Archive
Richard Chichakli Arrested and Facing IEEPA Charges for Alleged Association with ‘Merchant of Death’
Last Thursday, the Southern District of New York announced the arrest of Richard Ammar Chichakli in Australia. Chichakli has been charged with violations under the International Emergency Economic Powers Act (IEEPA), money laundering, wire fraud, and conspiracy.
It is alleged that Chichakli is an associate of Viktor Bout, dubbed the “Merchant of Death” by law enforcement authorities and the press for his dealings in international arms trafficking. Bout allegedly established an international network to facilitate arms trafficking, and furnished arms to the former regime of Charles Taylor in Liberia. Bout was convicted in November 2011 in the Southern District of New York for allegedly selling weapons to the Fuerzas Armadas Revolucionarias de Colombia, FARC, and is currently serving his 25-year sentence.
Chichakli’s indictment focuses mainly on his alleged connections to Bout’s network of arms trafficking. The U.S. Government believes that Chichakli assisted in the management and operations of several of Bout’s airline companies that facilitated the transportation of illegal weaponry. The U.S. followed the lead of the United Nations, in that once the U.N. Security Council designated Chichakli in 2004, the U.S. followed thereafter. On April 26, 2005, Chichakli was placed on the Specially Designated Nationals List (SDN List) by the Office of Foreign Assets Control (OFAC) under the Liberia sanctions program.
The indictment alleges that in order to evade U.S. sanctions, Chichakli pursued airline operations under the guise of the names of others, and used the airline, named Samar Airlines, to engage in the transportation of illegal arms. It is further alleged that Chichakli attempted to purchase two airplanes from a U.S. aviation company. The indictment also cites money laundering, wire fraud, and conspiracy for the transfer funds in the amount of $1.7 million related to arms trafficking that passed through the U.S. financial system.
The U.S. has pursued Chichakli for years, and finally arrested him with the help of Australian authorities. Chichakli could have benefited from attempting to contact the U.S. Government first and contesting his designation through a formal administrative process. Pursuing a request for reconsideration through OFAC allows a designated person or entity to contest the designation and also provide reasons and evidence in support of the wrongful designation.
At this point, Chichakli is facing multiple federal charges that are rooted in IEEPA violations. The national security implications alone are difficult to overcome. If Chichakli argues that he did not engage in the overt acts willfully, and attacks the circumstantial evidence against him, it might work in his favor. The other course of action, which may be his best option, is to begin plea negotiations. If he can provide substantial assistance to the U.S. Government, his ultimate sentence may be reduced.
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.
New York Man Accused of Illegally Exporting Defense Articles
Mark Henry, a United States citizen and a resident of Queens, New York, was arrested on December 6, 2012, in connection with an alleged scheme to illegally export defense articles and goods with military applications from the U.S. to Taiwan and China.
From April 2009 through September 2012, Henry allegedly operated an export company based in New York City, Duhua Electronics Corporations. According to the indictment, Henry shipped goods from suppliers located in the U.S. to customers in Asia, specifically China and Taiwan. Henry allegedly shipped military-grade materials that can be used as a protective coating for rocket nozzles, which are designated as defense articles on the U.S. Munitions List, to customers in Taiwan. He also allegedly attempted to ship microwave amplifiers, which have both commercial and military uses and are listed on the Commerce Control List (CCL), to China. The indictment states that Henry did not apply for or receive the requisite licenses for these shipments.
Henry has been charged with conspiracy to violate the Arms Export Control Act (AECA), willfully violating the Arms Export Control Act and the International Traffic in Arms Regulations (ITAR), and attempting to violate the International Emergency Economic Powers Act (IEEPA).
The Government has the burden to prove that Henry willfully and knowingly violated AECA, ITAR, and IEEPA. Henry may have a good defense if he can argue that he did not know his duty under the law regarding the requirement to obtain export licenses and/or approval for the items. The materials that were allegedly exported to Taiwan, which can be used for protective coating in rocket nozzles, clearly require a license under the CCL. However, the items that Henry allegedly attempted to export to China, microwave amplifiers, were dual-use items and may have been safe to export under the Export Administration Regulations (EAR). Dual-use items are those that may be used either for military purposes or for commercial purposes, and depending on their intended use, may be safe to export with a license.
