Archive
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.
The Fourth Circuit Upholds Defendant’s Sentence; Rejects the Applicability of the ‘Safety Valve’ Sentencing Departure
On February 29, 2012, the Fourth Circuit affirmed the lower court’s decision to deny Frank Aidoo, the defendant, the benefit in sentencing espoused in 18 U.S.C. 3553(f). Commonly referred to as the “safety valve,” section 3553(f) allows a judge to sentence a defendant to a term of imprisonment below a statute’s mandatory minimum. For example, Mr. Aidoo pleaded guilty to one count of 21 U.S.C. 952 after he was caught trying to import nearly one kilogram of heroin into the United States. The mandatory minimum sentence for the importation of heroin is 60 months. However, if one qualifies for the safety valve, a judge can sentence a term of imprisonment below the minimum.
To qualify for this reduced sentence a defendant must (1) “not have more than 1 criminal history point, as determined under the sentencing guidelines,” (2) must not have used “violence or credible threats of violence or possess a firearm or other dangerous weapon . . . in connection with the offense,” (3) the offense must not have resulted in the “death or serious bodily injury to any person,” (4) the defendant must not have been the “organizer, leader, manager, or supervisor of others in the offense,” and (5) the defendant “must have truthfully provided to the Government all information and evidence the defendant has concerning the offense or offenses that were part of the same course of conduct or of a common scheme or plan.”
The burden of proving whether the safety valve applies in a particular case belongs to the defendant. According to the court’s analysis, a defendant must demonstrate by a preponderance of the evidence that he has satisfied all five elements of the safety valve. At issue in this case was whether Mr. Aidoo satisfactorily met this burden with respect to the fifth element of section 3553(f). Unfortunately, the judge in the trial court did not think so and on appeal the Fourth Circuit agreed with the trial judge.
Mr. Aidoo claimed that because he provided a story to the Government that on its face satisfied the fifth element, that the burden then shifted to the Government to disprove the truth of this story. The Fourth Circuit rejected this argument. It opined that the court may use its own reasoned assessment of the defendant’s statements and credibility before it requires the Government to furnish independent rebuttal evidence. In essence, the court has stated that a sentencing judge can reasonably determine the veracity of defendant’s statement made to satisfy the fifth element without requiring any further evidence from the Government to disprove the defendant’s statement. The Fourth Circuit also mentioned that if they had held the opposite ruling in this matter, the burden of proving the fifth element would effectively be turned on its head. This is because the government would then be burdened with disproving any story furnished by the defendant, no matter how implausible that story may be.
The key takeaway from this case for defendants is that defense counsel should furnish to the sentencing judge as much evidence as is available that demonstrates the truthfulness of the defendant’s information. As such, defense counsel should request from the court sufficient time to gather such evidence. If defense counsel requires more time to gather evidence than is allotted by the court, then counsel should make his or her objection known on the record. By making this objection on the record counsel will preserve this issue for appeal in the event of an unfavorable ruling.
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 Executive at Gourmet Foods Company Sentenced to 30 Months in Prison for Embezzling Over $1 million from Her Employer
In the Central District of California, a woman was sentenced on February 13, 2012 for embezzling more than $1 million from her employer, a Santa Barbara-based gourmet food company. Lisa Sackie, 48, was sentenced by United States District Judge George H. Wu, who also ordered the defendant to pay $1.1 million in restitution to Future Food Brands, the parent company of Santa Barbara Bay Foods.
Sackie pleaded guilty to two counts of mail fraud in August of 2011, admitting that she wrote company checks to herself and to pay for personal expenses. Sackie pleaded to an information, and subsequently waived her right to a grand jury indictment. Sackie’s decision to plead to an information and waive her right to an indictment likely benefited her in sentencing because she admitted guilt early in the process and saved government resources. In fact, according to her sentencing memorandum and the sentencing guidelines, Sackie was facing a sentencing range of 33 to 41 months. Accordingly, Sackie was sentenced to 33 months in prison, the very bottom of her recommended sentencing range. Although her attorneys’ request for a variance of 33 months of probation was denied, Sackie benefited from cooperating, as reflected in the judge’s determination to sentence her at the bottom of the applicable range.
