Federal Criminal Defense Blog : Georgia Federal Criminal Defense Lawyer & Attorney : Gillen Withers & Lake Law Firm : White Collar Crime, RICO, Trial : Atlanta, Savannah, GA

Federal investigators are investigating an outbreak of debit card fraud in Northwest Georgia, according to a story by WCRtv in Chattanooga. Customers of the Bank of LaFayette, Cohutta Banking Company, and Tennessee Valley Federal Credit Union in Chickamauga, LaFayette, Rossville and Trion in Northwest Georgia have reported having their accounts drained.

Authorities believe that the thefts may be connected and may be the result of the theft of information from the company which handles the debit card transactions. The affected banks and credit unions have issued statements regarding the thefts.

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The season for college sports is upon us once again and what better way to honor the occasion than with a bit of news from 7th Space Interactive that Dale Brannan, of Fayetteville, Georgia, has been indicted in the U.S. District Court for the Northern District of Georgia for defrauding various universities and colleges, including Kansas State University, the University of New Mexico, Oakland University, Stonehill College and Minnesota State University - Mankato. Mr. Brannan was arraigned last week on charges of bank fraud, mail fraud, bankruptcy fraud, and one count of making a false declaration in a bankruptcy filing.

Mr. Brannan is alleged to have operated a company called Transport Athletics in Fayetteville and Savannah, Georgia, which purportedly arranged for overseas travel for collegiate sports teams to countries including China, Italy, Brazil and Finland. However, the government has charged that he used the funds paid by universities and colleges to pay the costs of earlier trips of other schools and to pay his personal expenses.

Mr. Brannan is alleged to have caused Transports Athletics to file for bankruptcy and notified the schools that the trips had been cancelled. He then allegedly started another company, Sports Tours and Tournament Specialists, Inc., or STATS, and re-commenced the scheme. The alleged loss from the activities is over $400,000.

Gillen Withers & Lake LLC are expert criminal law attorneys with a stunning record of success on behalf of our clients in criminal investigations and prosecutions.

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Federal officials last week announced that Deutsche Bank and its mortgage division, MortgageIT, allegedly engaged in fraud on a massive scale as a civil complaint was filed against Deutsche Bank. The complaint alleges that the massive German bank allegedly defrauded the government of up to $1.2 billion through alleged reckless lending practices. The Federal Housing Administration has allegedly paid out approximately $386 million in wrongful insurance claims. The government is seeking three times this amount in fines and penalties. Among the government's allegations is a charge that documents which would have informed bank officials about high rates of default were hidden in a closet at MortgageIT. The civil complaint fails to disclose any incriminating documents which could be used to establish an intent to defraud the government.

However, according to an article by Fox Business News, the government is holding back in the Deutsche Bank case from bringing criminal charges in response to the alleged massive fraud. The author points to the case as illustrative of a trend by Federal officials to prosecute alleged wrongdoing by corporations through civil, rather than criminal, means.

The article speculates that Federal officials might have elected civil, rather than criminal, proceedings due to the lower burden of proof , as well as the more time and resource-consuming nature of criminal proceedings. It also acknowledges concerns by prosecutors over potential harm to corporations, investors and the economy and markets in general, illustrated by the demise of accounting giant Arthur Andersen in 2002 as a result of the federal prosecution in the wake of the Enron scandal. The article cites the fact that criminal, as opposed to civil, actions, are often accompanied or followed by de-licensing actions by regulatory bodies.

The article also cites the relatively few criminal prosecutions following the financial collapse of 2007. What criminal proceedings there have been have focused on individuals with various Wall Street firms--rather than the firms themselves. Furthermore, several of these prosecutions have ended in failure, as exemplified by the acquittal of former Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin in 2009.

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Last Thursday, Federal Bureau of Investigation agents searched the dormitory room of Georgia Tech freshman student Zhiwei Chen as part of "Operation Payback," an investigation into cyber attacks launched on companies which cut off sponsorship to the website Wikileaks, including PayPal, Mastercard, Visa and Bank of America, according to Midtown Patch. A group called "Anonymous" has claimed responsibility for the attacks. Agents seized many electronic devices from Chen's dormitory. Chen denied any involvement in the attacks in statements to the media.

Operation Payback has resulted in the issuance of more than 40 search warrants.

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Randy Jones, a former executive vice president with Community Bank & Trust who worked for the bank for 30 years, pled guilty last week in the U.S. District Court for the Northern District of Georgia for an alleged multi-million dollar fraud scheme, according to an article in the Atlanta Journal-Constitution. Specifically, Jones was alleged to have made loans to a customer, Joseph Penick, Jr., to purchase tracts of land in North Georgia. Penick is alleged to have paid Jones $770,000. Penick has pled guilty to his involvement in the scheme.

Jones was also alleged to have used family members and friends to obtain more than $800,000 in loans from Community Bank & Trust to purchase an interest in six Zaxby's restaurants.

Community Bank & Trust was shut down by regulators in January of 2010. The bank opened in 1900 and had been insured by the Federal Deposit Insurance Corporation since 1934. Before it failed, it had 36 branches across the region and $1.1 billion in assets. An FDIC report in September of 2010 found that Community Bank & Trust failed to follow its own loan policy and had made more than $10 million in bad loans. Georgia has had more failed banks than any other state--52 since 2008. 

Investigators say he used the names of family members without their consent to obtain more than $800,000 in loans from the bank, which he used to buy a stake in six Zaxby's restaurants. And they claim he approved more than $2.8 million in loans to fraudulent borrowers so that a customer who was a real estate developer could pay down interest on loans.

The bank failures have also led to a number of prosecutions and suits against former bank executives, employees and others. Five people with ties to Omni National Bank of Atlanta were convicted on bank fraud and other charges after the bank collapsed during a federal mortgage fraud probe. A lawsuit by the FDIC also alleges that former officers of Alpharetta-based Integrity Bank engaged in gross negligence and breach of fiduciary duty relating to making bad loans. One of the defendants is State Senator Jack Murphy, a former bank official and the new Chairman of the Senate Banking Committee. Sen. Murphy has denied any wrongdoing.

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Today's Atlanta Journal-Constitution has an article on the nine pardons announced by the White House on Friday--the first pardons issued by President Obama. The pardons related to a variety of offenses dating all the way back to 1960. Only recipient appears to have been charged with an alleged federal, "white collar" crime--Laurens Dorsey, of Syracuse, New York, sentenced in 1998 to five years of probation and $71,000 in restitution for conspiracy to defraud by making false statements to the Food and Drug Administration

78 year-old George B. Hamlet of Georgia, unlike his prevaricating namesake, has allegedly taken decisive action to knock off a bank in Knoxville, Tennessee, according to an article at Knoxvillenews.com. Mr. Hamlet allegedly brandished a  weapon, jumped on the counter at First Tennessee Bank in Knoxville, and began collecting money from the tellers. Mr. Hamlet was stopped by a security guard as he was leaving the bank, and has been charged with one count of bank robbery in the U.S. District Court for the Eastern District of Tennessee.

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We knew it was coming, but Bloomberg reports today that Switzerland's Federal Tax Administration has said that it expects to deliver account data on almost 4,450 U.S. clients of UBS AG to the IRS in exchange for the IRS' withdrawal of a "John Doe" summons served on UBS and accompanying lawsuit. The IRS had sought information on approximately 52,000 UBS accounts, however the agency and UBS entered into a settlement in August 2009 in which UBS would provide information on 4,450 accounts. UBS also paid the U.S. government $780 million as part of the settlement. UBS was alleged to have aided wealthy U.S. citizens in evading taxes from 2000 to 2007.

