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

Frederick Scott Salyer, 54, former owner of  California-based SK Foods, which grows, processes and distributes tomatoes, was indicted on Friday on charges of racketeering, wire fraud, mail fraud, money laundering and obstruction of justice. Tomatoes from SK Foods are widely used in tomato-based products including sauces, ketchups and juices.

Salyer is alleged to have manipulated the industry through price fixing, bribery and mislabeling. Specifically, he is alleged to have bribed purchasing managers at food companies to guarantee that the companies purchased SK Foods' products over its competitors and for its competitors' pricing information. Salyer is also alleged to have ordered the mislabeling of products  As a result, consumers received dated and moldy products, and products mislabeled as organic at higher prices. In some cases, products as much as three years old with a shelf life of one year, or containing mold levels beyond limits set by the Food and Drug Administration, were alleged to have been placed on the market.

Salyer was arrested earlier this month at John F. Kennedy Airport in New York upon arriving on a flight from Switzerland. He had allegedly fled the U.S. last fall to relocate to a country where he could not be extradited after some of his subordinates pled guilty to charges in relation to the investigation, a joint effort by the FBI, IRS, FDA and Department of Justice Anti-trust Divison, nicknamed Operation Rotten Tomatoes. Salyer is alleged to have arranged for the transfer of millions of dollars to overseas accounts, and to have placed a $7 million home in Pebble Beach on the market. Salyer was denied bail.

SK Foods declared bankruptcy last May and has been acquired by another company.

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Of course we knew it was coming, but disbarred Fort Lauderdale attorney Scott Rothstein, architect of a $1.2 billion Ponzi scheme selling phony interests in settlements in employment and civil cases, pled guilty today in the U.S. District Court for the Southern District of Florida to charges of racketeering, fraud and money laundering,

and various other sources. Rothstein was also charged with taking monies from client trust accounts and making unlawful campaign contributions to politicians. Former attorneys and employees of Rothstein's former law firm, Rothstein Rosenfeldt Adler, are currently being investigated for illegal campaign contributions.

Following his surrender to authorities last fall, Rothstein assisted authorities in locating assets. His sentencing hearing has been set for May 6.

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Last Wednesday, the Government, through Deputy Assistant Attorney General Kenneth A. Blanco, filed a brief Motion to Dismiss Third Superseding Indictment with Prejudice seeking to dismiss its indictment against Miami, Florida, attorney Benedict P. Kuehne, and also Colombian attorney Oscar Saldarriaga Ochoa, in the criminal action of U.S. v. Velez, 1:05-cr-20770-MGC, in the U.S. District Court for the Southern District of Florida. The Government’s motion stated that it was based upon the “totality of the circumstances,” including the Eleventh Circuit Court of Appeals’ affirmance of the District Court’s dismissal of the Government’s charge of conspiracy to launder money against Mr. Kuehne. The Government stated that it believe that dismissal was in the interest of justice. On the same day, U.S. District Judge Marcia Cooke entered an order dismissing the Third Superseding Indictment.

The dismissal marked the end of a long ordeal for Kuehne, who was indicted over two years ago for alleged money laundering conspiracy, money laundering concealment conspiracy, concealment money laundering and wire fraud conspiracy. According to the Government’s indictment, Fabio Ochoa Vasquez was one of the leaders of the Medellin Cartel, one of the largest cocaine trafficking and money laundering organizations in the world. In 2001, Ochoa was extradited from Colombia to the U.S. to face charges of conspiring to smuggle approximately 30 tons of powder cocaine into the U.S. per month between 1997 and 1999. Ochoa hired distinguished attorney Roy Black, of the Miami law firm of Black, Srebnick, Kornspan & Stumpf, P.A., and other attorneys to represent him, and the defense in turn retained Mr. Kuehne, of the Law Offices of Benedict P. Kuehne, P.A., to investigate the funds which Ochoa would use to pay his legal team. Kuehne drafted various opinion letters for the offense. The Government alleged that Kuehne was paid for his investigation and opinions by various wire transfers with monies which were the proceeds of specified unlawful activity—the distribution and sale of illegal drugs, including monies from the Colombian “Black Market Peso Exchange” and drug proceeds supplied by undercover U.S. agents.

