael Antonio Pina-Nieves, aka “Raphy Pina”; Orlando Javier Sierra-Mercado, aka “Chiquitín,” “Chiqui”; and Wilson Álvarez-Luna as a result of an investigation led by the Internal Revenue Service (IRS), in conjunction with the Federal Bureau of Investigation (FBI).
The individuals are charged in a 19-count indictment with conspiracy to commit bank fraud, conspiracy and aiding and abetting to submit false statements to a financial institution, and money laundering. The government is seeking a criminal forfeiture amount of $4,071,652.19 U.S. dollars.
According to the indictment, the individuals conspired and aided and abetted each other and others to submit false statements to a financial institution with the purpose of illegally obtaining money and funds from Doral Mortgage, a wholly owned subsidiary of Doral Bank of Puerto Rico. The events were initiated when Sierra-Mercado applied for a mortgage loan for residential property in Palmas del Mar, Humacao.
The IRS has devoted a significant amount of resources in the past several years towards investigating fraud involving financial institutions. The property is currently being foreclosed because Sierra-Mercado defaulted on his mortgage payments. The default may have actually prompted the scrutiny of the IRS in this case, since the alleged transactions relating to the fraud occurred in late 2007 and early 2008.
Through a series of transactions, each individual listed above has been connected to the allegations of fraud through a document and/or bank transaction related to the loan for the property Sierra-Mercado purchased. In total, three Puerto Rican banks were involved in addition to Doral Bank, including Western Bank, Banco Popular de Puerto Rico, and Banco Santander de Puerto Rico. Allegedly, the fraud resulted in a loss of over $4 million dollars.
Although the press release goes into detail regarding the transactions that serve as the basis for these allegations, the motivation of these individuals still seems unclear. Their motivation for the alleged scheme will play a significant role at trial because the government must prove that the individuals intended to enter the conspiracy to commit fraud.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
Feds Utilize FISA and Charge Orange County Pharmacist with Providing Material Support to Terrorists and False Statements.
The U.S. Attorney’s Office for the Central District of California recently announced the indictment of Oytun Ayse Mihalik, a Turkish citizen and resident of La Palma, California. The 4-count indictment names Ms. Mihalik and alleges that she sent three wire transfers to an individual in Pakistan with knowledge that the money would be used to prepare for and carry out attacks that would kill United States military personnel overseas. Ms. Mihalik is also alleged to have provided the FBI and the Department of Homeland Security with false statements during the course of the agencies’ investigations into her wire transfers.
The allegations against Ms. Mihalik are substantial. The charge of providing material support to terrorists carries a statutory maximum penalty of 15 years in federal prison. Ms. Mihalik is facing three of these charges. Additionally, the charge of making false statements in a matter involving international terrorism carries a maximum sentence of eight years in federal prison. Even though the charges carry significant maximum penalties, the most unsettling aspect of these charges against Ms. Mihalik is that the charges are premised on classified evidence that neither Ms. Mihalik nor defense counsel has reviewed.
The Foreign Intelligence Surveillance Act (“FISA”) permits the U.S. Government to perform electronic surveillance and physical searches to obtain intelligence in the U.S. on foreign powers (such as enemy agents or spies) or individuals connected to international terrorist groups. As such, most of the information and evidence collected pursuant to such surveillance and searches pertains to the national defense and is classified. The prosecution may therefore protect the interests of the United States by requesting protective orders or offer to provide redacted summaries of the evidence against the defendant pursuant to the Classified Information Procedure Act (“CIPA”). Nonetheless, CIPA provides the defense with some very valuable tools.
Therefore defense counsel must be familiar with CIPA. Proper access to classified information is critically important to ensuring the government is put to its burden of proof and to afford defense counsel a meaningful opportunity to put forth applicable defenses. However, the defense’s needs are tempered by CIPA to avoid instances of “graymail” by defendants who might threaten to reveal classified information if prosecuted without saying what the evidence was or allowing the court to determine its relevance.
Accordingly, CIPA states that “if a defendant reasonably expects to disclose or to cause the disclosure of classified information in any manner in connection with any trial or pretrial proceeding involving criminal prosecution, the defendant shall . . . within 30 days prior to trial . . . notify the attorney for the United States and the court in writing.” Failing to follow such procedure risks empowering the court to deny the defense from accessing, reviewing, disclosing, or otherwise benefiting from classified information in its case. There is also a continuing obligation to disclose and describe any new classified information that may come up. This continuing responsibility states that such disclosures should be made “in writing as soon as possible” to both the attorney for the government and the court.
Defending national security related crimes presents both intellectual and procedural challenges. Defense counsel should therefore be well versed in both national security and criminal jurisprudence.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
Former Investment Fund Manager from Los Angeles Charged with Defrauding Investors
John Farahi, of Bel Air Estates, California, was named in a 41-count indictment returned on December 7, 2011 by a federal grand jury. The former investment fund manager defrauded investors out of millions of dollars by falsely promising investors their money would be invested conservatively to purchase corporate bonds backed by the Troubled Asset Relief Program (TARP) and then collaborating with his corporate counsel to cover-up the fraud.