The fact that Henry may have been exporting both kinds of items, those that definitely require a license and those that may not, seems to indicate the Henry might have simply been unaware of the law and his obligation to seek an exporting license or approval to export dual-use items. This argument may be useful when raising defenses against the Government’s accusations that he willfully violated the law.
Henry is also facing a conspiracy charge. The indictment contains unindicted co-conspirators. The Government typically does this when it believes that foreign co-conspirators are involved, but since they are located elsewhere and are not U.S. persons, the Government will have trouble pursuing a case against them. The indictment also cites to U.S. companies that supplied the goods to Henry. As inferred from the indictment, the U.S. companies are most likely cooperating with the Government in the case against Henry in order to alleviate their own liability. To prove conspiracy, the Government does not have to prove willfulness, which gives them a fallback in case Henry as a strong argument on other charges discussed above.
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.
Iranian Company, Subsidiaries, and Officers Accused of Illegal Exporting to Iran; U.S. Persons Face the Fallout
An Iranian corporation, its subsidiaries, and several of its officers and business partners have been charged in Alexandria, Virginia, accused of allegedly exporting more than $30 million in computer goods from U.S. companies to Iran, in violation of the Iranian sanctions program administered by the Department of Treasury’s Office of Foreign Asset Control (OFAC).
The case was originally filed under seal in July 2012, but was made public in December after two alleged conspirators were arrested in Los Angeles, California. The two U.S. persons arrested were Alireza Beshcari and Mikaeil Ghahramani.
Business Machinery World Wide (BMWW aka Jahan Goster, Co.) is an Iranian company that imports computer and related equipment and redistributes such equipment to persons and entities in Iran. BMWW has three subsidiary companies located in Dubai, United Arab Emirates. BMWW, its subsidiaries, and nine officers and individuals have been charged with conspiracy to defraud the United States and conspiracy to violate the International Emergency Economic Powers Act (IEEPA).
According to an affidavit filed in support of the criminal complaint, several U.S. persons are allegedly included in the conspiracy. In addition to the two individuals identified above, Amir Mazlomian is also included in the indictment as a U.S. person. Other U.S. entities cited to in the indictment include Photo Craft, Inc., located in Burke, Virginia, and Compudirect3000, located in Irvine, California. Photo Craft and Compudirect3000 have not been indicted nor charged in the criminal complaint.
The Government claims that it has direct evidence of involvement by U.S. persons in the form of emails, shipping forms, and other communications with BMWW and its subsidiaries. The Government is going to use such evidence to prove that the U.S. defendants had knowledge of the Iran sanctions and were willfully violating them by conspiring with others to exporting computer related goods to Iran via Dubai.
Because Beshcari, Ghahramani, and Mazlomian have been charged with conspiracy, the Government only has to prove that they entered into an agreement to export computer related goods ultimately destined for Iran. Further, they must prove that they engaged in acts in furtherance of the conspiracy. From a defense perspective, trying to argue against a conspiracy charge can be extremely difficult, particularly because the Government does not have to prove that the defendants acted willfully.
The criminal case is still in its early stages. Although two U.S. persons have been arrested, the case has not set a trial date as of today. This may give the U.S. persons a chance to cooperate with the Government in an effort to receive a reduced sentence. Plea negotiations are not always the best course, but the evidence in this case is mostly in the form of written communications, which tend to easily sway jurors.
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.
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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.
Texas Man Accused of Falsely Billing Medicare and Medicaid is Arrested
Lawrence T. Taylor, the Defendant, has been indicted on charges of health care fraud and conspiracy to commit health care fraud. The indictment, returned on Wednesday December 12, 2012 in the Southern District of Texas, formally charged the Defendant with the following nine counts:
Count (1) – 18 U.S.C. 371 – Conspiracy to commit health care fraud in violation of 18 U.S.C. 1347; and Conspiracy to violate the Anti-Kickback statute in violation of 42 U.S.C. 1320a-7b(b)(2)(A); and
Counts (2)-(9) – 18 U.S.C. 1347 – Health care fraud.