Kuehne, through his attorney, Jane Moscowitz of Moscowitz & Moscowitz, P.A., filed a motion to dismiss the indictment in July, which may be viewed here, relying on the fact that one of the federal money laundering statutes, 18 U.S.C. § 1957, contains an express exemption for “any transaction necessary to preserve a person’s right to representation as guaranteed by the sixth amendment to the Constitution.” 18 U.S.C. § 1957(f)(1).The motion began with a quote from Banking Crimes: Fraud Money Laundering and Embezzlement, by John K. Villa: "There is an inestimable difference... between expecting a defendant to be able to find an attorney willing to risk his fee, and expecting him to find an attorney willing to risk his personal liberty." Kuehne argued that Congress enacted the exemption in § 1957(f)(1) out of a concern that the threat of prosecution of criminal defense attorneys for accepting fees would have a “chilling effect” on attorneys’ willingness to accept clients, and therefore impose an unacceptable burden on the exercise of the Sixth Amendment right to counsel. The defense argued that the monies paid fell squarely within § 1957(f)(1)’s exemption and that Count One of the indictment should be dismissed. The District Court agreed and dismissed Count One, and the Eleventh Circuit affirmed in United States v. Velez, No. 09-10199, 2009 WL 3416116 (11th Cir., October 26, 2009).

As reported by the Miami Herald, Kuehne addressed reporters on the steps of the courthouse, stating that he always believed “things would turn out well in the end.” Prior to the allegations against him, he had been a prominent member of the legal community, serving on the Florida Bar board of governors, as a past president of the Dade County Bar Association and as a member of Vice President Al Gore’s legal team in the 2000 Florida presidential election dispute. Kuehne expressed his appreciation to the Department of Justice for the dismissal of the matter. Cynthia Hujar Orr, President of the National Association of Criminal Defense Lawyers, which filed amicus briefs in Kuehne’s case, called the Government’s prosecution of Kuehne “disgraceful.”

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Mark Shelnutt, a distinguished attorney and member of the Columbus, Georgia, community, was found not guilty by a jury in the United States District Court for the Middle District of Georgia, the Honorable Clay D. Land, United States District Judge, presiding, on 36 counts brought by the government, including conspiracy, aiding and abetting a conspiracy to distribute cocaine, concealment money laundering, false statements and attempted bribery. Mr. Shelnutt was represented in the trial by attorneys Thomas Withers and Craig Gillen and the firm of Gillen Withers & Lake LLC. The Government was represented by attorneys Charles Bourne, David Stewart and Joe Newman of the United States Attorneys Office for the Southern District of Georgia.

The 6 day trial saw testimony by convicted drug dealers, federal agents and attorneys, as well as numerous supporters of Mr. Shelnutt, including several ministers with the United Methodist Church, which included the late Reverend Joseph Roberson, head of the South Columbus United Methodist Church and Cabinet member of the South Georgia United Methodist Conference, who died in an auto collision near Statesboro, Georgia, on Saturday. This blog has been on a hiatus for the trial, and we would like to thank all those who supported Mr. Shelnutt throughout the trial, as well as to send our condolences to Reverend Roberson's family and congregation.

The allegations arose from Mr. Shelnutt's representation of Torrance Hill, a convicted drug trafficker. The central allegation was that Mr. Shelnutt laundered money which Hill paid him as legal fees.

Mr. Shelnutt was charged under the concealment money laundering provision, 18 U.S.C. s 1956(a)(1)(B). The companion federal money laundering statute, 18 U.S.C. s 1957, contains an express exemption for "transaction necessary to preserve a person’s right to representation as guaranteed by the sixth amendment to the Constitution…" 18 U.S.C. s 1957(f)(1). However, no such exemption for legal fees exists in s 1956. Two weeks before Mr. Shelnutt's trial began, the Eleventh Circuit Court of Appeals issued an opinion in United States v. Velez, No. 09-10199, 2009 WL 3416116 (11th Cir., October 26, 2009), in which it reaffirmed s 1957(f)(1)'s exemption of payment of fees for legal representation from transactions which can constitute money laundering.

The parties and the Court agreed that mere payment of attorney's fees, even from drug proceeds, was lawful. Mr. Withers and Mr. Gillen argued to the Court that if legal fees were lawful in an attorney's hands, the fees could not be "magically transformed" into unlawful fees no matter what the attorney might do with them afterwards. After considering these issues, Judge Land crafted an instruction to the jury on s 1956(a)(1)(b), which read as follows:

             I am first going to explain the law to you regarding the substantive offense of money laundering. I will then explain to you the separate charge of conspiracy to commit money laundering. I will then explain the other offenses alleged in the Indictment.