According to the plea agreement the government agreed to bring no additional charges against the defendant based upon her scheme to defraud her employer. Thus, instead of facing a multitude of fraud counts, Sackie only faced the maximum penalty of two fraud counts. Had Sackie not agreed to a plea agreement early on, the government would have likely convened a grand jury and charged her with a multitude of fraud counts dating as far back as 2004, which is when the government alleges Sackie’s scheme to defraud had begun. Depending on the full extent of the circumstances a defendant faces, it may be prudent to plea early, much like Sackie, and not put the government to its constitutional burden of proving a case.
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.
Seven Individuals Indicted for Engineering Sophisticated Internet Fraud Scheme That Infected Millions of Computers Worldwide
On November 9, 2011 the United States Attorney for the Southern District of New York announced charges against against six Estonian nationals and one Russian national for engaging in a massive and sophisticated Internet fraud scheme that infected with malware more than four million computers located in over 100 countries. Of the computers infected with malware, at least 500,000 were in the United States, including computers belonging to U.S. government agencies, such as NASA; educational institutions; non-profit organizations; commercial businesses; and individuals. The malware secretly altered the settings on infected computers enabling the defendants to digitally hijack Internet searches and re-route computers to certain websites and advertisements, which entitled the defendants to be paid. The defendants subsequently received fees each time these websites or ads were clicked on or viewed by users. The malware also prevented the installation of anti-virus software and operating system updates on infected computers, leaving those computers and their users unable to detect or stop the defendants’ malware, and exposing them to attacks by other viruses.
Six of the defendants, Vladimir Tsastin, Timur Gerassimenko, Dmitri Jegorov, Valeri Aleksejev, Konstantin Poltev and Anton Ivanov, all Estonian nationals, were arrested and taken into custody November 8, 2011 in Estonia by the Estonian Police and Border Guard Board. The U.S. Attorney’s Office will seek their extradition to the United States. The seventh defendant, Andrey Taame, a Russian national, remains at large.
As alleged in the indictment, from 2007 until October 2011, the defendants controlled and operated various companies that masqueraded as legitimate publisher networks (the “Publisher Networks”) in the Internet advertising industry. The Publisher Networks entered into agreements with ad brokers under which they were paid based on the number of times that Internet users clicked on the links for certain websites or advertisements, or based on the number of times that certain advertisements were displayed on certain websites. Thus, the more traffic to the advertisers’ websites and display ads, the more money the defendants earned under their agreements with the ad brokers. As alleged in the indictment, the defendants fraudulently increased the traffic to the websites and advertisements that would earn them money. The defendants accomplished this by making it appear to advertisers that the Internet traffic came from legitimate clicks and ad displays on the defendants’ Publisher Networks when, in actuality, it had not.
The defendants accomplished their scheme by employing both “click hijacking” and “advertising replacement fraud.” In “click hijacking” schemes the user of an infected computer clicks on a search result link displayed through a search engine query, the Malware causes the computer to be re-routed to a different website. Instead of being brought to the website to which the user asked to go, the user is brought to a website designated by the defendants. In “advertising replacement fraud” schemes the defendants used malware and rogue DNS servers which replaced legitimate advertisements on websites with substituted advertisements that triggered payments to the defendants. It is alleged in the indictment that both schemes earned the defendants at least $14 million in ill-gotten gains.
The defendants are being charged with wire fraud conspiracy, wire fraud, computer intrusion, computer intrusion conspiracy, and computer intrusion by transmitting information. The indictment also alleges that the defendants laundered the proceeds of the scheme through numerous companies.
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.
Virginia Man Accused of Acting as Unregistered Agent of Syrian Government and Spying on Syrian Protestors in America
Mohamad Anas Haitham Soueid, 47, a resident of Leesburg, Va., has been charged for his alleged role in a conspiracy to collect video and audio recordings and other information about individuals in the United States and Syria who were protesting the government of Syria and to provide these materials to Syrian intelligence agencies in order to silence, intimidate and potentially harm the protestors.