Like in most federal indictments, the Defendant is charged with a combination of substantive offenses (8 counts of actual health care fraud) and the inchoate offense of conspiracy (for entering into an agreement to commit health care fraud and violate the Anti-Kickback statute).
By charging the Defendant with conspiracy the Government is able to thoroughly describe the background story leading up to the substantive fraud offenses. This is because the “overt acts” of a conspiracy can be as benign as incorporating a business or leasing office space, if those acts were indeed undertaken to further the criminal goal of the conspiracy. In this case the Government lists the Defendant’s formation of 1866ICPAYDAY.COM LLC, his leasing of office space, and his registration of a d/b/a all as overt acts in furtherance of the conspiracy, effectively casting the Defendant’s otherwise normal business activities as criminal acts.
Additionally, by charging the defendant with conspiracy, the Government can also significantly increase the loss amount of the alleged fraud. Unlike specific instances of fraud, a conspiracy can last for many years and encompass all of the acts of a defendant, criminal or otherwise. In essence, it gives the Government broad discretion to use as many of the Defendant’s own actions against him. As such, the Government is able to increase the loss amount to $1,238,823.85 when the 8 specific counts of fraud in the indictment only add up to $24,065.60.
If the Defendant is eventually convicted of an offense, defense counsel should argue for a lesser loss amount at sentencing, especially if some of the Defendant’s claims to Medicare and Medicaid were in fact legitimate. Pushing back against the Government’s asserted loss amount is critically important at sentencing because an increased loss amount correlates directly with an increased sentence according to the U.S. Sentencing Commission’s Guidelines Manual.
Depending on how much of the Defendant’s business activities are eventually proven to be fraudulent, defense counsel may also have the opportunity to argue against the “willfulness” element of the fraud counts. Isolated instances of medically unnecessary claims to Medicare or Medicaid can be cast as legitimate mistakes, instead of criminal acts. To determine whether the Government’s allegations are broader than what is reflected in reality requires defense counsel to thoroughly review the Defendant’s business and patient records. Upon this review, defense counsel will be able to effectively compare the Defendant’s version of the facts against the Government’s allegations.
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.
Former Navy Sailor Accused of Attempted Espionage
Robert Patrick Hoffman II, 39, of Virginia Beach, Va., has been indicted by a federal grand jury for allegedly attempting to provide classified information to individuals who he believed to be representatives of the Russian Federation.
According to the indictment, Hoffman is a U.S. citizen born in Buffalo, N.Y., who served for 20 years in the U.S. Navy until his retirement in November 2011. While serving in the Navy, Hoffman was a Cryptologic Technician, which required him to maintain Top Security clearance. Hoffman also had access to sensitive information and special programs.
The indictment and other court documents reveal that Hoffman allegedly supplied “drops” of classified information in September and October 2012 to individuals he believed to be part of the Russian Federation. Hoffman was, in fact, engaging in communications with undercover FBI agents. However, Hoffman was solicited by the FBI agents following his return from a trip to Eastern Europe. Apparently, a letter was mailed to Hoffman “from Moscow” that inquired into his interest in assisting the Russian Federation and requested an immediate response.
Although Hoffman responded to the letter, he never came into actual contact with any Russian nationals, hence the attempt charge under 18 U.S.C. § 794(a). Further, Hoffman argued at his detention hearing that he provided some information as a means to gain the interest and trust of the Russian Federation before reporting the communications to the FBI. Hoffman eventually reported the interactions to the FBI, but since they were behind the whole operation, it obviously provided no benefit to him. With the weight of the evidence against him, the judge ordered that Hoffman be detained until trial.
18 U.S.C. § 794(a) is an espionage statute, and carries with it the potential for up to life in prison, and even death under certain circumstances. To sustain a conviction, the government must be able to prove that the defendant acted intentionally or with reason to believe that the disclosed information will be used to cause injury to the United States. Further, the information must be communicated, delivered, or transmitted, or the defendant must attempt to do so. Lastly, the information must be related to the national defense of the United States.