The article notes that, since February 2009, the Justice Department has filed criminal tax charges against 17 U.S. clients of UBS clients, two UBS bankers and three others accused of aiding tax evasion.

And in Georgia tax news, the government has sued two tax preparers in Cobb County, Georgia, seeking to put them out of business, according to a press release. A complaint was filed in the U.S. District Court for the Northern District of Georgia against Christopher Musyoki, Samuel Nganga and Musyoki’s tax preparation business, Simba Consultants Inc., alleging that the defendants allegedly underreported their customers' income on tax returns and made false claims for earned income credits, child tax credits and fuel tax credits.

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The U.S. Department of Justice and the U.S. Securities and Exchange Commission have brought criminal charges and civil claims against Lee B. Farkas, former Chairman of Taylor, Bean and Whitaker Mortgage Corp. (“Taylor Bean”) for allegedly selling at least $1.5 billion in fictitious and impaired residential mortgage loans to Colonial Bank and its parent company, The Colonial BancGroup, Inc. (“CBG”), according to press releases by the Department of Justice and the SEC, and the SEC’s complaint. Mr. Farkas, a resident of Ocala, Florida, is also charged with attempting to defraud the U.S. Department of Treasury through its Troubled Asset Relief Program (“TARP”) by allegedly representing to CBG and the public that Taylor Bean had secured a $300 million equity investment in CBG which would allow CBG and Colonial Bank to qualify for $550 million in TARP funds. The government contends that the investment and prospective TARP grant was a sham.

Taylor Bean was the largest non-depository mortgage lender in the United States by 2008, originating more than $30 billion in mortgage loans. Taylor Bean engaged in the the origination, acquisition, sale and servicing of residential mortgages through a network of local banks and mortgage brokers. The company filed for Chapter 11 bankruptcy in August of 2009. 
 

Colonial Bank, one of the fifty largest banks in the U.S., has had its own problems. In August of last year, the Alabama State Banking Department seized the bank and appointed the Federal Deposit Insurance Corp. as receiver. CBG subsequently filed for Chapter 11 bankruptcy and a financial holding company purchased Colonial Bank’s assets and assumed its deposits.

Taylor Bean had a financing arrangement with Colonial Bank to fund the mortgage loans which it originated. Under the agreement, Taylor Bean would represent that the loans were of a certain quality and that there was a commitment from a third-party investor to ultimately purchase the loan. When the investor purchased the loan, Colonial Bank would receive the proceeds to reimburse it for advancing the loan funds.

Colonial Bank and Taylor Bean also had another financing agreement, called an assignment of trade agreement, under which Colonial Bank would purchase a 99 percent interest in a bundled group of mortgage loans, or mortgage-backed securities, which Taylor Bean would issue, market and sell to third parties. Under the agreement, Taylor Bean was required to provide evidence of a binding commitment from a third party investor to purchase the securities.

The government alleges that Taylor Bean began experiencing liquidity problems in 2002. It alleges that Farkas and an unnamed officer of Colonial devised a pattern of “kiting” in which certain debits to Taylor Bean’s warehouse line of credit were not entered until after credits for the following day were entered. As a result of this kiting, Taylor Bean was supposedly overdrawing its accounts with Colonial Bank by approximately $150 million a day.

Farkas and the bank officer, in order to conceal the kiting activity, allegedly devised a scheme in which Taylor Bean would create and submit fictitious loan information to Colonial Bank. In December of 2003, Farkas allegedly directed Taylor Bean to submit approximately $150 million in non-existent loans, which Farkas allegedly referred to as “Plan B,” and impaired loans, which Farkas is alleged to have referred to as the “Crap,” to Colonial Bank for funding.

In 2004, as the loans began to age, in order to conceal them, Farkas and the officer allegedly bundled the loans in fictitious trades to Colonial Bank. Following the trades, Colonial Bank was unable to identify individual loans, or the age of the loans, within the trade. Farkas and the officer then caused information to be submitted to Colonial Bank which would reset the commitment dates on the loans and make the loans appear as if they had only recently been purchased. Farkas also caused Ocala Funding, L.L.C., a wholly-owned subsidiary of Taylor Bean, to divert funds which it received from Freddie Mac and other third parties for purchases of mortgages to Taylor Bean in order to pay down Taylor Bean’s debt to Colonial Bank.

By the close of 2007, Colonial Bank allegedly held $1 billion in impaired loans and $500 million in wholly fictitious, unsecured loans, as a result of Farkas’ and the officer’s conduct. The impaired and fictitious loans caused Colonial Bank to misstate its assets to the SEC and investors.

Finally, in November of 2008, Colonial Bank applied for TARP funds from the U.S. Treasury. The Department of Treasury approved Colonial Bank to receive $550 million in TARP funds on the condition that Colonial Bank increase its equity by $300 million. In 2009, Farkas allegedly approached Colonial Bank to raise the $300 million captial infusion through an investment group. Farkas falsely represented to Colonial Bank that it had found investors to participate in the capital infusion, and created a false stock purchase agreement. Farkas diverted $50 million in funds from an Ocala Investors Account to an escrow account in a move which he allegedly referred to as “Project Squirrel” in order to convince Colonial Bank that Taylor Bean had obtained investors. Colonial Bank entered the stock purchase agreement with Taylor Bean, however both companies subsequently terminated the agreement.

The indictment against Farkas in the U.S. District Court for the Eastern District of Virginia charges him with one count of conspiracy to commit bank, wire and securities fraud; six counts of bank fraud; six counts of wire fraud; and three counts of securities fraud. The SEC complaint alleges violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.
 

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Arthur Marshall, a former wide receiver for the Denver Broncos, was sentenced to 69 months imprisonment yesterday for bank fraud in the U.S. District Court for the Southern District of Georgia, Augusta Division, as reported by the Augusta Chronicle. Marshall was indicted in June of last year and pled guilty to two counts of bank fraud last October for defrauding banks in the Augusta area of over $3 million in mortgage loans. Marshall admitted to falsifying information to obtain the loans.

Marshall's victims included veterans whom Marshall met through his father's American Legion post, who never received title to the properties they purchased. The post is in bankruptcy and has filed a $91,000 claim against Marshall. Marshall's company, Custom Contractors, declared bankruptcy in August of 2008, listing $11 million in debts.

Marshall was born in Fort Gordon, Georgia. He played football at Hephizbah High School before going on to play for the University of Georgia Bulldogs. Marshall was a wide receiver for the Broncos from 1992 through 1996, receiving for 1,267 yards during his five year NFL career and scoring four touchdowns.

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Last week, an indictment was unsealed in the U.S. District Court for the Northern District of Georgia, charging Guy Mitchell of Coral Gables, Florida, and Douglas Ballard and Joseph Todd Foster, of Atlanta, with bribery, insider trading and securities fraud, as reported in the Atlanta Journal Constitution.

Mitchell was a hotel developer and Ballard was a vice president with Integrity Bank in Alpharetta, Georgia. Beginning in 2004, Mitchell allegedly took out tens of millions in loans from Integrity for alleged real estate ventures, including $29 million to purchase Casa Madrona, a 63 room resort hotel overlooking San Francisco Bay, and for the purchase of an island in the Bahamas. Ballard allegedly authorized the loans and draw downs, in exchange for accepting more than $230,000 in kickbacks from Mitchell.

The indictment alleges that Mitchell misled Integrity's Board of Directors regarding the amount of work which had been done on the hotel. Integrity's Board claims that it never approved many of the loans.