             Counts Five through Thirty-Five of the Indictment allege that Defendant engaged in money laundering. Title 18, United States Code, Section 1956(a)(1)(B), makes it a Federal crime or offense for anyone to knowingly engage in certain kinds of financial transactions commonly known as money laundering. The Government alleges that the Defendant committed this crime on thirty-one separate occasions. You must consider each separate alleged count and determine whether the Government proved beyond a reasonable doubt the essential elements for each separate count.

             The Defendant can be found guilty of the offense of money laundering only if all of the following facts are proved beyond a reasonable doubt:

First: That the Defendant knowingly conducted, or attempted to conduct, a “financial transaction;”

Second: That the Defendant knew that the funds or property involved in the financial transaction represented the proceeds of some form of unlawful activity;

Third:    That the funds or property involved in the financial transaction did in fact represent the proceeds of “specified unlawful activity” - - in this case the proceeds of the distribution of controlled substances, also known as illegal drugs; and

Fourth:            That the Defendant engaged in the financial transaction knowing that the transaction was designed in whole or in part to conceal or disguise the nature, location, source, ownership or the control of the proceeds of the distribution of a controlled substance.

             The term “conducts” means initiating, concluding, or participating in initiating or concluding a transaction. “Knowingly conducted” means that conduct was done voluntarily and intentionally and not because of accident or mistake.

             The term “transaction” means a purchase, sale, loan, pledge, gift, transfer, delivery or other disposition of funds or property; and, with respect to a financial institution, includes a deposit, withdrawal, transfer between accoiints, exchange of currency, loan, extension of credit, purchase or sale of any stock, bond, certificate of deposit, or other monetary instrument, or use of a safe deposit box.

             The term “financial transaction” means a transaction which in any way or degree affects interstate or foreign commerce involving one or more “monetary instruments” which includes coin or currency of any country, travelers or personal checks, bank checks or money orders, or investment securities or negotiable instruments in such form that title thereto passes upon delivery. The term “financial transaction” also means a transaction involving the use of a “financial institution” which is engaged in, or the activities of which affect, interstate or foreign commerce in anyway or degree. The term “financial institution” includes a bank.

             The term “interstate or foreign commerce” includes any commercial activity that involves transportation or communication between places in two or more states or between some place in the United States and some place outside the United States.

             The term “proceeds of some form of unlawful activity” means profits of some form of unlawful activity and not simply gross receipts.

             The term “knowing that the funds or property involved in the financial transaction represented the proceeds of some form of unlawful activity” means that the Defendant knew that such funds or property involved in the transaction represented proceeds from some form, though not necessarily which form, of activity that constitutes a felony offense under state or Federal or foreign law.

             The term “specified unlawful activity means distribution of a controlled substance. “Controlled substances” means illegal drugs.

             In this case, the Government alleges that the Defendant committed the crime of money laundering for each of the separate amounts listed in Counts Five through Thirty-Five of the Indictment by doing the following:

1)       Knowingly receiving the money as alleged from Torrance Hill;

2)       That the money Defendant received from Torrance Hill which he is accused of laundering actually came from illegal drug proceeds;

3)       That Defendant knew that the money he received from Torrance Hill came from illegal drug proceeds; and

4)       That the Defendant received the money and deposited it for the purpose of concealing or disguising the nature, location, source, ownership, or control of the proceeds from the distribution of illegal drugs.

In order for you to find the Defendant guilty as to these money laundering counts, you must find beyond a reasonable doubt the existence of all of these elements.

             I instruct you that it is not illegal for an attorney who represents a defendant accused of a crime to accept payment of his attorney fees in cash. It is also not illegal for an attorney to receive attorney’s fees from someone accused of a crime who pays those attorney’s fees from money that the person got from illegal activities. In other words, if you found here that Torrance Hill paid the Defendant attorney’s fees and that the source of those fees was Hill’s illegal drug activities, then the Defendant’s receipt of those attorney’s fees, without proof of concealment as described previously, is not money laundering or a federal crime.

              Just as it is not a federal crime for a Defendant to receive an attorney’s fee from illegal drug activities, it is not a federal crime to conceal a legitimate attorney’s fee, even if the fee comes from illegal proceeds. To be money laundering, the concealment must be concealment of illegal proceeds other than those that are paid for legitimate attorney’s fees.

