Divorce, RICO & An Asset Search

Posted on February 28, 2008 by Fred Abrams
When an asset search uncovers that a divorcing spouse or ex-husband may be fraudulently hiding assets, it can lead to a civil RICO case.  Plaintiff Christa Ritter's asset search of her ex-husband for example, ended in the filing of such a RICO case in Ritter v. Klisivitch et. al., Index # 2:06 CV 05511, U.S. District Court for the Eastern District of New York.  Although Plaintiff Ritter's RICO case is currently the subject of Defendants' pending dismissal motions, the Court may ultimately permit her to proceed via the following Proposed Complaint:
Plaintiff Ritter's Proposed Complaint alleges that Defendant Klisivitch had violated RICO laws (18 U.S.C. §1961 et. seq.), through mail, wire and bank fraud (18 U.S.C. §§ 1341, 1343, 1344); obstruction of justice (18 U.S.C. §1503); money laundering (18 U.S.C. § 1956);  tax fraud (26 U.S.C. §§ 7201, 7202, 7206); and bankruptcy fraud (18 U.S.C. § 152).  Also according to the Plaintiff, the foregoing had occurred because Defendant had tried to protect his assets from judgments against him arising from the Plaintiff's and Defendant's divorce.


Via the Proposed Complaint, Plaintiff alleges some of the common money laundering indicia.  Plaintiff for example, essentially claims that Defendant had transferred money through nominee bank accounts and / or holding companies.  Among other things, the Proposed Complaint further alleges that Defendant had purchased real property through a nominee.


As Klisivitch partly suggests, a civil RICO complaint can sometimes be used as a countermeasure against those suspected of hiding assets related to a divorce.  Another N.Y. litigant for example, (in Ostashko v. Ostashko, No. 00 CV 7162; 2002 U.S. Dist. LEXIS 27015 at *50-*82 {E.D.N.Y. Dec. 10, 2002}), used a RICO complaint to set aside her divorcing husband's fraudulent confession of judgment.  This happened because the Ostashko Court found that the divorcing husband had used his confession of judgment to fraudulently conceal marital assets offshore, in Russia.


Copyright 2008 Fred L. Abrams
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Money Laundering In Philadelphia

Posted on February 18, 2008 by Fred Abrams
As the Philadelphia Inquirer reported on January 18, 2008, ex-Philadelphia lawmaker German Quiles, his wife and daughter, were recently convicted of money laundering in U.S. District Court.   According to a July 13, 2007 Department of Justice press release, the Quiles' family had earlier been indicted for laundering about $175,900 dollars between Philadelphia and Aruba.  While under investigation by the U.S. Bureau of Immigration & Customs Enforcement (ICE), the Quiles had laundered what they believed were drug proceeds.  They had used their Money Service Businesses (which cashed checks, wire transferred money and sold traveler's checks), as a laundering link to wash money.  


According to the Quiles' indictment, ICE had heavily relied on a confidential informant during its investigation.  Other facts mentioned by the Quiles' indictment support the conclusion that ICE had also likely recognized a number of money laundering indicia.  In the Quiles' case, these inidica may have included the use of:
  • a high-risk geographical location to transfer funds (i.e. Aruba).
  • multiple jurisdictions, such as Philadelphia and Aruba.
  • offshore wire transfers.
  • traveler's checks to convert cash.
  • structured transactions to avoid Bank Secrecy Act reporting requirements.
  • false identification.

In addition to using a confidential informant and recognizing money laundering indicia, ICE also would have scrutinized phone records belonging  to the Quiles.  Any relevant government filings about the Quiles, (like Suspicious Activity Reports filed by U.S. financial institutions), would too most likely have been examined by ICE.  As the website of  Visual Analytics Inc. suggests, law enforcement  agencies like ICE may also sometimes detect money laundering / other crimes by using "data mining" to analyze phone calls or Suspicious Activity Reports.


Copyright 2008 Fred L. Abrams
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The Gramm-Leach-Bliley Act & An Asset Search

Posted on February 11, 2008 by Fred Abrams
The Gramm-Leach-Bliley Act (GLBA) at 15 U.S.C. § 6801 et. seq., protects the privacy of customers who provide information to U.S. financial institutions.  Although there are some important exceptions mentioned at 15 U.S.C. §6821(c) - (g), GLBA restricts access to  "nonpublic personal information" like bank account numbers, account balances, etc.  In some cases, GLBA can therefore act as a bar to an asset search at a financial institution.


At 15 U.S.C. §6821, GLBA specifically protects personal information at U.S. financial institutions by outlawing pretexting.  This means for example, that it is illegal to make false statements to a bank customer or a bank in order to access protected personal information.   Submitting false documents to a bank, (to obtain the protected information), is also illegal pursuant to 15 U.S.C. § 6821.  Soliciting a person to use false pretenses to access the protected information at a bank, is also prohibited.


Violating GLBA is punishable pursuant to 15 U.S.C. § 6823 by a criminal fine or imprisonment of up to five years.  In aggravated cases, fines may also be doubled and imprisonment can be for up to ten years.  As NXIVM Corp. vs. Rick Ross, U.S. District Court, District of New Jersey, Index # 06-CV-01051 demonstrates, a GLBA violation can however, also be alleged in a civil court case.  Although the NXIVM case was commenced as a trademark / copyright violation claim against Mr. Rick Ross, Mr. Ross filed a Verified Counterclaim alleging that NXVIM had illegally obtained his bank and other private information by hiring Mr. Juval Aviv of the Interfor private investigation firm.


According to allegations at page 8, paragraph 27of the Verified Counterclaim, Mr. Aviv had bribed a Fleet Bank employee to access Mr. Ross's personal bank information.  The Counterclaim alternatively alleged that Mr.Aviv had engaged in pretexting to illegally acquire the Fleet Bank information.  Mr. Aviv however, has denied any wrongdoing In his November 7, 2007 Reply filed with the Court.  As of the time of this writing, the foregoing claims have not yet been fully adjudicated by the Court.


Copyright 2008 Fred L. Abrams
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An Asset Search In Israel

Posted on February 5, 2008 by Fred Abrams
Given news reports like the September 27, 2007 Reuters' article about money laundering in Israel, I am never surprised when an asset search reveals that a bankruptcy debtor, a divorcing spouse or other person has washed money through Israel.  In one case for example, (the facts of which have been sanitized / changed herein), the defendant in a civil case had laundered millions via an offshore bank account concealed in Israel.  The defendant had used an Israeli bank account as a laundering link to wash money after it had been transferred through several Major Money Laundering Countries.  The defendant had also hidden assets by purchasing real property in Israel in the name of a shell company which had been secretly formed.


Despite the fact of the real property hidden in Israel, (and the millions the defendant had laundered), the defendant repeatedly told the plaintiff in the civil case, things like: "I don't have the money you think I have".  The defendant then threatened during settlement discussions that: "If we don't settle now and we have to go to trial, you might never see a dime". 

   
In the above case, the plaintiff might have considered filing a Request For Legal Assistance / Letter Rogatory to elicit financial evidence from bank and other witnesses in Israel.  Prosecuting a Request For Legal Assistance, (like the attached sanitized / changed copy), can sometimes be critically important to the successful outcome of a civil litigation.  As my local counsel in Tel Aviv also has advised, a Request For Legal Assistance may also uncover violations of the Prohibition on Money Laundering Law 5760-2000 or other Israeli laws.


Copyright 2008 Fred L. Abrams
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