Foster, vice president of risk management for Integrity, allegedly sold 30,000 shares for $350,000 after discovering that Integrity did not have enough liquid security to cover a $20 million loan to Mitchell.

Integrity, a faith-based bank, sustained an alleged $80 million in losses and constitutes the fourth largest of Georgia's many bank failures. The bank was shut down by the Federal Deposit Insurance Corporation in August of 2008.

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As reported by the Wall Street Journal, the U.S. Department of Justice and Wachovia Bank have entered into a $160 million settlement and deferred prosecution agreement to settle the DOJ's allegations that Wachovia enabled drug traffickers to launder drug money through transfers of money from Mexican currency exchange houses to the bank. The bank has agreed to forfeit $110 million to the government and to pay an additional $50 million in fines.

The government alleges that Wachovia failed to use proper money laundering detection and allegedly processed billions in transactions. Currency exchange houses, or casas de cambio, are primarily used as a legitimate means for immigrants to send money to relatives abroad, but authorities have stated that the houses are also used by drug traffickers to launder drug money. The government alleged that Wachovia laundered at least $110 million in drug proceeds, some of which was used to purchase aircraft for use in drug trafficking.

Wachovia released a statement in which the company stated that it had made significant enhancements to its anti-money laundering and Bank Secrecy Act compliance program and its mechanisms for detecting wrongdoing. The bank has spent $42 million to improve its compliance program. On the other hand, the U.S. Attorney's Office for the Southern District of Florida has stated that Wachovia "blatantly" disregarded banking laws.

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As reflected in an FBI press release, an indictment was unsealed in the U.S. District Court for the Southern District of New York against Robert Egan, President of Mount Vernon Money Center (MVMC) on Wednesday charging Egan with one count of conspiracy to commit bank fraud and wire fraud and six counts of bank fraud for allegedly defrauding banks and other financial institutions of approximately $50 million.

MVMC operated various cash management businesses, including replenishing cash for over 5,300 automated teller machines (ATMs), payroll services for businesses, and an armored car service, Armored Money Services (AMS). MVMC's clients included banks and financial institutions, businesses and universities. MVMC also had several cash vaults to store and process cash from its businesses.

The government alleges that, from 2005 through 2010, Egan and MVMC's Chief Operating Officer, Barnard McGarry, allegedly collected hundreds of millions of dollars from MVMC clients based on false representations that they would not commingle clients' funds or use the funds for purposes other than those specified in MVMC's agreements with the clients. However, Egan and McGarry are alleged to have engaged in a practice known as "playing the float," in which they misappropriated funds from the substantial cash flow into MVMC to their own uses, to pay prior client obligations or to cover operating expenses of MVMC's businesses. Egan and McGarry are also alleged to have commingled its clients' monies in its accounts and cash vaults, and instructed employees to use whatever monies were available to replenish ATM machines. McGarry is alleged to have transferred clients' monies among MVMC's accounts. In addition, both defendants are alleged to have made false representations in reports to ATM clients regarding the amount of funds MVMC allegedly held in its vaults for the clients. MVMC was entrusted with approximately $70 to $75 million by its clients, but allegedly only kept approximately $20 to $25 million in its accounts and vaults.

Egan was arrested last month. A receiver has been appointed to administer MVMC. The press release stated that the case was brought in coordination with the White House's Financial Fraud Enforcement Task Force. Among the officials who addressed the media in conjunction with the press release was the Special Inspector General of the Troubled Asset Relief Program (SIGTARP) Neil Barofsky.

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Trevor Cook was 37 year-old Minneapolis, Minnesota-based investment advisor. He is alleged to have defrauded investors of at least $130 million. U.S. District Judge Michael Davis found Cook in contempt of an order by the Court requiring Cook and his associates to turn in investor assets to a receiver, according to an article in the Minneapolis Star-Tribune. Cook invoked his Fifth Amendment privilege against self-incrimination in response to questions regarding money, assets and offshore accounts. U.S. Marshals took Cook into custody yesterday. The Court ordered Cook to remain incarcerated until he cooperates with the receiver and surrenders monies and assets, including a houseboat and a submarine. Cook is also ordered to assist in the recovery of a computer and other records.

Cook pitched currency investments to investors. The alleged scheme was promoted by Cook and Pat Kiley in a widely broadcast radio program called "Follow the Money." Cook used a vast array of business entities and bank accounts to funnel monies from investors, including eight accounts in the U.S. and 19 foreign accounts in a dozen countries. The structuring of the transactions and the fact that some of the foreign accounts are in countries noted for being bank secrecy havens has made the monies difficult to locate. Cook has not yet been indicted.

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So whatever happened to indicted billionaire Sir Robert Allen Stanford? Well, not much, as reported by the Houston Chronicle. Stanford, who is charged with allegedly defrauding investors of more than $7 billion, is still incarcerated, despite his extensive efforts to secure release prior to his trial since his arrest in June of last year. Stanford has submitted a report from a physician to U.S. District Judge David Hittner of the U.S. District Court for the Southern District of Texas, in which the physician opines that Stanford is close to “a complete nervous breakdown.” Two psychiatrists have diagnosed Stanford with severe depression as a result of his confinement.

Stanford's counsel complained to the court that Stanford needed to have frequent communication with his defense team in order to review the more than 7 million documents in the case and answer questions by his counsel. Unmoved, Judge Hittner denied Stanford's latest motion for release in an order issued two days before Christmas, and Stanford has appealed the denial.

Stanford's trial is still a year away, scheduled to begin in January 2011. He has denied the government's charges, as well as civil fraud charges brought by the U.S. Securities and Exchange Commission.

Also reported in the Chronicle, similar to confessed attorney/Ponzi schemer, Scott Rothstein, Stanford allegedly had many ties to politicians. The Department of Justice is investigating approximately $2.3 million dollars in alleged contributions from Stanford and his staff to politicians over the past decade, as well as $5 million paid to lobbyists.  Donations by Stanford and his staff included $40,000 to the Senate Republican Campaign Committee, $100,000 to the inaugural committee of George W. Bush and $500,000 to the Democratic Senatorial Campaign Committee. He furthermore set up his own lobbying firm in Washington, D.C. Stanford is alleged to have successfully lobbied to defeat legislation in Congress relating to financial secrecy and offshore banking which would have allegedly revealed his activities.

Stanford allegedly treated politicians to trips to the Carribean, hosting dinners with lobster and caviar. Illustrative of Stanford's high level government contacts was the fact that, mere hours after Stanford was arrested last year, Representative Pete Sessions of Texas, Chairman of the National Republican Congressional Committee, sent Stanford an e-mail stating that he "loved" Stanford and believed in him, and offering his advice or to listen to Stanford. Stanford and his staff contributed $44,375 to Sessions. Stanford entertained numerous Congressional delegations to the Carribean nation of Antigua, where Stanford was based, at a total cost of $311,307. Stanford also hosted a wedding dinner for New York Representative John Sweeney at a five-star restaurant owned by Stanford in Antigua, and held a cocktail fundraiser for Ohio Representative Bob Ney in Miami. Ney was later sentenced to 30 months imprisonment for accepting money and gifts from convicted lobbyist Jack Abramoff.

Stanford opened a trust office in Miami in 2001, which allegedly enabled his bank to sell millions in certificates of deposit. This event allegedly prompted him to become involved in politics in order to prevent legislation which would have forced Stanford to reveal the source of the flow of monies to the office.