The Shelnutt prosecution raised serious issues and concerns for criminal defense attorneys who represent clients charged with drug offenses, or in other contexts, where there is a high likelihood that any legal fees paid to counsel may be derived from unlawful activity. The defense argued that the prosecution of Mr. Shelnutt for money laundering could set a frightening precedent whereby the government could choose to prosecute any criminal defense attorney or money laundering for accepting payment for legal fees which was also proceeds of unlawful activity. The Court acknowledged these concerns and addressed them in the instruction it crafted for the jury. Fortunately, there have to date been very few prosecutions of attorneys under s 1956 for receiving attorney's fees, however the Shelnutt prosecution and the Court's instruction illustrate the need for either an amendment to s 1956 to contain an exemption for payment of legal fees similar to s 1957, or for the courts to make clear, as the Court's instruction did in this case, that (1) it is not illegal for an attorney to receive attorney's fees from money a person got from illegal activity and (2) it is not illegal to conceal monies received as legitimate attorney's fees.

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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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As reported by Law.com, the sentencing of celebrity attorney and Ponzi schemer Marc Dreier is scheduled for next Monday, July 13. Dreier was arrested last December for defrauding investors and clients of more than $740 million through a series of schemes. A full history of the Dreier saga is set forth here. He pled guilty on May 11 to one count of conspiracy to commit securities fraud and wire fraud, one count of money laundering, one count of securities fraud and five counts of wire fraud and has remained under house arrest in his luxury apartment in Manhattan.

Dreier's attorney, Gerald L. Shargel, filed a sentencing memorandum on Tuesday requesting a sentence for Dreier of between 10 years and 12 years and 7 months. Shargal asserted that Dreier has already started to be punished through his public disgrace, the loss of his law firm and possession, and "the shame and suffering that his actions have brought upon his family."

However, the prosecution, headed by Assistant U.S. Attorney Jonathan R. Streeter, has filed a sentencing memorandum aiming for a higher sentence for Dreier--145 years in prison, or, in the alternative, "a term of years that would both assure that Dreier will remain in prison for life and emphatically promote general deterrence."

The government's recommended sentence for Dreier is a mere 5 years less than the 150 year sentence imposed two weeks ago on the largest Ponzi scheme fraudster in history, Bernard Madoff (as massive as Dreier's crimes were, Madoff defrauded investors of exponentially more money). Dreier is currently 59. The proposed 145 years aside (and 145 years before his sentencing date--June 13, 1864--Ulysses S. Grant and Robert E. Lee had just concluded one of the bloodiest battles in American history at Cold Harbor, Virginia) any sentence imposed by the Court is all but guaranteed to ensure that Dreier spends the rest of his life behind bars. Although Drier's fraud, as massive as it is, is only a small fraction of the damage caused by Madoff, the record for a white collar criminal sentence is actually 845 years, imposed on Shalom Weiss in 2000 for a $450 million mortgage and insurance scheme against Florida pensioners (to be eligible for release today, even counting "good time," Weiss would have had to have started his sentence in 1290--the year Edward I of England passed the statute of Quia Emptores, which reformed the feudal land system). You can enjoy Money Central's list of the ten longest white-collar criminal sentences here.

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Sir Robert Allen Stanford is scheduled to be arraigned today on conspiracy, mail and wire fraud, money laundering and obstruction charges in Houston in the U.S. District Court for the Southern District of Texas. Stanford is represented by attorneys Dick DeGuerin and Sean Ryan Buckley, of the Houston firm of DeGuerin and Dickson.

According to the docket for the case, the Government obtained its 21-count indictment, which can be viewed here, last Thursday and promptly moved to seal (i.e. prevent public access to) it, and then unsealed it on Friday shortly before Stanford’s arrest.

The Court will likely revisit the issue of whether Stanford is entitled to release before trial. On Friday, the Court ordered co-defendants Mark Kuhrt and Gilberto Lopez released on a $100,000 unsecured bond. However, given Stanford’s considerable wealth and ties abroad, any amount of bond imposed in his case will undoubtedly be far higher, if Stanford is granted pre-trial release at all, that is. The U.S. District Court for the Eastern District of Virginia determined that Stanford posed a high risk of flight, and denied bond.

The case will be tried before U.S. District Judge David Hitter, a brief description of whom can be found here.

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The writers of Federal Criminal Defense Blog have been busy writing on other matter and apologize for the brief hiatus. Much has happened in the sphere of white collar crime even during our short absence, most notably developments in the two largest Ponzi schemes in U.S. history, and we have some catching up to do.