From a defense perspective, particularly at this early stage in the proceedings, an in-depth review of the evidence is critical. The evidence must be reviewed to determine the defendant’s mental state and whether he/she acted with the specific intent to cause injury to the U.S., whether the defendant attempted to transmit information, and whether such information is so sensitive as to qualify as related to national defense. The evidence must also be evaluated to determine the viability for any justifiable defenses.
Hoffman’s mental state is a major component in this case. If he was acting with the intent to gain the trust of the Russian Federation in order to ultimately benefit the FBI, then the argument that he intended to cause injury to the U.S. fails. Further, court documents indicate that the information that was allegedly communicated or transmitted to the undercover FBI agents pertained to methods of tracking U.S. submarines, including technology and procedures. The issue of whether Hoffman transmitted information does not appear to be in dispute; thus, the relevancy turns to the type and classification of the information, and whether it relates to national defense.
In addition to the two key issues above, another defense that appears to jump out immediately is entrapment by the FBI agents, due to their solicitation of Hoffman. However, an entrapment defense can be a difficult argument to make, particularly because the defendant must prove that he was induced to commit the crime by solicitation plus some overreaching or improper conduct on the part of the government, and that he was not otherwise predisposed to commit the crime. Solicitation by the government, is not in and of itself entrapment.
The defense’s strategy going forward should focus on the strength of the evidence as to Hoffman’s mental state, specifically whether he formed the intent necessary to commit attempted espionage, and whether the information that was communicated to undercover FBI agents did, in fact, relate to national security. Such details may mitigate the ultimate result of the outcome of the case and will effect the defense’s next steps and viability of potential defenses.
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.
Grand Jury Returns Indictment Against Virginian for Conspiracy and Tax-Related Offenses
On July 10, 2011 the U.S. Attorney’s Office for the Eastern District of Virginia announced that a federal grand jury has indicted Jeffrey Charles, of Mathews County, Va., for conspiring with his daughter and son-in-law to defraud the United States. The docket also indicates that a warrant has been issued in this matter.
According to the indictment, Charles conspired with his daughter and son-in-law to impair and impede the IRS in ascertaining, computing, assessing and collecting federal income taxes. The government charged this count under the general conspiracy statute, 18 U.S.C. 371. General conspiracy makes it a crime for two or more persons to agree to work together to commit any federal crime, so long as the participants in the conspiracy undertake any act, commonly referred to as an overt act, to further the underlying criminal activity. This overt act itself does not have to be a criminal act or illegal. Accordingly, in its indictment, the government alleges no less than 21 overt acts in furtherance of the alleged conspiracy to defraud the United States of tax revenue.
The indictment also alleges that Charles aided and assisted in the preparation of three false tax returns in his daughter’s name for tax years 2000, 2001, and 2005, and attached false documents to each tax return. The statute, 26 U.S.C. 7206(2), makes it a criminal offense for anyone to assist in the filing of a false return. The statute specifically disregards whether or not the fraudulent information or falsity was included with the knowledge or consent of the person authorized or required to present the documents to the IRS. Therefore, tax preparers can be liable for this offense even if the taxpayer himself intentionally produced false or fraudulent information. In such a scenario the tax preparer would have to demonstrate that they could not have reasonably known the information presented to them was false.
As alleged in the indictment, Charles also filed a false tax return in his own name for tax year 2006 in which he allegedly falsely reported earning $0.00 income. Since this count is with regards to Charles’ own tax return, the count is charged as 26 U.S.C. 7206(1), which targets the actual taxpayer or the person obligated to file, not the preparer.
An interesting note about this case is that according to the indictment Charles was affiliated with an organization known as the American Rights Litigators (ARL) (a.k.a. the Guiding Light of God Ministries). The organization is a tax protest group located in Lake County, Florida. As alleged in the indictment, Charles utilized materials provided by this organization to fulfill his alleged criminal endeavors.
