My post “Domestic Shell Companies & An Asset Search” explained that assets are sometimes concealed by shell companies used in a variety of financial frauds.  In fact, states like Nevada and Delaware are especially prone to the formation of shell companies lacking transparency.  Once such shell companies are established in Nevada, Delaware or elsewhere, they can be a means to open nominee bank accounts for a beneficial owner to hide his / her assets in.

Two federal cases pending in the he U.S. District Court for the Northern District of California, perhaps highlight how domestic shell companies might possibly be misused.  In the first of these cases, a December 18, 2008 criminal complaint was filed against Mr. AUSAF UMAR SIDDIQUI, alleging money laundering (18 U.S.C. §1957) from January 2005 to November 2008.

Although Mr. SIDDIQUI had reportedly earned an annual salary of about $225,000 as Vice President of Merchandising and Operations at Fry’s Electronics, Inc., he still supposedly defrauded Fry’s out of tens of millions of dollars.  As a review of the criminal complaint against Mr. SIDDIQUI reveals, Mr. SIDDIQUI was accused of laundering kickbacks he received from Fry’s Electronics’ vendors.  Paragraphs “8” & “23” of the complaint, claimed that Mr. SIDDIQUI concealed his kickbacks through the shell company PCI INTERNATIONAL, LLC– which Mr. SIDDIQUI allegedly operated from his residence.

A San Francisco Chronicle article from December 2008, reported that Mr. SIDDIQUI had hidden about $65 million through a shell company.  The docket report in Mr. SIDDIQUI’s case additionally reveals that Mr. SIDDIQUI was indicted on January 6, 2009 and charged with five counts of wire fraud (18 U.S.C. §1343) along with four counts of money laundering (18 U.S.C. § 1957 {a}).  The government is also seeking asset forfeiture under 18 U.S.C. §981(Civil Forfeiture), 18 U.S.C. §982 (Criminal Forfeiture), & 28 U.S.C. §2461(Mode of Recovery), as is fully set forth in Mr. SIDDIQUI’s indictment.

According to the unproven allegations in a second Northern District of California case, (i.e. Eclectic Properties East, LLC et. al. v. The Marcus & Millichap Company), real estate giant Marcus & Millichap Compay may too have misused domestic shell companies. Plaintiffs’ civil RICO complaint in that case alleges a fraudulent scheme involving 22 commercial properties in 4 states, which could have caused the loss of tens of millions of dollars.  According to that RICO complaint, the Defendants had sold properties after “artificially inflat[ing]” their value by using among other things, shell companies formed in Nevada and Delaware. (Plaintiffs’ Complaint, at ¶¶ 2, 5, 56-64, 69, 83, 85 & 86) (allegation of fraud via “dummy” or shell companies).

Plaintiffs’ RICO Complaint filed February 4, 2009, can be viewed below:

Copyright 2009 Fred L. Abrams