We’ll start with the second largest—an indictment indictment against billionaire Texas financier Sir Robert Allen Stanford, 59, was unsealed in the U.S. District Court for the Eastern District of Virginia on Friday according to the Associated Press  and the BBC. The 50-page indictment alleges that Stanford and six other defendants with allegedly perpetrated a $7 billion Ponzi-style fraud. It charges Stanford and the other defendants with 21 counts, including 7 counts of wire fraud, 10 counts of mail fraud, conspiracy to obstruct an investigation for the Securities and Exchange Commission, obstruction of an investigation by the SEC and conspiracy to commit money laundering. Defendants Laura Pendergest-Holt, Gilberto Lopez and Mark Kuhrt are executives of Stanford Financial Group. Defendant Leroy King, a former bank regulator for the Caribbean island nation of Antigua and Barbuda, allegedly accepted more than $100,000 in bribes from the other defendants in order to allow the alleged scheme to continue.

The indictment alleges that the defendants sold certificates of deposit issued by Stanford International Bank, based in Antigua, to investors, promising large returns. The defendants allegedly made false claims to investors regarding the growth of Stanford Financial Group’s assets.

The scheme had approximately 30,000 investors. Stanford is alleged to have diverted more than $1.6 billion in investment funds in personal loans to himself. More than $1 billion in investment money is allegedly unaccounted for. Stanford is also charged in the indictment with allegedly conspiring to obstruct an SEC proceeding. Stanford Financial Group’s finance chief, James M. Davis, is cooperating with investigators. Davis has been charged with fraud and obstruction in a separate indictment.

Stanford was the owner of a newspaper, two restaurants, and a development company in Antigua, and was a cricket enthusiast and owner of the Stanford cricket grounds in Antigua. In 2008, Stanford staged a $20 million, winner-takes-all, match between a West Indian XI and England at the grounds. In 2006, Stanford became the first American to be knighted by Antigua and Barbuda.

Stanford is represented by attorney Dick DeGuerin, who has issued a statement to the press that Stanford is innocent of the charges. Stanford has made repeated statements as to his innocence and has alleged that no money was lost.

Stanford surrendered to the FBI on Thursday and had his initial appearance on Friday. U.S. Magistrate Judge Hannah Lauck determined that Stanford posed a flight risk and ordered him to remain in custody pending a future detention hearing in Houston. Several governments have frozen his assets. Stanford faces as much as 250 years in prison if convicted.

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By way of background, the Government originally charged Syed Haris Ahmed in a sealed indictment filed on March 23, 2006. The Government obtained a Superseding Indictment on July 19, 2006. It has charged Ahmed and his co-defendant, Ehsanul Islam Sadequee, with one count of conspiracy to provide material support to terrorists, in violation of Title 18 United States Code Sections 956 and 2332b; one count of providing and attempting to provide material support to terrorists, in violation of Title 18, Sections 956, 2332b and 2339A; one count of conspiracy to provide material support to a Designated Foreign Terrorist Organization, in violation of Title 18, Section 2339B; and one count of attempting to provide material support to a Designated Foreign Terrorist Organization, in violation of Title 18, Section 2339B.

The Government’s Superseding Indictment contains the following facts and allegations:

Ahmed was born in Pakistan in 1984 and became a naturalized U.S. citizen. Sadequee, who is allegedly nicknamed “Shifa,” was born in Virginia in 1986, and is of Bangladeshi descent.

In or around late 2004, Ahmed and Sadequee and another person engaged in alleged paramilitary training, including with paintball guns, in Northwest Georgia.

On or about February 26, 2005, Ahmed and Sadequee traveled to Toronto, Canada, by bus. While in Toronto, Ahmed and Sadequee allegedly met in person with “supporters of violent jihad” and “discussed strategic locations in the United States that were suitable for terrorist attack, including military bases and oil storage facilities and refineries.” Ahmed, Sadequee and the others allegedly also “explored how they might disrupt the world-wide Global Positioning System (GPS)” and “a plan for members of the group to travel to Pakistan to seek and receive paramilitary training that they would then use to engage in violent jihad.”

After returning to Atlanta, in or about March or April 2005, Ahmed and Sadequee further discussed these plans, and also the possibility of attacking Dobbins Air Reserve Base in Marietta, Georgia.

At or around this time, Sadequee was allegedly in communication with Younis Tsouli, an unindicted co-conspirator in the United Kingdom.