19 politicians have returned a total of $87,800 in contributions from Stanford to the court-appointed receiver. Other politicians have stated that they have donated money contributed by Stanford to charity, including $45,000 by Senator Bill Nelson of Florida, and $11,800 by Representative Charlie Rangel.

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Georgia leads the nation in bank failures this decade, with 32 failed banks since 2002, 25 of those in 2009 alone, according to the Federal Deposit Insurance Corporation (FDIC). Fraud has undoubtedly played a substantial role in the failure of many of these banks, and the FDIC and other agencies are especially vigilant in detecting and prosecuting fraud in the wake of bank failures.

Brent Merriel of Atlanta, Georgia, was indicted last week in the U.S. District Court for the Northern District of Georgia on four counts of aggravated identity theft and two counts of making false statements to the FDIC as announced by the U.S. Attorney's Office for the Northern District of Georgia. Merriel is alleged to have obtained several million worth of loans on properties in his name and the names of family and friends from Omni National Bank (Omni). Omni failed on March 27, 2009, and was taken over by the FDIC. Merriel then asked the FDIC to forgive $2.2 million in loans and to allow him to make a "short sale" of two properties to purchasers. A short sale is a sale of a property for less than the full amount due or owed, which serves to reduce a lender's losses or assist the property owner. However, in Merriel's case, the alleged purchasers were allegedly persons whose identities had been stolen. Merriel is also alleged to have forged sales contracts and loan commitment letters which he submitted to the FDIC.

The release notes that other individuals have been prosecuted relating to Omni, including Mark Anthony McBride, who fraudulently obtained millions in mortgage loans from Omni and other lenders and who pled guilty last April, and Delroy Oliver Davy, who similarly obtained millions in fraudulent loans from Omni and others. It quotes FDIC Office of Inspector General, Southeast Region Special Agent In Charge C. Ed Slagle as stating that FDIC will aggressively investigate and prosecute fraudulent acts uncovered in the FDIC's process of liquidating assets of failed banks in order maximize recoveries. The release also quotes Special Inspector General for the Troubled Asset Relief Program (SIGTARP) Neil Barofski, Department of Housing and Urban Development Inspector General Kenneth M. Donohue and U.S. Postal Inspector in Charge, Atlanta Division Martin D. Phanco on fraud and enforcement.

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Although it may be considered small change when compared with the fraud of fellow Floridian Scott Rothstein, according to an FBI press release, Gary Ernest Williams, former Chief Financial Officer for Marian Gardens Tree Farm (MGTF) in Groveland, Florida, was sentenced to eight years imprisonment on Monday in the U.S. District Corut for the Middle District of Florida. Williams was charged with embezzling approximately 10.5 million from MGTF since 2000 through falsified checks, use of a credit card in the company's name and making large cash withdrawals which he told bank officials were to be used to pay “employee bonuses.” Willams spent the money on lavish homes, luxury cars, jewelry, drugs, and vacations by private jet. He also failed to failed to pay federal income taxes in the amount of $3,675,000 on the illegally obtained funds.

Williams entered a guilty plea in July. The District Court ordered Williams to pay more than 14 million in restitution to MGFT and to forfeit homes in North Carolina, Pennsylvania and the Bahamas.

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In response to allegations uncomfortably similar to those against former New York celebrity lawyer and arch Ponzi-schemer Marc Dreier, Fort Lauderdale attorney Scott Rothstein, head of Rothstein, Rosenfeldt and Adler, P.A., appeared in response to a criminal information in the U.S. District Court for the Southern District of Florida on Tuesday. The information charges Rothstein with one count of Racketeering Conspiracy, in violation of 18 U.S.C. § 1962(d); one count of Money Laundering Conspiracy, in violation of 18 U.S.C. § 1956(h); one count of Mail and Wire Fraud Conspiracy, in violation of 18 U.S.C. § 1349; and two counts of Wire Fraud, in violation of 18 U.S.C. § 1343, as well as criminal forfeiture, U.S. v. Rothstein, 0:09-cr-60331-JIC.

According to the criminal information, available here, from about 2005 through November 2009, Rothstein, and other “known and unknown” unnamed co-conspirators, allegedly unlawfully obtained approximately $1.2 billion from investors through a Ponzi scheme (outdoing even Dreier’s scheme). The Government alleges that Rothstein used false statements, documents and computer records to induce investors to loan money to alleged borrowers based upon fraudulent and fictitious promissory notes and bridge loans. Rothstein allegedly falsely informed investors that his law firm, Rothstein, Rosenfeldt and Adler, P.A.’s, clients requested short-term financing for undisclosed business deals and that the clients were willing to pay high rates of return for loans negotiated by Rothstein.

Rothstein also allegedly told investors that they could purchase at a discount confidential settlement agreements in sexual harassment and whistleblower cases in amounts ranging from hundreds of thousands of dollars to millions of dollars. Rothstein allegedly falsely represented that the settlement agreements would be repaid to the investors at face value over time. Rothstein allegedly represented to investors that the settlements were highly confidential in order to protect the reputations of the companies and executives involved; that the plaintiffs preferred to settle the claims rather than purse them in a public forum; that Rothstein, Rosenfeldt and Adler, P.A., would disburse the investors’ funds to the plaintiffs; that the firm would make payments to the investors pursuant to the payment schedules in the alleged settlement agreements; that the funds were maintained in designated trust accounts for the investors in accordance with the rules and regulations of the Florida Bar and were verified by independent sources, as well as numerous other alleged false statements regarding the settlement agreements, investment funds and the firm.

To effect the fraud, Rothstein allegedly established numerous trust accounts in Rothstein, Rosenfeldt and Adler, P.A.’s name; falsified statements from financial institutions and manufactured online banking information allegedly showing investors’ monies; created false and fictitious settlement agreements and other documents. Among the alleged false and fictitious documents was a court order in a case, purportedly signed by a Federal District Judge, which falsely alleged that Rothstein, Rosenfeldt and Adler, P.A.’s clients had prevailed in a lawsuit and were owed $23 million, when in fact the firm had settled the case without the clients’ knowledge and had obligated them to pay $500,000 to the defendant.

The information also alleges that Rothstein allegedly falsely told clients that, in order to recover funds, they had to post bonds to be held in Rothstein, Rosenfeldt and Adler, P.A.’s trust account. Over several years, clients wired approximately $57 million to a trust account controlled by Rothstein. Rothstein allegedly created another false Federal court order to conceal the scheme, providing that the funds were to be returned to the clients by a later date.

Rothstein used the funds acquired through the alleged scheme to fund the operations of Rothstein, Rosenfeldt and Adler, P.A., and to expand the firm. The firm grew to employ approximately 70 attorneys. Rothstein is alleged to have laundered the funds from the scheme through corporations, contributions and large bonuses and gifts to employees. The information alleges that Rothstein used the funds to make contributions to Federal, State and local political candidates in a manner designed to conceal the source of the funds and to circumvent Federal and State limits on campaign contributions; for charitable donations; to purchase controlling interests in restaurants in South Florida; and to hire members of local law enforcement to provide security for Rothstein, Rosenfeldt and Adler, P.A., and for Rothstein personally.

The enormous wealth amassed by Rothstein through the alleged scheme is apparent in the Governement’s forfeiture allegations, which seek forfeiture not only of a sum of $1.2 billion, but also of 24 properties in Fort Lauderdale, Lauderdale by the Sea, Boca Raton, Hollywood and Plantation, Florida; New York City and Narragansett, Rhode Island, including Rothstein’s 10% ownership in the Miami Beach mansion of late fashion mogul Gianni Versace, “Casa Casuarina.” Forfeiture is also sought of numerous business interests, bank accounts and jewelry, as well as 24 vessels and vehicles purchased by Rothstein, including a 55 foot yacht.