Soueid, aka “Alex Soueid” or “Anas Alswaid,” a Syrian-born naturalized U.S. citizen, was charged by a federal grand jury on Oct. 5, 2011, in a six-count indictment in the Eastern District of Virginia. Soueid is charged with conspiring to act and acting as an agent of the Syrian government in the United States without notifying the Attorney General as required by law; two counts of providing false statements on a firearms purchase form; and two counts of providing false statements to federal law enforcement.
According to the indictment, since March 2011, Soueid has acted in the United States as an agent of the Syrian Mukhabarat, which refers to the intelligence agencies for the Government of Syria, including the Syrian Military Intelligence and General Intelligence Directorate. At no time while acting as an agent of the government of Syria in this country did Soueid provide prior notification to the Attorney General as required by law.
Under the direction and control of Syrian officials, Soueid is accused of recruiting individuals living in the United States to collect information on and make audio and video recordings of protests against the Syrian regime – including recordings of conversations with individual protestors – in the United States and Syria. He is also charged with providing the recordings and other information to individuals working for the Mukhabarat. Soueid and others conspired to use this information to undermine, silence, intimidate and potentially harm those in the United States and Syria who engaged in the protests. The indictment also alleges that Soueid provided information regarding U.S. protestors against the Syrian regime to an individual who worked at the Syrian Embassy in Washington, D.C.
On Aug. 3, 2011, FBI agents interviewed Soueid, and the indictment accuses him of lying to the agents when he denied that he had collected information on U.S. persons and transmitted that information to the government of Syria. In addition, Soueid allegedly made further false statements when he denied to FBI agents that he had directed someone to audio or videotape a conversation, meeting, rally or protest, or that he was aware of any individual taking photographs or videotaping people. He also allegedly made false statements when he denied that he had ever been an agent of the Syrian government or a foreign intelligence officer.
In addition, the indictment alleges that, when purchasing a Beretta pistol on July 11, 2011, Soueid listed a false current residence address on a firearms purchase application and in records that were kept by a licensed firearms dealer.
If convicted, he faces a maximum penalty of 15 years in prison on the conspiracy and foreign agent charges, 15 years in prison on the firearms purchase charges and 10 years in prison on the false statement charges
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.
U.S. Citizen Indicted for Plotting to Attack Capitol, Pentagon, and U.S. Soldiers
On September 29, 2011, the U.S. Attorney’s Office for the District of Massachusetts indicted Rezwan Ferdaus, a 26 year old Northeastern University physics graduate. The indictment states that Mr. Ferdaus is accused of planning to commit acts of violence against the United States “with the goal of terrorizing the United States, decapitating its ‘military center,’ and killing as many [non-believers] as possible.”
Mr. Ferdaus has been specifically charged with 18 U.S.C. sections 844(f) for attempting to damage or destroy a Federal building, section 2155 for attempting to damage and destroy national-defense premises, section 844(d) for being in receipt and possesion of explosive materials, section 2339A for attempting to provide material support to terrorists, and section 2339B for attempting to provide material support to a designated Foreign Terrorist Organization (FTO). Mr.Ferdaus was also charged with 26 U.S.C. section 5861 for being in receipt of non-registered firearms.
Mr. Ferdaus thought he was meeting with members of al-Queda when in fact the individuals he was meeting with were undercover federal agents. Mr. Ferdaus revealed to federal agents that he extensively planned and took substantial steps to bomb the United States Pentagon and United States Capitol Building using remote controlled aircraft filled with explosives.
Mr. Ferdaus began designing and constructing detonation components for improvised explosive devices (IEDs) using mobile phones. These modified mobile phones were given to the undercover agents by Mr. Ferdaus who thought they were going to be used to kill U.S. soldiers overseas.
Mr. Ferdaus also requested firearms, ammunition, and explosives from the undercover agents whom he thought were al-Queda operatives. They provided him with C-4 explosives, AK-47 assault rifles and grenades. These items were needed for him to carry out a detailed plan to attack the Capitol and Pentagon with remote control aircraft that he shared with the undercover agents on two USB storage devices. The plans were highly detailed and contained “recon” photos of the proposed attack sites. As soon as Mr. Ferdaus was in receipt of these items he was arrested by federal law enforcement in Massachusetts.
