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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.
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.
Lawyer for Indian Tribe and Three Others Indicted for Casino Bribery Scheme
An attorney for the Twenty-Nine Palms Band of Mission Indians is among four people who have been indicted on federal bribery and money laundering charges for allegedly participating in scheme in which associates of the lawyer hired to provide assistance to the tribe paid kickbacks to the attorney.
The 48-count grand jury indictment returned Wednesday afternoon names Gary Edward Kovall, 66, of Ely, Minnesota, a licensed California attorney who acted as legal counsel for the tribe; David Alan Heslop, 74, of Templeton, who, on Kovall’s recommendation, was hired by the tribe to oversee some tribal business; Paul Phillip Bardos, 57, of Rancho Cucamonga, a general contractor; and Peggy Anne Shambaugh, 56, of Ely, Minnesota, who is Kovall’s wife.
Arraignments are set for today in the United States District Court in Los Angeles. The indictment has not been posted publicly as of yet.
According to the press release, Kovall advised the tribe to create a limited liability company to purchase real estate, and the attorney allegedly convinced the tribe to hire Heslop as the company’s manager. Kovall and Heslop then recommended that the tribe hire Bardos to act as the tribe’s “owner’s representative” in several construction projects at the Spotlight 29 Casino. Allegedly, when additional construction or construction oversight became necessary in relation to casino projects, Bardos submitted proposals to perform the work, and Kovall persuaded the tribe to give Bardos the contracts. After being paid by the tribe, Bardos allegedly paid kickbacks to Heslop who, in turn, paid kickbacks to Kovall through Shambaugh.
As far as the financial aspect of the alleged scheme, the press release only cites to one instance in 2007, when Bardos allegedly paid Heslop more than $186,577 which was then funneled to Shambaugh.
Although the indictment has not been made public yet, it is interesting to note that Twenty-Nine Palms Enterprises has been involved in two civil suits in the past, and Twenty-Nine Palms Band of Mission Indians has been involved in five civil suits. One of the civil lawsuits was apparently between Twenty-Nine Palms Enterprises and Cadmus Construction, Inc., which is owned by Bardos. Cadmus Construction brought the suit against Twenty-Nine Palms Enterprises in 2010 to recover payment for construction work that Twenty-Nine Palms was refusing to pay.
Without access to the indictment, there is no telling how or why the federal government began to investigate the relationship between Twenty-Nine Palms and the four individuals who have been criminally indicted. Perhaps the earlier civil lawsuit between Bardos and Twenty-Nine Palms led to the federal investigation after issues regarding payment was brought up. Regardless, the four individuals now face serious federal criminal charges and if convicted, might face federal prison and significant fines.
All four individuals have been indicted with conspiracy. Additionally, Kovall, Bardos, and Shambaugh are charged with eight counts of bribery, while Heslop is charged with 16 counts of bribery. In addition to the conspiracy and bribery charges based on the kickback scheme, Bardos is charged with eight counts of money laundering, Heslop is charged with seven counts of money laundering, and Shambaugh is charged with two counts money laundering.
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.
Spa Operators Indicted for Alleged Prostitution Ring
A federal grand jury in the District of Nebraska has returned two indictments charging four individuals in connection with the operation of various “spas” in Omaha. According to the indictments, all four individuals were involved in operating spas under various names at different locations in Omaha, all of which were alleged fronts for prostitution. The indictments allege that the individuals conducted an interstate prostitution operation by using various facilities of interstate commerce to run their businesses and, in so doing, attracted clients from both Nebraska and other states.
William R. Knox is alleged during certain time periods to have operated a spa business himself or through managers. Knox is alleged during other time periods to have entered business sublease or purchase arrangements with others, under which the sublessor or purchaser paid Knox a weekly fee in exchange for the opportunity to operate the ongoing spa business on the premises.
Tammy L. Schuck is alleged to have operated a spa business under a sublease with Knox and to have thereafter opened and operated two other spas. Tabatha N. Ashburn is alleged to have managed and operated the spas. Christopher J. Tierney is alleged to have provided computer and electronic services for the spas, including setting up a website and creating a computerized record keeping system.
Knox’s indictment charges him with inducement of another to travel in interstate commerce with intent to engage in illicit sexual conduct (18 U.S.C. § 2422), use of facilities in interstate commerce in aid of racketeering enterprises (18 U.S.C. § 1952), money laundering, and conspiracy. The others indicted are facing similar charges.
Under 18 U.S.C. § 2422, a person can be charged with knowingly coercing or inducing others to travel across state lines in order to engage in prostitution or other illicit sexual acts. This enables the U.S. government to charge an individual with a federal crime without actually identifying those who were coerced or induced. Further, if there is any type of business linked to criminal acts, it can be construed as racketeering. Racketeering and money laundering typically go hand in hand, and as with any business, the paper trail may give away the illicit activity.
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 Deputy Director of USAID Contractor and His Wife Accused of Embezzlement
Mark Adams, 43, a former deputy director at a private USAID contractor, and his wife, Latasha Bell, 36, have been indicted by a federal grand jury on charges that they acquired more than $1 million from a program meant to address global health problems such as HIV/AIDS. Among other things, Adams and Bell are accused in the indictment of using the money to renovate their home and purchase two luxury cars worth over $110,000.