Farahi, a former Reno, Nevada City Council Member and Farsi-language radio investment advisor, instead used the investment funds for a variety of personal purposes, including to support his family’s lavish lifestyle, to make Ponzi payments to early clients of his investment fund, and to trade in high-risk and speculative future options trading. Farahi was able to attract many of his clients through his daily radio show in which he touted a conservative investment philosophy. Most of his clients were members of the Southern California Iranian-Jewish community.
In the face of huge trading losses at the end of 2008, Farahi allegedly tried to extend the scheme by drawing down extensively on lines of credits at banks while making false statements to those banks about his financial condition. The victim banks included TARP recipients Bank of America and U.S. Bank as well as Sun West Bank.
The indictment charges Farahi with 16 counts of mail fraud, one count of wire fraud, five counts of offering for sale unregistered securities, four counts of loan fraud, one count of aggravated identity theft, five counts of alteration of documents, one count of suborning perjury, one count of concealing a material fact, one count of witness tampering. If he is convicted of the 40 counts in which he is charged, Farahi would face a statutory maximum sentence of 717 years in federal prison.
It is alleged that Farahi’s scheme lasted from 2005 until 2010. The Securities Exchange Commission (SEC) had filed a federal complaint alleging violations of federal securities laws against Farahi and other in January 2010. Many of the charges Farahi now faces are derived from his attempts to mislead, conceal, and redirect the SEC’s investigation. Otherwise known as cover-up crimes, targets of federal investigations often get themselves into more trouble early on in an investigation by lying to investigators or acting unethically. Now that the SEC has referred the case to the DOJ for criminal prosecution, Farahi now faces a significant number of charges in addition to his initial fraud scheme.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
Blagojevich’s Sentence Sets a Precedent
Judge James Zagel sentenced Rod Blagojevich on Wednesday in the Northern District of Illinois on 18 counts of corruption, including his June convictions on charges that he tried to sell or trade an appointment to President Barack Obama’s U.S. Senate seat for campaign cash or a top job. The impeached governor must report to prison on February 16.
Prosecutors in the case were seeking 15 to 20 years for Blagojevich, while defense counsel was arguing for only 4 to 5 years. Judge Zagel was clearly upset with Blagovich when he pronounced his sentence, stating “When it is the governor who goes bad, the fabric of Illinois is torn, disfigured and not easily repaired.”
In federal court, judges typically follow the Federal Sentencing Guidelines to determine how much time a defendant will serve. The Supreme Court has ruled that the Guidelines are not mandatory, but most federal judges determine their sentence based on how the convicted counts fit into the Guideline range. Unfortunately for Blagojevich, not only was he convicted on 18 counts, but he was also a public official at the time which fares a higher sentence.
Blagojevich’s first trial took place in the summer of 2010 and he was convicted of making false statements to FBI agents when he told them in an interview on March 16, 2005, that he did not track, or want to know, who contributed to him or how much money they contributed to him, but the jury was deadlocked on all remaining counts.
The government went after Blagojevich again in the spring of 2011, and this time he was convicted on 17 additional counts, including 10 counts of wire fraud, two counts of attempted extortion, two counts of conspiracy to commit extortion, one count of soliciting bribes, and two counts of conspiracy to solicit and accept bribes.
Federal prosecutors and the judge have made a spectacle of this case, as Blagojevich’s lengthy sentence is surely meant to heed a warning to others not to engage in public corruption practices. Unfortunately, the ones suffering the most in this case are Blagojevich’s young daughters, who will be adults when he is released in 14 years.
Blagojevich is the fourth Illinois governor to be sentenced to prison. The previous governor, George H. Ryan, is still serving time for his corruption sentence and is set to be released in 2013.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
False Statements – Be Careful What You Say, Whenever You Say It
Before speaking to government agents think long and hard about the information you want to provide them. Even if you aren’t the target of their investigation, any statements you provide the government that turn out to be false can be grounds for charging you with a separate and distinct felony under 18 U.S.C. 1001. This offense carries a penalty of up to 5 years imprisonment and should not be taken lightly. Therefore, think through your statements before providing them to government agents, and if possible, retain counsel before making any such statements.
The False Statements statute makes it a felony to (1) conceal a material fact, (2) make a false statement or representation, or (3) make or use a false writing, in any matter within the jurisdiction of the United States Government. Thus the statute criminalizes the making of a wide range of both sworn and unsworn statements to the federal government.
False statements typically arise when prosecutors charge those who have lied to cover up some other illegal activity. Hence the common characterization of 18 U.S.C. 1001 as a “cover-up” crime.
What follows is a brief break down of the three primary offenses:
(1) Concealing a material fact – a person has to falsify, conceal or cover up any material fact that he had a duty to disclose. Such a duty exists if the government asks you to disclose the fact either in person or on an official form. Even answering “no” to an agent’s question of whether you committed the crime can be grounds of charging you under section 1001 if you did in fact commit the crime.