The Government also lists millions in political and charitable contributions by Rothstein which it seeks forfeiture of, including contributions to the Republican Party of Florida; Florida Governor Charlie Crist; Democratic Chief Financial Officer Alex Sink, who is running for governor; and two hospitals.

As reported in the Miami Herald here, and here, Rothstein started Rothstein, Rosenfeldt and Adler, P.A., in 2002 as an obscure attorney practicing employment law. Over the next six years, his net worth grew from about $160,000 to tens of millions. Rothstein used flashy wealth and connections in the Broward County social and business communities to lure wealthy persons to invest in his schemes. He befriended the rich and famous, including NFL Hall of Famer Dan Marino

George G. Levin, a wealthy Fort Lauderdale resident and hedge fund manager, gave $656 million to Rothstein to invest in settlements purportedly worth $1.1 billion. Levin helped Rothstein market investments in employment and sexual harassment lawsuits to investors, although he is not alleged to have been complicit in Rothstein’s crimes. Another of Rothstein’s clients, car-dealership mogul Ed Morse, claims that Rothstein defrauded him of $57 million, arising from the settlement of a contract dispute with an interior decorator.

Rothstein would allegedly give large bonuses to employees of Rothstein, Rosenfeldt and Adler, P.A. on the condition that they make campaign contributions to political candidates who Rothstein would specify. The Government has stated that the recipients of the political contributions have returned the contributions. The Florida Democratic Party has returned $200,000 and the Florida Republican Party has given back $150,000. After Crist won the Governor’s race in 2006, he appointed Rothstein to a panel which nominates Broward County judicial candidates. The Florida Democratic Party has called for an investigation of Crist. Rothstein also allegedly paid gratuities to local law enforcement officers to avoid scrutiny.

Rothstein’s scheme began to unravel over Halloween weekend, when investors began calling the firm for overdue payments and discovered the fraud. Rothstein fled to Morocco in October, taking $400,000 to $500,000 in cash with him and wiring $16 million to Casablanca. Rothstein reportedly sent e-mails to members of his firm that he was contemplating suicide, but he returned to the U.S. on a private jet in early November. He met with Federal authorities and provided details regarding his Ponzi scheme. FBI and IRS agents raided Rothstein, Rosenfeldt and Adler, P.A.’s law offices, and seized Rothstein’s real and personal property. Rothstein agreed to waive indictment, an indication that he is cooperating with the Government, although Rothstein’s counsel has denied that he has any deal with the Government.

The Government’s information does not name Rothstein’s alleged co-conspirators, however news reports suggest members of Rothstein's inner circle at the law firm, and officers at Toronto Dominion Bank, where the investor trust accounts were held.

Rothstein’s alleged Ponzi scheme has been called the largest in the history of South Florida by Federal officials. The Florida Bar has disbarred Rothstein for stealing from the firm’s trust account. Rothstein, Levin and TD Bank are also being sued by a group of investors for more than $100 million.

Rothstein appeared in court on Tuesday in casual attire with a confident demeanor and pled not guilty to the information. U.S. Magistrate Judge Robin Rosenbaum ordered Rothstein jailed pending trial based on Rothstein’s flight to Morocco. Rothstein is represented by attorney Marc Nurik, oddly of Rothstein, Rosenfeldt and Adler, P.A. He faces up to 100 imprisonment if convicted.

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As is well known, Bear Stearns, one of the largest investment banks in the world, was sold to JP Morgan Chase and effectively ceased to exist in March of 2008, after two Bear Stearns hedge funds invested in collateralized debt obligations—mainly subprime home loans—and once worth approximately $1.6 billion, lost nearly all of their value. The collapse of Bear Stearns was the harbinger for a succession of massive failures of financial institutions, including Lehman Brothers, Merrill Lynch and AIG, triggering the current global recession.

As reported by New York Magazine, Reuters and the Daily Telegraph, two managers of the hedge funds, Ralph Cioffi and Matthew Tannin were charged in June in the Eastern District of New York with several counts of wire and securities fraud for allegedly misleading investors regarding the status of the funds in the Spring of 2007. Cioffi, a hedge fund manager, and Tannin, the Chief Operating Officer of Bear Stearns Asset Management (BSAM), have pled not guilty. The collapse in value of the funds cost investors approximately $1.4 billion. When traders wanted to sell some of the funds’ subprime mortgages, no one wanted to buy them.

The trial of Cioffi and Tannin is set to begin in October. The evidence against Cioffi and Tannin consists largely of e-mails between them and investors describing the funds as “an awesome opportunity,” despite allegedly knowing that the funds had problems. Bear Stearns investors are expected to testify at the trial. Both men have consistently maintained their innocence. They face a potential 20 years in prison if convicted.

Cioffi is also charged with alleged insider trading for withdrawing $2 million of his own money from the funds. The government alleges that he engaged in hundreds of transactions involving the funds without the necessary approval by the fund’s directors and despite being warned about conflicts of interest. All trades between Bear Stearns, a securities firm, and BSAM, an asset management firm, were supposed to be vetted by an independent committee. In the Fall of 2006, Bear Stearns ordered a moratorium on such internal trades by Cioffi. Prosecutors sought to introduce evidence of Cioffi’s alleged insider trading in order to demonstrate how Cioffi allegedly operated.

British bank Barclays, a shareholder of one of the funds, also filed suit against Cioffi and Tannin for alleged fraud, however, the suit has been withdrawn.

The prosecution of Cioffi and Tannin makes conspicuously noticeable the fact that no senior executives from Bear, Lehman Brothers, AIG, etc., have been charged with any wrongdoing in the fallout from the financial crisis.

 

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The Federal government is building criminal cases against more than 150 U.S. citizens holding overseas bank accounts with Union Bank of Switzerland (UBS), as reported by Reuters and the Banking Times. The criminal investigations are part of a Federal crackdown on tax evasion by means of overseas accounts and were facilitated by a settlement between U.S. and Swiss authorities earlier this month in which Switzerland agreed to disclose the identities of some 5,000 U.S. citizen account holders, contrary to Switzerland's longstanding tradition of banking secrecy. UBS has already settled charges that it assisted U.S. customers in evading taxes for $780 million.

As the IRS states on its website, under the agreement, the IRS will receive information on accounts of various amounts and types, including bank-only accounts, custody accounts in which securities or other investment assets were held and offshore company nominee accounts through which an individual indirectly held beneficial ownership in the accounts. UBS will give account holders notice if information relating to the acocunt holders is included in the IRS treaty request. "Information provided to the IRS through this process will be thoroughly examined for all potential civil and criminal tax violations." "The IRS will also recommend criminal prosecution in those cases where the facts warrant such an action."

Four U.S. clients of UBS, three in Florida and one in California, are already being prosecuted based on the information provided by UBS. And the number of investigations and prosecutions are expected to grow. In a press release,Tax Commissioner Doug Shulman claimed that the U.S./Swiss agreement "puts in place an apparatus for the IRS to obtain information on thousands of offshore accounts. Further the Swiss government is prepared to work with us regarding similar U.S. requests, if any, involving other financial institutions." U.S. and Swiss authorities are reportedly negotiating for the disclosure of thousands of additional names of U.S. account holders. Commissioner Shulman stated that international tax evasion is a "top priority."