On or about April 10 and 11, 2005, Ahmed and Sadequee traveled to Washington, D.C., in Ahmed’s pickup truck. On April 11, Ahmed and Sadequee allegedly “made short digital video recordings… of symbolic and infrastructure targets of potential terrorist attacks in the Washington, D.C., area, including the United States Capitol; the headquarters building of the World Bank…; the Masonic Temple in Alexandria, Virginia; and a group of large fuel storage tanks near I-95 in northern Virginia.”

On returning to Atlanta, Ahmed allegedly gave the video clips to Sadequee so that he could send the clips to supporters of violent jihad abroad. Sadequee allegedly sent the video clips to Tsouli in the United Kingdom and Tsouli stored the clips on his computer along with other materials relating to violent jihad.

Between March and July 2005, Sadequee allegedly provided Ahmed with the contact information for Abu Umar, an unindicted co-conspirator, and told Ahmed that Abu Umar could assist Ahmed with obtaining paramilitary training in Pakistan. On or about July 17, 2005, Ahmed traveled from Atlanta to Pakistan for the alleged purpose of studying in a madrassa and then obtaining paramilitary training to engage in violent jihad in Kashmir or other locations, including the U.S. Ahmed is alleged to have intended to join Lashkar-e-Tayyiba (“Army of the Righteous”). Ahmed was allegedly unsuccessful in his attempts to enter a madrassa or to obtain paramilitary training, and returned to Atlanta.

On or about August 18, 2005, Sadequee traveled from Atlanta to Bangladesh to allegedly get married and to pursue violent jihad. Sadequee was stopped as he traveled through John F. Kennedy Airport in New York and was discovered to allegedly have two compact discs concealed in the lining of his suitcase which contained a Fairfax County, Virginia, Visitor’s Center map of the Washington area, including the sites of four potential terrorist targets which Sadequee and Ahmed had videotaped in April 2005. Sadequee was interviewed by federal agents and allegedly falsely stated that he had traveled to Toronto alone.

On or about August 19, 2005, Ahmed returned to Atlanta from Pakistan and was interviewed by federal agents at Hartsfield International Airport in Atlanta. Ahmed allegedly made false and misleading statements about his travel to Canada and Pakistan, allegedly stating that he had made the trips to visit friends and family and to attend a religious school.

In the Fall of 2005, Ahmed allegedly researched shaped explosive charges and methods to defeat surveillance by government authorities. He also allegedly cautioned an individual to avoid discussing certain topics over the telephone.

On or about November 27, 2005, Ahmed allegedly told a supporter of violent jihad of his intent to go abroad again to train for, and engage in, violent jihad, and told the individual to read the indictment against Jose Padilla. At or around this time, Ahmed allegedly reviewed a periodical for gun enthusiasts.

In early 2006, Ahmed allegedly engaged in efforts to detect and evade suspected government surveillance. In March of 2006, agents from the FBI Joint Terrorism Task Force engaged in a series of interviews with Ahmed, in which Ahmed allegedly attempted to conceal the true nature of his, Sadequee’s and their alleged co-conspirators’ discussions, activities and plans. After the interviews began, Ahmed communicated with Sadequee in Bangladesh and warned him about the FBI’s interest in their activities.

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The trial of Syed Haris Ahmed is Georgia’s most significant terrorism case and we will collect for readers daily information on the trial and additional information. Today’s information on the Ahmed/Sadequee Trial comes from the Atlanta Journal-Constitution, WSBTV and CNN.

Ahmed is 24, an Atlanta area native and a former student at Georgia Tech. Ahmed waived his right to jury trial, and his case is being tried before District Court Judge William S. Duffey in the U.S. District Court for the Northern District of Georgia without a jury. Jack Martin, of Martin Brothers, P.C., is representing Ahmed. Assistant U.S. Attorney Robert McBurney is representing the United States. Ahmed’s co-defendant, Ehsanul Islam Sadequee, will be tried in August. Stephanie Kearns of the Federal Defender Program is representing Sadequee.

On Monday, Mr. Martin gave his opening statements to the Court, describing Ahmed as a confused, frustrated and immature young man who “fell prey” to websites espousing extremist views. Mr. Martin characterized the alleged plans for terrorist acts as “passing random thoughts, momentary ideas, childish fantasies, unformed, inchoate notions.” Mr. Martin argued that Ahmed had the ability to commit the alleged acts but said “No.” He stated that Ahmed’s idea of paramilitary training was shooting paintball guns with a friend in the North Georgia woods.