(2) Making a false or fraudulent statement – a person makes a “false” statement if the statement was untrue when it was made, and the person knew it was untrue at that time. A statement is “fraudulent” if it was untrue when it was made, and the person knew it was untrue at that time, and the person intended to deceive.
(3) Making or using a false writing – a person uses a false writing or document when that person knows it contains materially false, ficticious, or fraudulent statements or entries.
For each of the three offenses above, the following additional elements must be proven before someone can be convicted of 18 U.S.C. 1001:
(a) The subject of the false statement, the fact, must be material. To be material, a fact either has a natural tendency to influence or is capable of influencing a decision of any federal governmental entity.
(b) The person must have acted knowingly and willfully. A person acts knowingly or willfully if they have acted voluntarily and intentionally, and not because of mistake or some other innocent reason.
(c) And finally, that the fact actually pertained to a matter before some agency or branch of the U.S. Government regardless of whether the person knew it was actually a matter before the government. As such, making false statements to private contractors carrying out a federal project or filing papers with your employer that are subsequently sent to the federal government can make you liable under section 1001.
You must understand and respect the gravity of the situation when speaking to government agents either in person or in written responses. Make sure your statements are true and reflect the knowledge you actually possess about any matter you are being asked about. The risk of prosecution is real, and the government is not shy about charging section 1001. However, if you fear that speaking the truth will get you in trouble you can just decline to speak to the agents altogether until you are compelled to by court order or subpoena. At that time you can invoke your Fifth Amendment right to remain silent.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
DC Councilmember Harry Thomas Jr. Target of an Ongoing Criminal Investigation
On Monday June 6, 2011 the U.S. Attorneys Office for the District of Columbia confirmed for the first time that Councilmember Thomas, of Ward 5, is the focus of an ongoing criminal investigation. The potential allegations from this criminal investigation will likely mimic the alleged conduct in the $1 million civil lawsuit recently filed against Thomas by the District Attorney General on behalf of the Council.
After conducting a five-month investigation the Attorney General stated that more than $300,000 intended for youth baseball programs and other charitable purposes as part of the 2008 budget went to Thomas for his personal use. In 2000 Thomas co-founded a nonprofit called Team Thomas which purportedly ran children’s sports programs until it was dissolved last December. DC funds granted to the Langston 21st Century Foundation were allegedly distributed to Thomas through his nonprofit and for-profit organizations. Further, Thomas is also accused of soliciting more than $80,000 from private donors on behalf of nonprofit Team Thomas even though the organization was not registered in the city to do so.
Thomas used Team Thomas’ debit card to spend more than $20,000 on personal travel and entertainment, including trips to Pebble Beach and Las Vegas. Thomas also wrote thousands of dollars worth of checks drawn from his nonprofit to himself, his for-profit company, HLT Development, or to “cash.” He also used $58,000 worth of funds to buy an Audi SUV which is registered in his own name.
So what potential crimes could Thomas be charged with by the US Attorneys Office? First, the USAO will likely have the discretion to charge Thomas under either the federal or District criminal code because under 5 U.S.C. 4101, District employees are classified as federal employees. And since Thomas’ conduct pertains to his position as a member of the DC council the USAO will probably charge him with federal offenses.
A variety of federal embezzlement charges may be utilized against Thomas. For example 18 U.S.C. 643 criminalizes instances in which officers or employees of the U.S. don’t account for any public funds they were not authorized to retain. Additionally, Section 641 subjects anyone who knowingly converts something of value of the United States. Since DC funds can be qualified as federal funds, Thomas can also potentially open himself up to liability under this embezzlement statute. Both embezzlement statutes carry 10 year maximum sentences.
A charge that commonly accompanies embezzlement is tax evasion, and if Thomas failed to report these embezzled funds in his annual tax returns he will likely face criminal tax evasion charges. Tax evasion carries maximum penalties of $100,000 and 5 years imprisonment. In addition to tax evasion, Thomas’ conduct could possibly have included false statements with regards to the tax-exempt status of his nonprofit organization. The false statements in this instance would be criminalized under either 18 U.S.C. 1001 or 26 U.S.C. 72061. False statements carry a maximum sentence of 5 years for each violation. Accordingly, Thomas could face a false statement charge for each document or tax return he filed related to this conduct.
Thomas can also be charged with wire or mail fraud if he utilized the mails or wires to carry out his scheme or artifice. It is already apparent that he used his nonprofit organization’s debit card to carry out some of this misappropriation of funds. Mail and wire fraud are codified under Sections 1341 and 1343, respectively. Fraud carries a maximum a sentence of 20 years imprisonment.
It is going to be interesting to see what, if any, charges the USAO will bring against Thomas. But what is readily apparent is that if he is charged, he will face significant charges and potential jail time. Another interesting note will be to see if the USAO will learn more about its own criminal investigation by observing the civil trial filed by the Attorney General.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