Commissioner Shulman stated that the IRS has set a "voluntary disclosure" deadline of September 23, 2009, for UBS customers with unreported, offshore income, and advised persons to contact a tax professional. Customers receiving notification from the bank may come forward under the voluntary disclosure program--however "once the Swiss government sends [the IRS] the name, all bets are off." UBS customers with any reason for concern should strongly consider promptly contacting tax and legal professionals.

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As reported by the International Business Times and Reuters, the U.S. and Switzerland entered an agreement last week under which UBS, Union Bank of Switzerland, would disclose the identities of approximately 4,500 to 5,000 holders of secret Swiss bank accounts.

The Internal Revenue Service had filed suit against UBS in February in the U.S. District Court for the Southern District of Florida, accusing UBS of aiding and abetting U.S. citizens in tax evasion and demanding disclosure of the identities of approximately 52,000 U.S. citizens who hold Swiss accounts, upon which the Swiss government ordered UBS to disclose the identities of 250 account holders, bypassing UBS' customer appeal process, in order to settle criminal charges. UBS also paid the U.S. a $780 million fine. The Swiss People's Party has called the U.S. government's actions "blackmail." However, after negotiations with the U.S., the Swiss government held an extraordinary special session last Monday to discuss settlement of the case.

The agreement between the U.S. and Switzerland will supposedly leave Switzerland's banking secrecy intact and UBS will not have to pay a fine. However, under the terms of the agreement, Switzerland is obliged to assist the U.S. if the U.S. seeks its help in a criminal investigation. Swiss accounts below a certain size will not have to be reported, however the precise limit will be kept confidential, leaving account holders without notice as to whether they might be vulnerable. Account holders threatened with disclosure would, however, be able to challenge disclosure in Swiss courts. The U.S. government supposedly backed off its original demands because the U.S. Treasury did not want to cause UBS to fail.

The total amount of fines which the 4,500-5,000 U.S. citizens are estimated to be charged is estimated at $3.74 billion. On April 2, Steven Michael Rubenstein of Boca Raton, Florida, an accountant for a yacht company, became the first U.S. citizen to be arrested for tax evasion as a result of UBS' disclosures.

UBS is the world's largest manager of private wealth assets, and is the second-largest bank in Europe in both market capitalization and profitability. UBS operates in 50 countries nationwide, including the U.S., and has offices across the country. Since 2007, after UBS incurred huge losses, the bank's single largest sharholder has been the Government of Singapore Investment Corporation. Last November, Raoul Weil, Chairman and CEO of UBS' Global Wealth Management and Business Banking and member of UBS' Group Executive Board, was indicted in the Southern District of Florida.

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As reported by the New Orleans Times-Picayune, Judge T.S. Ellis, III, of the U.S. District Court for the Eastern District of Virginia read instructions to the jury yesterday which lasted over 2 & 1/2 hours, and the jury retired for its deliberations in the case against former U.S. Representative William Jefferson. The jury deliberated for about four hours and will re-convene to continue deliberations this morning.

The jury weighing the evidence in the six week long trial of Jefferson on 16 criminal counts, including racketeering, honest services fraud and violations of the Foreign Corrupt Practices Act, consists of two white males, six white females, two black males and two black females. Jefferson's case is the first time the Foreign Corrupt Practices Act has been applied to a public official. The Court sent three alternate jurors home yesterday, instructing them to remain "pristine" with regard to their exposure to information regarding the case.Jefferson's lead attorney, Robert Trout, told reporters that Jefferson intends to be present at Court each morning when the jury arrives.

Closing arguments were heard earlier in the week, with numerous media outlets and journalists from Louisiana in attendance.

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The trial of former Representative William Jefferson, which has gone on for six weeks in the U.S. District Court for the Eastern District of Virginia, will come to an end today. As reported by Ashby Jones at the Wall Street Journal Law Blog and UPI, both sides gave their closing arguments yesterday. Judge T.S. Ellis will give jury instructions and likely send the case to the jury this morning.

The case is best known for the infamous discovery of $90,000 in cash stuffed in boxes for burgers and pie crusts in the freezer at Jefferson's home by federal agents. Jefferson was indicted in 2007 on 16 counts of bribery, racketeering, and violations of the Foreign Corrupt Practices Act. The government charged Jefferson with using his position to promote business ventures in West Africa in exchange for cash payments for his family.

Assistant U.S. Attorney Rebecca Bellows argued during the govenrment's closing that Jefferson allegedly schemed to give at least $100,000 in cash (the "freezer money") to the Vice President of Nigeria, Atiku Abubakar, as a bribe in exchange for granting rights to a telecommunications company with ties to Jefferson's family. The government also played video and audio tapes of meetings between Jefferson and Virginia businesswoman Lori Mody, who was working for the government as an informant. In one video, Jefferson supposedly informed Mody that the cash would be "doled out" to "make sure the hook is in there," and on another tape Jefferson allegedly referred to the bribe as "a goodwill present."

The defense maintained during trial that Jefferson's conduct was stupid or unethical, but not criminal. Defense attorney Robert Trout told the jury during his closing arguments that the government wanted to make Jefferson's actions a crime when it was really a "gray area." He told the jury that Jefferson only agreed to give the money to Abubaker in order to please Ms. Mody.

Prior to closing arguments, Judge Ellis refused to dismiss an obstruction of justice count against Jefferson. Jefferson faces a lengthy prison sentence if convicted.

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As reported by the Atlanta Journal-Constitution and WSB Radio, Anthony Ray, a DeKalb County resident, solicited money from investors by promising them large returns from real estate investments by his company, Key Funding Group. He would frequent local churches to locate victims, making presentations to the congregations. Ray lulled his victims by giving them back portions of their investment and falsely referring to them as returns. Ray hosted his victims at several locations around the Atlanta area, including his condominium in Buckhead as well as a $680,000 home in Decatur, Georgia, which belonged to one of his victims and in which he ran his office. In all, Ray stole at least $5 million from over 30 investors.

Ray stole $160,000 from his own parents. He started Key Funding Group with his father, Calvin Ray, 70, and took out large loans using his father’s identity and his parents’ home as collateral. His parents subsequently turned him in. Ray’s twin brother, Antonio, told reporters that Ray took everything his parents had, and that their father, decided that they had to prosecute.

Ray previously served five years in prison for stealing his brother's identity.

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Sir Robert Stanford has filed a Motion for Relief from Oppressive Jail Conditions. Stanford is currently being held at the Joe Corley Detention Facility in Conroe, Texas. The Motion alleges that temperatures have reached 100 degrees and that the cell in which Stanford is being housed in a cell with 8 to 10 other men and with no windows or air conditioning. Stanford requests transfer to the Federal Detention Center in downtown Houston. The Motion also asserts, as a ground for transfer, the fact that the government has provided discovery in electronic form and the Joe Corley Facility does not permit the use of electronic devices. Stanford's counsel, Dick DeGuerin, claims that he has tried to work these issues out with the U.S. Marshals Service and the staff of the Joe Corley Detention Facility, but to no avail.

A status conference has been set in Stanford's case for September 10, which the defendants moved to continue from August 17. Meanwhile, Stanford's appeal of the District Court's denial of pretrial release is listed in the U.S. Court of Appeals for the Fifth Circuit, U.S. v. Stanford, Case No. 09-20444.

While in no way meaning to detract from the charges against Stanford and his codenfendants, which are extremely serious in magnitude, this Blog notes that arch-Ponzi schemer Bernard Madoff and celebrity attorney-turned-crook Marc Dreier were both granted pretrial release and were confined to their residences with electronic monitoring devices. Given that the government has frozen all of Stanford's assets effectively starving his defense of funding, and that the defense has alleged deliberate misrepresentations by the prosecution in arguing for pretrial detention, pretrial release appears to be appropriate in Stanford's case. We will await the hopefully speedy resolution of the bail issue by the Fifth Circuit.