Mr. McBurney argued that Ahmed “one step removed from the bomb throwers” and intended to wage violent jihad. Mr. McBurney argued that Ahmed was a would-be terrorist who went to Pakistan to join the Taliban. He said that the videos made by Ahmed while allegedly “casing” locations in Washington, D.C., including the Capitol and the Pentagon, were intended to prove to terrorists overseas that Ahmed had access to Washington’s “backyard” and could get in close to targets. McBurney said the government’s case is about supporting terrorism and not actually “pulling the trigger or dropping the bomb.”

FBI Special Agent Mark Richards testified for the government. During Agent Richard’s testimony, the government showed some of the videos. In one video of the World Bank Building, Ahmed bobbed up and down so much that Mr. Martin asked Special Agent Richards “If a terrorist was attacking on a pogo stick, this might be useful, right?” However, another video shows Ahmed and Sadequee driving past the Pentagon with Sadequee stating “This is where our brothers attacked.”

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            Supreme Court Justice David Hackett Souter has announced his intention to retire at the end of the Court’s term in June. In his 19 years on the Court, Justice Souter has been a key vote in many cases and has written over 150 majority, plurality, concurring and dissenting opinions, including in many criminal cases. In the area of criminal law, Justice Souter has issued numerous opinions fairly consistently advancing the rights of defendants at all stages of criminal proceedings. Federal Criminal Defense Blog salutes Justice Souter and his highly distinguished tenure on the Court by listing some of his significant opinions in the criminal arena, beginning today with majority and plurality opinions.

            Criminal defense attorneys everywhere will be familiar with Kyles v. Whitley, 514 U.S. 419 (1995) in which the Court, in an opinion delivered by Justice Souter, reversed the defendant’s conviction and held that a state prosecutor has a duty to learn of any favorable evidence known to the others acting on the government's behalf in the case, including the police, and has a duty to turn over all exculpatory evidence to the defense, pursuant to  Brady v. Maryland, 373 U.S. 83 (1963). And in Missouri v. Seibert, 542 U.S. 600 (2004), Justice Souter authored a majority opinion holding that warnings pursuant to Miranda v. Arizona, 384 U.S. 436 (1966) given to a defendant in the middle of an interrogation are ineffective and any statements given during the interrogation are inadmissible. And in Corley v. U.S., 129 S.Ct. 1558 (2009) discussed on this Blog, Justice Souter delivered the majority’s opinion that 18 U.S.C. § 3501 does not alter the rule that confessions made during periods of detention which violate the prompt presentment requirements of Federal Rule of Criminal Procedure 5(a) are inadmissible pursuant to the rule of McNabb v. United States, 318 U.S. 332 (1943) and Mallory v. United States, 354 U.S. 449 (1957).

            Justice Souter had Georgia on his mind early in his career on the Court when he delivered the unanimous opinion for the Court in Ford v. Georgia, 498 U.S. 411 (1991), in which the majority held that the Georgia Supreme Court erred in concluding that the petitioner’s claim pursuant to Batson v. Kentucky, 476 U.S. 79 (1986), which prohibits racially-based exercise of peremptory challenges by the prosecution, was untimely pursuant to State v. Sparks, 257 Ga. 97, 98, 355 S.E.2d 658, 659 (1987), in which the Georgia Supreme Court held that a Batson objection must be made within the period of the jurors’ selection and the administration of their oaths, because the Sparks rule was not “firmly established and regularly followed” at the time of the petitioner’s trial. In Wade v. U.S., 504 U.S. 181 (1992), Justice Souter, again writing for a unanimous Court, held that federal district courts have the authority to review the government’s refusal to file a substantial-assistance motion and to grant a remedy if they find that the refusal was based on an unconstitutional motive. Justice Souter authored the majority opinion in Old Chief v. U.S., 519 U.S. 172 (1997), in which the Court reversed the petitioner’s conviction for  possession of a firearm by anyone with a prior felony conviction in violation of 18 U.S.C. § 922(g)(1), holding that a district court abuses its discretion where it refuses a defendant’s offer to concede a prior judgment under Federal Rule of Evidence 403 and admits the full judgment over the defendant’s objection. In Shepard v. U.S., 544 U.S. 13 (2005) he wrote a majority opinion holding that in applying the Armed Career Criminal Act, 18 U.S.C.A. § 924(e), a sentencing courtcannot look to police reports or complaint applications to determine whether an earlier guilty plea necessarily admits, and supports a conviction for, generic burglary. Justice Souter wrote the majority’s holding in Watson v. U.S., 128 S.Ct. 579 (2007) that a person who trades drugs for a gun does not receive the gun in violation of 18 U.S.C. § 924(c)(1)(A), which provides for a mandatory minimum sentence where a defendant uses a firearm during a drug trafficking crime.