However, it may be constitutionally improper for the government to use Charles’ affiliation with this group against him at trial. Using someone’s political affiliations against them in the court of law gets dangerously close to offending the First Amendment. Therefore, defense counsel in this matter should probably attempt to limit its usage in court and look into whether the investigation into Charles was originally initiated due to his association with this protest group.
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.
Two Virginia Brothers Charged with Conspiracy and 16 Counts of Interference with Commerce by Robbery
On June 20, 2012, the U.S. Attorney’s Office for the Eastern District of Virginia indicted Laquan Draper and Angelo Draper for their alleged participation in an eight-week robbery spree in July of 2011, spanning Norfolk to Roanoke, VA.
As alleged in the indictment, the brothers, concealing their identities with shirts tied around their faces, entered 7-11 convenience stores with either firearms or replica firearms, jumped over the counter and took money from store employees. The men are also alleged to have robbed employees of two McDonald’s, a Wendy’s, an ABC Store, and a Fast Auto Loans location. In addition, at Got It Video in Norfolk, the Drapers entered with a third person, shattering the locked front glass door by shooting out the bottom half. They then held customers and employees at gun-point and took money from the store registers.
The brothers were arrested in Chesapeake on August 25, 2011 after they crashed the stolen Saturn Vue they were driving into a police vehicle. A .22 caliber hand-gun was found in the passenger floor board of the stolen vehicle when the men were removed. Additional evidence recovered from the car was linked forensically to several of the crime scenes.
The Draper brothers were charged with conspiracy to commit robbery, 16 counts of interference with commerce by robbery, and three firearm charges. Laquan Draper has also been charged with possession of a firearm by a felon. If convicted, they face a maximum of 20 years in prison for each of the robbery and conspiracy charges, and a total of 60 mandatory years on the firearm charges.
The government’s decision to charge the brothers with conspiracy places the defendants at a serious disadvantage. Most importantly, that the government can prosecute the brothers together in a single trial. This is especially important if one of the brothers was only a minor participant because now the jury will see all of the evidence at trial, not just the evidence pertaining to the minor participant’s role in the conspiracy.
Conspiracy also allows the government to introduce hearsay evidence against the brothers under the co-conspirator hearsay exception. This means that statements made by one brother in furtherance of the conspiracy can be used against the other brother.
Perhaps the most important disadvantage facing the brothers is that each may be responsible for the substantive crimes committed by the other during the course of the conspiracy. This concept is known as vicarious liability and was upheld by the Supreme Court in Pinkerton v. United States, 328 U.S. 640 (1946). Not only can the brothers face jail time for the crimes they personally committed, they can be convicted for the offenses committed by the other brother if they were committed during the term of the conspiracy.
Managing both the scope of the conspiracy and the flow of admissible evidence by the government will be very important for the defense. Also important will be communicating to the prosecutor if one brother was in fact only a minor participant in the conspiracy (e.g., one brother coerced the other, less capable brother, to participate in the conspiracy).
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 Background Investigator Sentenced to Prison Term for Making a False Statement
Bryan M. Marchand, 39, a former background investigator who did work under contract for the U.S. Office of Personnel Management (OPM), was sentenced yesterday to three months in jail on a charge stemming from the alleged falsification of work on background investigations of federal employees and contractors.
Marchand pled guilty in April 2012 in the United States District Court for the District of Columbia. Upon completion of his prison term, Marchand will be placed on three years of supervised release, 12 months of which will be on home detention. As part of the guilty plea, Marchand agreed to pay $192,071 in restitution to the federal government.
Marchand was employed with United States Investigations Services (USIS) as an investigator under contract to conduct background investigations on behalf of OPM’s Federal Investigative Services. For certain federal employment positions and other various circumstances, federal background investigations are required. For example, in order to obtain a security clearance, a background investigation must be conducted into the individual’s personal life and previous work experiences. The investigation results are then compiled into a comprehensive report and used as a basis to grant or deny the security clearance.
According to prosecutors, between May 2007 and May 2008, in more than four dozen reports of investigations on background investigations, Marchand represented that he had interviewed a source or reviewed a record regarding the subject of the background investigation although he had not conducted the interview or obtained the record.