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The 44 public officials and other persons arrested in the massive sweep on Thursday by the FBI, the result of efforts by the convicted son of a rabbi, include:

Daniel Van Pelt, State Assemblyman;

Peter Cammarano III, Mayor of Hoboken, New Jersey;

Dennis Elwell, Mayor of Secaucus, New Jersey;

Anthony Suarez, Mayor of Ridgefield, New Jersey;

Leona Beldini, Deputy Mayor of Jersey City;

Mariano Vega, President of the Jersey City Council, Commissioner with the Jersey City Housing Authority and Director of Parks, Engineering and Planning for Hudson County, New Jersey;

L. Harvey Smith, President of the Jersey City Council and former State Assemblyman;

Lou Manzo former State Assemblyman;

Edward Cheatam, Jersey City Housing Authority Commissioner and Hudson County Affirmative Action officer;

Michael Schaffer an employee of the North Hudson Sewerage Authority and former Hoboken Councilman;

John Guarini, city taxi inspector and former 13th District Congressional candidate

Denis Jaslow, former 32nd District State Senate candidate;

Guy Catrillo, Michael J. Manzo and LaVern Webb Washington, former Jersey City City Council candidates;

Richard Greene, former aide to L. Harvey Smith;

Joseph Cardwell, Jack Shaw, political operatives;

Also Moshe Altman, Charles Amon, Joseph Castagna, Schmulik Cohen, Levi Deutsch, Yeshayahu Ehrental, Mordchai Fish, Yolie Gertner, David S. Goldhirsh, Shimon Haber, Eliahu Ben Haim, Itzak Friedlander, Saul Kassin, Maher A. Khalil, Ron Manzo, Edmond Nahum, Abraham Pollack, Levi Izhak Rosenbaum, Lori Serrano, Jack Shaw, Vincent Tabbachino, Jeffrey Williamson, Lavel Schwartz, Binyomin Spira, Naftoly Weber and Arye Weiss.

As reported by various sources here, here and here, the arrests were part of a 10-year, two-track investigation by the FBI, code named “Bid Rig” which uncovered three criminal schemes: bribery of public officials; an international money laundering ring operating between Deal, New Jersey, and Israel; and trafficking in illegal kidneys and Gucci bags. The schemes were uncovered by a confidential informant had been charged with bank fraud in 2006 and agreed to work with the FBI. Five rabbis from New Jersey and New York were among those arrested. Hundreds of federal agents raided the suspects’ homes in New Jersey and New York. There were so many arrestees that they had to be brought to FBI headquarters in Newark, New Jersey, by bus. One religious leader arrived in a Mercedes-Benz. Bail was set as high as $3 million for some of the suspects.

FBI Special Agent Ed Kahrer stated to reporters that New Jersey has one of the worst, if not the worst, public corruption problems in the nation, and that corruption has become “engrained” in New Jersey’s “political cult.” Acting U.S. Attorney Ralph J. Marra, Jr., announced that the conspiracy, which was headed by rabbis cloaked their criminal activity in a “facade of rectitute.”

Investigators stated that they have hundreds of hundreds of hours of video and audio recordings containing evidence of money laundering and bribery.

The Public Corruption and Bribery Cases

A criminal complaint filed against Hoboken Mayor Peter Cammarano, 32, alleges that Cammarano accepted a bribe in exchange for giving priority to an FBI informant posing as a real estate developer wanting to develop property in Hoboken. Hoboken’s waterfront contains prime real estate across from Manhattan. The informant is believed to have been Solomon Dwek, who was arrested in 2007 and charged with bank fraud for bouncing a $25 million check. Dwek is the son of Rabbi Isaac Dwek of the Deal Synagogue in Deal, New Jersey, which was raided by the FBI on Thursday. Dwek told the conspirators that he was in bankruptcy and was interested in hiding his assets.

The informant met Cammarano while he was running for Mayor and told Cammarano that he would give him $10,000. The complaint alleges that Cammarano promised the informant that he would sponsor the plans and treat the informant like a “friend.” Michael Schaffer, a North Hudson Utilities Authority commissioner and former Hoboken Councilman, allegedly acted as a middle man for the bribe.

Cammarano has only been in office for three weeks. He allegedly told the informant that those who oppose him get “ground into powder.” When the discussion turned to a possible runoff election with Cammarano’s challenger Dawn Zimmer, who lost the election by only 161 votes, Cammarano allegedly told the informant “I could be indicted and still get 85 to 95 percent of the vote.” Cammarano’s attorney, Joseph Hayden, has made a statement that Cammarano intends to fight the charges.

Cammarano is charged with allegedly accepting a total of $25,000 in cash bribes. Dennis Elwell, 64, Mayor of Secaucus is charged with allegedly accepting a $10,000 cash bribe and Anthony Suarez, 42, Mayor of Ridgefield, is also charged with allegedly accepting a $10,000 cash payment—for his legal defense fund.

L. Harvey Smith, Jersey City Council President, and several other current and former Jersey City public officials also are accused of allegedly accepting money to help the fake developer gain permits and approvals. Deputy Mayor of Jersey City Leona Beldini is charged with conspiracy to commit extortion for allegedly accepting $20,000 in illegal campaign contributions.

FBI agents raided the home and office of New Jersey Department of Community Affairs Commissioner and former State Senator Joe Doria as part of the investigation. Doria resigned on Thursday afternoon. Officials have not stated whether he will face charges.

The Money Laundering and Black Market Organ and Designer Goods Cases

Five rabbis from Deal and Brooklyn were charged with alleged money laundering and sale of fake designer bags. The rabbis were approached by Dwek and dealt with him, despite the fact that it was well known that he had been charged by the government. Dwek’s dealings with the rabbis eventually uncovered the public corruption case when a Jersey City building inspector accepted a $20,000 bribe. Rabbi Saul Kassin of Deal is charged with allegedly laundering more than $200,000. Mordchai Fish, a rabbi at Congregation Sheves Achim, and his brother, Lavel Schwartz, laundered nearly $600,000 for Dwek, giving him cash and taking a 15% cut.

Agents raided “cash houses” run by associates of the rabbis, including a charity called Bnoth Jerusalem and a beeper store.

Levy Rosenbaum, a Brooklyn resident, was charged in a criminal complaint with allegedly conspiring to broker a sale of a human kidney for transplant for $160,000. The complaint further alleged that Rosenbaum had been selling kidneys from vulnerable persons in Israel for 10 years, which he would purchase for $10,000 and sell in the U.S. for $160,000.

The public corruption scandals will undoubtedly figure into the current U.S. Senate contest between Senator Jon Corzine and former U.S. Attorney Chris Christie, who claims to have obtained 130 convictions of elected and appointed officials on corruption charges.

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On Wednesday, U.S. Attorney General Eric Holder addressed the Organized Crime Drug Enforcement Task Forces and Asset Forfeiture Program's National Leadership Conference. Mr. Holder spoke regarding the Organized Crime Drug Enforcement Task Forces (OCDETF) Program, an inter-agency program established in 1982 to conduct comprehensive, multi-level attacks on major drug trafficking and money laundering organizations. OCDETF combines the resources and expertise of the Drug Enforcement Administration, the Federal Bureau of Investigation, the Bureau of Immigration and Customs Enforcement, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the U.S. Marshals Service, the Internal Revenue Service, and the U.S. Coast Guard in cooperation with the Department of Justice Criminal Division, Tax Division and its U.S. Attorney’s Offices, as well as state and local law enforcement. Its mission is to identify, disrupt, and dismantle drug trafficking and money laundering organizations.