            Less pro-defense, Justice Souter authored the majority opinion in U.S. v. Wells, 519 U.S. 482 (1997) which held that material of falsehood was not an element of making false statements to a federally insured bank under 18 U.S.C. § 1014. And he rejected the petitioner’s arguments that 18 U.S.C. § 666(a)(2), which proscribes bribery of State and local officials of entities, was unconstitutional because of a lack of any jurisdictional requirement of a connection to federal money in Sabri v. U.S., 541 U.S. 600 (2004), holding that the statute was an instance of necessary and proper legislation.

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I apologize for being away from the blogging world for the past 2 weeks, but the press of business has kept me too busy. There are many noteworthy developments in the blogosphere, but none more important to the criminal practitioner than the Supreme Court's decision yesterday on the landscape of money laundering.

The Supreme Court in United States v. Santos, -- S.Ct. --, 2008 WL 2229212, (available here) affirmed the Seventh Circuit in holding that the term “proceeds” in 18 U.S.C. § 1956 (a)(1) means “profits,” not “receipts.” Efrain Santos was found guilty of running an illegal lottery business in violation of 18 U.S.C. § 1955, and money laundering and conspiracy to commit money laundering in violation of 18 U.S.C. § 1956 (a)(1) and 18 U.S.C. § 1956 (h). He was sentenced to 60 months imprisonment for the illegal gambling charges and 210 months on the money laundering charges. Following affirmance on direct appeal, Santos filed a section 2255 motion to vacate his sentence, ultimately alleging in part, that that his payments to customers and collectors of his illegal operation did not constitute money laundering. United States v. Santos, 342 F.Supp.2d 781 (N.D. Ind. 2004). The district court granted Santos’ 2255 motion finding that Judge Easterbrook’s decision in United States v. Scialabba, 282 F.3d 475 (7^th Cir. 2002), controlled, and that the “proceeds” of an illegal gambling business under 1956 means “net” proceeds, not the ongoing monies used to conduct the illegal business in the first place. That decision was affirmed on appeal. Santos v. United States, 461 F.3d 886 (7^th Circuit 2006), and the government appealed to the Supreme Court.

            Justice Scalia writing for the majority held that “proceeds” under section 1956 means “profits,” not the ongoing “receipts” of the illegal business. Justice Scalia adds “a word concerning the stare decisis effect of JUSTICE STEVENS’ [concurring] opinion.” 2008 WL 2229212, * 10. Because Justice Stevens’ vote was necessary to the Court’s judgment, but since it rested on a narrower ground, the Santos opinion is, accordingly, limited. Therefore, so that there will be no mistake as to the meaning of his opinion, Justice Scalia stakes out the exact contours – “that ‘proceeds’ means ‘profits’ when there is no legislative history to the contrary.” Id.

            So, why is this opinion so important to us – because the government routinely uses money laundering to jack up a defendants’ sentence, if the defendant chooses to go to trial. Look at the effect on Santos – 60 months for gambling, but 210 months for money laundering. This decision  effects many former and current cases. We should be looking through our inventory of cases to see what meritorious 2255 motions lie therein.

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     Kirk Wright founded and was Chief Executive Officer of Atlanta-based International Management Associates (IMA), which managed several hedge funds, as reported by the Atlanta Business Chronicle. By 2006, IMA had thousands of clients, had received more than $150 million in investments and also had offices in New York, Los Angeles and Las Vegas. However, IMA actually lost almost all the money invested, yet Wright falsely reported monthly gains to investors. At the same time, Wright diverted millions to his personal use, spending the money on a half million dollar wedding, multiple properties in Atlanta and California, luxury vehicles, jewelry and on relatives.

     When several investors requested distributions early in 2006, IMA collapsed and the investors, including several National Football League players, received bad checks and filed suit against IMA. Wright proceeded to take $500,000 in cash from the company and fled. The Federal Bureau of Investigation conducted a nationwide manhunt and arrested Wright in May of 2006 at the Ritz Carlton hotel in Miami Beach, Florida, finding him in possession of numerous pieces of false identification and equipment for making false identifications.

     Wright was charged with mail fraud, securities fraud and money laundering and was convicted following a two week trial in the United States District Court for the Northern District of Georgia. He faces up to 710 years in prison and $16 million in fines.

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