The U.S. Agency for International Development, or USAID, is an independent government agency that lends support mostly to developing countries in order to assist with economic growth, global health and other development relief. According to the forty-page indictment, USAID contracted with an unidentified outside company to perform analysis and information management services. Adams served with the company as the deputy director and project manager on the contract.
The 23-count indictment was filed April 10, 2012 in the U.S. District Court for the District of Columbia. It includes one count of conspiracy, ten counts of wire fraud, two counts of mail fraud, seven counts of theft from a program receiving federal funds, one count of conspiracy to launder money, and two counts of aggravated identity theft. Both individuals pleaded not guilty to the charges at their arraignments on April 11, 2012.
Adams has been accused of using his position as deputy director to submit and approve false and fraudulent invoices worth more than $1 million between 2005 and 2010. The alleged invoices claimed to bill for services purportedly provided by Bell and companies controlled by Adams’s two friends, an unidentified co-conspirator and co-conspirator Everett Lipscomb Jr. The alleged scheme caused the USAID contractor to pay the invoices for services not rendered.
The indictment indicates that the unidentified co-conspirator provided testimony to the grand jury. Further, the press release issued by the U.S. Attorney’s Office for D.C. reveals that Lipscomb pleaded guilty to one count of conspiracy to commit wire fraud on March 2, 2012. The tedious detail provided in the indictment, and the fact that the indictment against Adams and Bell came several weeks after Lipscomb’s plea, indicates that the entire case against them is based on the statements and information provided by the co-conspirators.
The co-conspirators, who are childhood friends of Adams’, have managed to push a majority of the blame on Adams and Bell while receiving only minimal charges against themselves. It is unclear what, if any, charges have been brought against the unidentified co-conspirator, but Lipscomb’s plea reflects the favorable treatment he received for turning against Adams and Bell.
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.
Juarez Drug Cartel Member Pleads Guilty and Sentenced to Life in Prison
An alleged leader of the Juarez Drug Cartel in Juarez and Chihuahua, Mexico, pleaded guilty last Thursday in El Paso, Texas, and was sentenced to life in prison for his participation in drug-trafficking and numerous acts of violence in connection with the Barrio Azteca gang.
Jose Antonio Acosta-Hernandez, 34, aka “Diego,” “Dienton,” “Diez” and “Bablazo,” of Chihuahua, was extradited to the United States from Mexico on March 16, 2012. On April 5th, he pleaded guilty to four counts of racketeering, narcotics trafficking and money laundering. Acosta-Hernandez also pleaded guilty to seven counts of murder and weapons charges, which specifically related to the March 13, 2010, triple homicide in Juarez of U.S. Consulate employee Leslie Enriquez, her husband Arthur Redelfs and Jorge Salcido Ceniceros, the husband of another U.S. Consulate employee. Immediately after the guilty plea hearing, Acosta-Hernandez was sentenced to seven concurrent life terms, three additional consecutive life terms and 20 years in federal prison by U.S. District Judge Kathleen Cardone of the Western District of Texas, El Paso Division.
The conviction comes after the issuance of a third superseding indictment, returned on March 2, 2011, alleging that Acosta-Hernandez was an associate of the Barrio Azteca (BA), a violent street and prison gang with ties to the Juarez Drug Cartel. The drug routes through Juarez, known as the Juarez Plaza, are used frequently due to the close proximity to the United States.
Many are unaware that El Paso and Juarez are practically on top of one another, and the area is patrolled constantly by U.S. border agents. With the rise of the Juarez Drug Cartel, the border has become an integral focal point for the U.S. government in their efforts to prevent the importation of drugs into the United States.
It is unclear the motivation behind Acosta-Hernandez’s guilty plea. Many of the counts against him were brought simply because he was determined to be a leader in the cartel and therefore liable for the actions of other cartel members. Because Acosta-Hernandez was extradited to the U.S., he will avoid the dangerous prison conditions in Mexico and may actually live out his life sentence in prison.
A total of 35 individuals were charged in the third superseding indictment and are alleged to have committed various criminal acts, including racketeering, narcotics distribution and importation, retaliation against persons providing information to U.S. law enforcement, extortion, money laundering, obstruction of justice and murder, including the 2010 Juarez consulate murders.
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. and Mexico Share Forfeiture Funds from Sigue Corporation
On Monday, U.S. Attorney General Eric Holder and Mexican Attorney General Marisela Morales Ibáñez signed a letter of intent for the United States to share approximately $6 million in forfeited funds with the Office of the Attorney General of the Republic of Mexico (PGR) to support Mexican efforts to combat the financial infrastructure of organized criminal groups and to enhance bilateral cooperation between the two countries in forfeiture matters.
The letter of intent recognizes the PGR’s recent cooperation in the investigation and resolution of the U.S. government’s case against Sigue Corporation for violations of the Bank Secrecy Act (BSA). In January 2008, Sigue entered into a deferred prosecution agreement with the Department of Justice on charges of failing to maintain an effective anti-money laundering program. As a result, Sigue forfeited $15 million to the United States and agreed to commit an additional $9.7 million to improving its anti-money laundering program.