If convicted on all counts, Mr. Ferdaus would face up to 80 years in prison and have any property linked to his criminal conduct subject to forfeiture. Had his conduct caused anyone to actually died, Mr. Ferdaus’ would be facing life in prison or even the death penalty.
What is apparent from this indictment is that the federal government is well prepared to deal with threats against the national security of the United States. With undercover agents and a series of effective criminal statutes, would-be terrorists often face many years in prison before their conduct actually harms anyone. However, investigators must conduct their sting operations carefully to ensure the target cannot utilize an entrapment defense.
Entrapment is a complete defense to a criminal charge on the theory that “government agents may not originate a criminal design, implant in an innocent person’s mind the disposition to commit a criminal act, and then induce commission of the crime so that the Government may prosecute.” Thus there are two elements to the defense: (1) inducment by the government; and (2) the defendant’s lack of predisposition to engage in the criminal conduct. From the facts alleged in Mr. Ferdaus’ indictment, it seems that an entrapment defense would be unsuccessful because he possessed the disposition to engage in criminal conduct. He authored the plans to attack U.S. buildings and soldiers while the government merely “facilitated” his plans by providing the hardware necessary.
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 U.S. Army Corps of Engineers Employees and Two Others Indicted in $20 Million Bribery and Kickback Scheme
The FBI has reported that four Virginia men, including two longtime employees of the U.S. Army Corps of Engineers, were arrested October 4, 2011 on charges stemming from an indictment that accuses them of taking part in a conspiracy involving more than $20 million in bribes and kickback payments and the planned steering of a $780 million government contract to a favored contractor.
The defendants include Kerry F. Khan, 53, of Alexandria, Va.; his son, Lee A. Khan, 30, of Fairfax, Va.; Michael A. Alexander, 55, of Woodbridge, Va.; and Harold F. Babb, 60, of Sterling, Va. Kerry Khan and Alexander are employed by the U.S. Army Corps of Engineers, and Babb is director of contracts for a company that did business with the government.
All four men were taken into custody on charges contained in an indictment that was returned by a grand jury, under seal, on Sept. 16, 2011, in the U.S. District Court for the District of Columbia. The arrests took place as authorities executed search warrants at seven locations in Virginia and one in the District of Columbia. The indictment was unsealed the day of the arrests.
According to the indictment, Kerry Khan and Alexander helped funnel more than $45 million in payments to a favored company through a federal government contract they oversaw, with plans to steer hundreds of millions more to the business. Approximately $20 million in fraudulent expenses were built into the invoices, and proceeds went to all four defendants.
All four defendants were indicted on one count of conspiracy to commit bribery and wire fraud and aiding and abetting and causing an illlegal act to be done, as well as one count of conspiracy to commit money laundering. Kerry Khan and Alexander also were indicted on one count of receipt of a bribe by a public official, and Babb was indicted on one count of unlawful kickbacks.
If convicted of the charges, Kerry Khan and Alexander face a maximum of 40 years in prison. Babb faces up to 35 years, and Lee Khan faces a sentence of up to 25 years.
The United States has obtained warrants to seize funds in 29 bank accounts and to seize three luxury vehicles and seven high-end watches. In addition, the indictment includes a forfeiture allegation against 16 real properties financed in whole or in part with proceeds of the crimes. The United States has begun the process of securing forfeiture of those 16 properties, which include 14 properties in Virginia, one in West Virginia, and one in Florida.
The indictment also provides the defendants notice that, if convicted, the United States will seek forfeiture of all proceeds of the charged offenses.
The case is being prosecuted by the Fraud and Public Corruption and the Asset Forfeiture and Money Laundering Sections of the U.S. Attorney’s Office for the District of Columbia. Their coordinated efforts with the FBI, the Office of the Inspector General for the Small Business Administration, the Department of Defense Criminal Investigative Service, Army Criminal Investigation Command and the IRS led to the indictment and arrests.
Given the global economic climate, the federal government’s burgeoning debt crisis, and the increased public scrutiny of government expenses law enforcement has stepped up enforcement of contract procurement fraud, abuse, and waste. The government will prosecute these offenses rigorously and knowledgeable defense counsel should be sought immediately by those targeted by a federal investigation.
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.