These types of reports are utilized and relied upon by the agencies requesting the background investigations to determine whether the candidates are suitable for positions having access to classified information, for positions impacting national security, or for receiving or retaining security clearances. If a background investigator has not actually conducted the investigation according to all requirements, but states as such, then the federal government apparently views the claim as a false statement under federal criminal law.
In the past three years, the U.S. Attorney’s Office in D.C. has prosecuted 11 other background investigators and two record checkers for similar charges. The press release indicates that prosecutors are usually tipped off after being informed of inaccuracies that are found during internal compliance procedures taken by the federal contractor providing the service, which in this case would be USIS. Albeit a violation of employment practices to falsify information in the report of investigation, the fact that federal criminal charges can be imposed for false statements should put the employees of USIS, and similar government contractors, on notice of what they are facing if the company or federal government believes such falsifying is taking place.
In addition to the prison term and supervised release, Marchand’s sentence requires him to pay $192,071 in restitution to the U.S. government for the reopening and reworking of background investigations, as claimed by OPM’s Federal Investigative Services.
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.
Check Cashers in Brooklyn, Philadelphia, and Los Angeles Charged for Allegedly Evading Anti-Money Laundering Laws
On June 14, 2012 seven individuals and four check cashing businesses were charged in the Eastern District of New York and the Central District of California for their alleged roles in separate schemes to violate the Bank Secrecy Act (“BSA”). The defendants allegedly failed to follow reporting and anti-money laundering requirements for transactions totalling more than $50 million. A total of four indictments were filed.
Two of the indictments were returned in Los Angeles and named three individuals and two check cashing businesses. The other two indictments were returned in Brooklyn and named four individuals and two check cashing businesses. All seven individual defendants were arrested or surrendered to authorities. Those named in the indictments include Belair Payroll Services, Bargain Island, G&A Check Cashing, and AAA Cash Advance, all check cashing businesses. The individuals names in the indictments include Craig Panzera, Lasha Goletiani, Zhan Petrosyants, George Gonchar, Karen Gasparian, Humberto Sanchez, and Diana Brigitt.
The four indictments charge the defendants with failure to file currency transaction reports (“CTRs”) or falsely filing CTRs, as well as failure to have an effective anti-money laundering program, all violations under the BSA.
The BSA is a set of laws and regulations enacted by Congress to address an increase in criminal money laundering through financial institutions, which include check cashing businesses. Check cashers enable people to cash checks without having to go to a bank account or maintain a bank account. A check casher will typically charge a fee for this service.
Under the BSA, financial institutions, including check cashers, are required to file a CTR with the Department of Treasury for any transaction involving more than $10,000 in currency. As part of the CTR, the check casher is required to verify and accurately record the name and address of the individual who conducted the currency transaction, the individual on whose behalf the transaction was conducted, as well as the amount and date of the transaction. CTRs are important law enforcement tools for uncovering criminal activity.
The BSA also requires financial institutions, including check cashing businesses, to maintain an effective anti-money laundering (AML) program. The purpose of an AML program is to effectively detect and prevent attempts to facilitate money laundering. Check-cashing businesses are therefore required to have written policies and procedures regarding CTR filings, records maintenance and responses to law enforcement.
According to the indictments, despite these regulations, check-cashing businesses are a common venue for individuals who want to anonymously cash large numbers of checks to facilitate fraud and money laundering schemes. According to the indictments, the use of check cashers to launder money is particularly prevalent in the area of health care fraud, where fraudulent health care businesses commonly convert the proceeds of their fraud into cash by presenting checks to check cashers who they know will not ask for proof of the payee’s identity and will either not file CTRs or file false CTRs.
The BSA is intended to assist both the private sector and the government in its detection and prevention of criminal money laundering. By implementing these regulations, financial institutions provide law enforcement agencies from around the world with valuable insight into the banking and financial activities of people from all walks of life. Although the specific conduct of those named in the indictments may not in any way be connected to the criminal activity they’re designed to detect, the allegations of noncompliance with CTRs and anti-money laundering programs are in and of themselves considered criminal conduct.
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.