Mr. Holder praised the track record of OCDETF and the Asset Forfeiture Program. He mentioned that, since the inception of the Attorney General's Consolidated Priority Organization Target (CPOT) List in 2002, OCDETF has dismantled or disrupted over 1,2000 CPOT and CPOT-linked organizations.

The Attorney General discussed the innovation of OCDETF in establishing the OCDETF Fusion Center to gather intelligence on drug trafficking and money laundering organizations from human and electronic sources in its "Compass" database. Mr. Holder also stated that the International Organized Crime Intelligence and Operations Center -- or "IOC-2"--has recently entered into a partnership with the OCDETF Fusion Center to add data to the Compass database in order to "broaden our capability to attack organized crime in all its forms."

Mr. Holder also remarked on the success of permanent OCDETF Strike Forces in Boston, New York, Atlanta, Tampa, San Juan, Houston, Phoenix, San Diego, with an additional Strike Force planned for El Paso. He mentioned that OCDETF has begun placing Document and Media Exploitation (DOMEX) Teams in the Atlanta and Houston Strike Forces, which permit agents to rapidly capture and exploit evidence and permit prosecutors to quickly develop trial exhibits.

The Attorney General cited the national security threat of the Mexican drug cartels. Mr. Holder furthermore discussed the success of the Asset Forfeiture Program and noted that, since 1984, more than $13 billion in net federal forfeiture proceeds have been deposited into the Justice Assets Forfeiture Fund and more than $4.5 billion has been equitably shared with more than 8,000 state and local law enforcement agencies nationwide, thereby supplementing their constrained resources without further taxing the public. The Attorney General stated that, in fiscal year 2008 alone, approximately $500 million was paid to more 39,000 victims.

Mr. Holder also praised Operation Honor Student, which involved a task force led by the Rhode Island U.S. Attorney’s Office, the Asset Forfeiture and Money Laundering Section of the Criminal Division, and the Food and Drug Administration’s Office of Criminal Investigations, and resulted in the forfeiture of $2.7 million from the accounts of GeneScience, one of the largest biopharmaceutical companies in China which had been involved in the illegal distribution of Human Growth Hormone into the United States. He noted that the task force employed a new statutory vehicle-- 18 U.S.C. § 981(k) --enacted as part of the Patriot Act and used for the first time, which permitted the Government to seize the funds, physically located in China, from the corresponding accounts of Chinese banks in New York. Task force agents estimate that at the time of the investigation, GeneScience manufactured approximately 90% of the hGH being illegally sold and distributed in the United States.

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New legislation typically means new criminal laws, and the White House's and Congress' recent ‘‘American Clean Energy and Security Act of 2009,’’ H.R. 2454, better known as the "Waxman-Markey Bill" or "Cap and Trade Bill," is certainly no exception. The bill is over 1,000 pages long and, for those with copious amounts of time, may be viewed in its entirety here. H.R. 2454 was introduced on May 15, 2009, and narrowly passed in the House of Representatives on June 26, 2009, by a vote of 219 to 212. The Senate is expected to vote on the bill sometime this Fall.

FCDB seeks to keep readers and practitioners alike abreast of changes in criminal law posed by such new legislation. Somewhat surprisingly, a search of H.R. 2454 reveals just one criminal provision, Section 1041, page 1045, in Part IV of the bill entitled "Carbon Market Assurance," which provides:

§ 1041. Fraud and false statements in connection with regulated allowances
        Whoever in connection with a transaction involving a regulated allowance (as defined in section 401(a) of the Federal Power Act, as added by section 341 of the American Clean Energy and Security Act of 2009), knowingly—
        (1) makes or uses a materially false or misleading statement, writing, representation, scheme,
or device; or
        (2) falsifies, conceals, or covers up by any trick, scheme, or device any material fact, shall be fined not more than $5,000,000 (or $25,000,000 in the case of an organization) or imprisoned not more than 20 years, or both.
        (2) The table of sections at the beginning of chapter 47 of title 18, United States Code, is amended by adding at the end the following new item:
‘‘1041. Fraud and false statements in connection with regulated allowances.’’

A "regulated allowance" is defined in Section 401 of H.R. 2454 as "any emission allowance, compensatory allowance, offset credit, or Federal renewable electricity credit established or issued under the American Clean Energy and Security Act of 2009." The proposed changes would be to 18 U.S.C. § 1041, which currently prohibits fraud in connection with a major disaster or emergency benefits.

The Waxman-Markey/Cap and Trade legislation amends the Federal Power Act to require corporations which emit pollutants such as carbon to hold the allowances, which represent the right to emit a certain amount of pollutant. It also would create “regulated allowance derivatives,” which are financial instruments derived from the allowances. The derivative instruments would be purchased and traded by corporations, financial institutions and funds. The proposed change to 18 U.S.C. § 1041 represents a typical fraud/false statement criminal provision for new legislation, albeit with stiff penalties.

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As we have noted, the prosecution of wealthy, international financier Sir Robert Allen Stanford has been characterized from the outset by vigorous disputes over bond for Stanford. The prosecution has argued that Stanford poses a risk of flight given his international connections and the potential that he possesses resources hidden overseas. The defense, led by attorney Dick DeGuerin, has hit back, arguing that Stanford possesses considerable ties to the U.S. and voluntarily surrendered himself, and further charging that the prosecution has made numerous knowing misrepresentations in arguing against bond for Stanford.

The U.S. magistrate judge had ordered Stanford to be released on $500,000 bond, however the District Court Judge reversed the order and ordered Stanford to remain in custody. Last Friday, Stanford's attorneys appealed the Court's bond determination to the U.S. Court of Appeals for the Fifth Circuit.

The government is certainly pulling out all the stops in putting pressure on Stanford, who is charged in an alleged Ponzi scheme which allegedly lost investors $7 billion. Not only has it managed to deny him bond, but it has frozen his assets and those of his companies. Yesterday, the defense was granted permission by the Court to file a motion regarding attorney's fees ex parte and under seal.

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As reported in the Macon Telegraph, Dwight "Malachi" York, former leader of the United Nuwaubian Nation of Moors who was indicted and convicted on over 100 counts of child molestation in April 2004 and setenced to 135 years, has filed a motion in the U.S. District Court for the Southern District of Georgia to vacate his sentence. York, who has been a minister and a musician, is best know as the founder of "Nuwaubianism," an unorthodox religious sect established in the 1970s. In 1993, York moved the Nuwaubians from upstate New York to a compound in Putnam County, Georgia, near Eatonton. York was arrested for sexually molesting dozens of children in 2002. The charges against York were truly astounding and hideous in their magnitude--author Bill Osinsky, in the fact sheet for his book Ungodly, reveals that state prosecutors literally had to cut back the number of counts listed in the indictment from well over 1,000 to slightly more than 200 because "they feared that a jury simply would not believe the magnitude of York's evil."

York has now filed a motion alleging that Federal Bureau of Investigation agents threatened witnesses to give perjured testimony against him, as well as alleging that the prosecution used unauthenticated tapes of York having sex with minors to taint the jury. The motion attached affidavits from witnesses in York's trial, including one by a witness who alleges that FBI agents took him from his family and transported him to a home in Milledgeville and pointed guns at him until he agreed to give information against York. York is currently incarcerated at the supermax prison in Florence, Colorado.

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