Sigue is a large international corporation engaged in money transfer services, with a focus on transactions between the U.S., Mexico and Latin America. Money transfer services operating in the U.S. are required to comply with the BSA, which includes anti-money laundering provisions. Specifically, money transmitters are required to implement internal preventative measures to guard against money laundering and must report suspicious activity to the Financial Crimes Enforcement Network (FinCEN).
The case, filed in the Eastern District of Missouri, arose out of transactions conducted by Sigue and its authorized agents from November 2003 through March 2005. During this time, more than $24.7 million in suspicious transactions were allegedly conducted through registered agents of Sigue, including transactions conducted by undercover U.S. law enforcement agents using funds represented to be proceeds of drug trafficking. According to the government’s theory, Sigue did not identify broader patterns of money laundering activity, failed to prevent the unlawful activity from continuing and did not create systems and procedures to identify suspicious financial transactions being conducted by related senders and beneficiaries.
Failure to comply with the BSA may result in civil and criminal penalties, with this case being a prime example. Sigue was forced to forfeit $15 million to the DOJ to avoid prosecution, and was also required to pay an additional $12 million in civil penalties to FinCEN.
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.
TWO SOUTHERN CALIFORNIA LOAN OFFICERS CHARGED IN MORTGAGE FRAUD SCHEME
On February 2, 2012, the U.S. Attorney’s Office for the Southern District of California indicted Simon Saed Alizadeh and Kian Ashkanizadeh for allegedly engaging in a mortgage fraud scheme involving four homes in Carlsbad, California. The indictment charges Alizadeh and Ashkanizadeh with conspiracy, wire fraud, mail fraud, and money laundering.
In a press release issued on February 14, 2012, U.S. Attorney Laura E. Duffy alleges that Alizadeh and Ashkanizadeh, working for the mortgage company Southern California Finance, asked family members to provide their name and signatures on mortgage applications, leading to the qualification of approximately $1 million in mortgage funding for each of the four properties.
According to the indictment, Alizadeh and Ashkanizadeh arranged for $200,000 in “consulting fees” and $45,000 in “construction fees,” but no consulting or construction was ever performed. It is alleged that the funds would first be channeled into the bank accounts of relatives and friends and then cause the funds to be transferred or withdrawn to their own accounts.
Alizadeh and Ashkanizadeh will appear before United States District Judge Irma E. Gonzalez for a motion hearing on April 3, 2012. Count 1 of the indictment charges Alizadeh and Ashkanizadeh with Conspiracy. The maximum penalty is up to five years imprisonment, and the greater of a $250,000 fine or twice the gross pecuniary gain or twice the gross pecuniary loss. Count two is for Mail Fraud, which carries a maximum sentence of twenty years imprisonment, and the greater of a $250,000 fine or twice the gross pecuniary gain or twice the gross pecuniary loss. Count three and four are for Money Laundering, which carries a maximum twenty years imprisonment, and the greater of a $250,000 fine or twice the gross pecuniary gain or twice the gross pecuniary loss. Counts five through eight are for Money Laundering, which carries a maximum penalty of twenty years imprisonment, and a fine for the greater of $500,000 or twice the value of the property involved in the transaction.
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.
Nine Charged in Southern California for Alleged Multi-Million Dollar Mortgage Fraud Scheme
An indictment was unsealed Tuesday in the Southern District of California, charging a local real estate agent and eight others with multiple counts of conspiracy, wire fraud, money laundering and criminal forfeiture, for an alleged mortgage fraud scheme.
Eric Elegado, and eight other mortgage industry professionals, Charmagne Elegado, Theodore Cohen, Minh Nguyen, Regidor Pacal, Alexander V. Garcia, Roman Macabulos, Ramin Lotfi and Roderick Huerto, were allegedly involved in a scheme to defraud low-income immigrants in San Diego, California.
According to the indictment, Eric Elegado owned and operated real estate and mortgage brokerage businesses in San Deigo, and the other individuals were all employees. Allegedly, the individuals conspired together to obtain mortgage loans for unqualified buyers by falsifying and assisting others in falsifying the employment and salary information on the loan documents.
In this case, it is unclear whether the mortgage borrowers were aware of the allegedly falsified employment and income documents used to obtain these loans. As always, any person who willfully participates in a scheme to defraud has opened themselves up to a potential investigation and prosecution.
The documents would then be submitted to mortgage lenders. The mortgage lenders allegedly loaned more than $50 million dollars during the course of the scheme. According to the FBI press release, the mortgage companies, lending institutions, and financial institutions lost more than $15 million dollars.
Although the government’s focus has mostly been on large corporations involved in subprime mortgage lending, this does not mean that investigations of smaller companies and individuals has fallen to the wayside. Whether the case involves a financial institution or an individual, the U.S government has stepped up their investigative efforts to seek out those whom they believe are defrauding the system. One significant difference must be mentioned – corporations are punished by fines, such as the recent $26 billion dollar settlement between the big banks and the U.S. government for foreclosure abuses, whereas individuals must face potential prison time.
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.
