White-Collar Crime Generally

Back to Back Loan Image

Money Laundering, Marital Assets & Divorce was my first Asset Search Blog post highlighting back-to-back loans (i.e. a fully collateralized loan in which the borrower and the lender are one and the same). That post mentioned a divorcing husband who hid millions from his wife and the IRS, by claiming he was indebted because of an arm’s length business loan. The husband’s claim about owing money to an arm’s length lender was false, as the loan was back-to-back. In other words, the husband hid millions by secretly arranging to be both the borrower and lender of the loan; and by pretending to be in debt.

Federal prosecutors similarly discussed back–to-back loans in their tax fraud case against Los Angeles, California businessman Masud Sarshar. According to prosecutors, Mr. Sarshar hid tens of millions of dollars from the IRS by using two back-to-back loans and offshore bank accounts in Israel and Hong Kong. Mr. Sarshar supposedly maintained the offshore bank accounts in the names of intermediaries (i.e. nominees). Prosecutors also said an Israeli banker delivered offshore bank account statements to Mr. Sarshar by smuggling them into the U.S. on a USB drive hidden in a necklace.

To avoid being flagged as an American by the offshore banks, Mr. Sarshar is believed to have used Israeli and Iranian passports to open his offshore accounts. When Mr. Sarshar mentioned his offshore accounts during conversations with his Israeli bankers, Mr. Sarshar also reportedly spoke in code. On 3/13/17 Mr. Sarshar was sentenced to 24 months in prison for conspiring to defraud the U.S. and for seeking to impair/impede administration of internal revenue laws. Mr. Sarshar’s 8/1/16 plea agreement can be read here.

Image: Ionut Catalin Parvu/Shutterstock.com

Copyright 2017 Fred L. Abrams

11 27 16 Post

2/12/17 Update: It seems that after I published this post on 11/27/16, the Jamaican Major Organized Crime and Anti-Corruption Task Force, (“MOCA”), listed Mr. Peter Sangster as a fugitive. “The people on this list are wanted for serious and or violent crimes” MOCA’s website says. 

Forty-seven-year-old Peter Sangster of Cherry Gardens, Kingston 8, Jamaica, has been a local politician and businessman in Jamaica. After Jamaican authorities subjected telephone carrier Jamus Communications Ltd., (“Jamus”), to a levy, Mr. Sangster allegedly offered to help Jamus by procuring a “waiver” of payment. Mr. Sangster supposedly supplied Jamus with this waiver which was dated 1/9/2013. The waiver appeared to be signed by the then Prime Minister Portia Simpson Miller. The Prime Minister’s signature on the waiver is now however, thought to be a forgery.  It also appears that Jamaican law does not provide for a waiver of payment regarding the levy.

In exchange for allegedly supplying Jamus with the waiver, Mr. Sangster may have had Jamus transfer over $150,000 U.S. dollars to 2 bank accounts in the United States. One of the bank accounts is believed to be titled “Sangster Group LLC,” maintained at Bank of America, 515 Ocean Avenue, Brooklyn, New York. The other bank account was also at Bank of America and was thought to be titled “Peter and Tania Sangster.” Based on these allegations, MOCA investigated Mr. Sangster to determine whether he committed a forgery and larceny.

MOCA seemed to search for assets related to Mr. Sangster. MOCA sought corporate & banking records for “Sangster Group LLC.” MOCA similarly sought records for the “Peter and Tania Sangster” Bank of America account. On 10/6/16 a court in Delaware issued an order on behalf of MOCA, permitting a prosecutor to collect these records. The order authorized the prosecutor to gather the records listed on pp. 7-11 at the following letter rogatory/legal assistance request from Jamaica:¹

Letter Rogatory P Sangster
To Read The Letter Rogatory, Click On The Image Above

¹The letter rogatory/legal assistance request has been partly sanitized for privacy reasons.

First Image: Light And Dark Studio/Shutterstock.com

(Edited 2/12/17)

Copyright 2016 Fred L. Abrams

Zinnel Post
This 32nd Asset Search Blog post in my “Divorce & Hidden Money” series, explains how Steven Zinnel is thought to have hidden assets during his divorce & personal bankruptcy.

Plastic surgeon Michael D. Brandner & business owner Goderick Augustus Benjamin were accused of committing federal crimes & hiding assets from their wives. Like Dr. Brandner & Mr. Benjamin, Steven Zinnel was a divorcing husband suspected of concealing assets from his wife. According to prosecutors in USA v. Zinnel, Steven Zinnel had hidden assets from his wife Michelle Zinnel; & Steven Zinnel had fraudulently concealed assets during his personal bankruptcy.

Mr. Zinnel reportedly filed his personal bankruptcy to hamper the Family Court’s distribution of property to Michelle Zinnel, during the couple’s divorce. Mr. Zinnel’s e-mail to Michelle Zinnel dated July 15, 2001, seemed to give a glimpse into Mr. Zinnel’s bankruptcy scheme. The e-mail said that as a consequence of Mr. Zinnel’s bankruptcy, Mr. Zinnel expected “all the money to be gone in less than two months” & that “[t]he property settlement will then be very easy.

During his personal bankruptcy, Mr. Zinnel however, failed to disclose valuable assets which were apparently hidden from Michelle Zinnel & others. Prosecutors ultimately charged Mr. Zinnel with money laundering & bankruptcy fraud. At Mr. Zinnel’s superseding indictment &/or other court filings, prosecutors essentially claimed that Mr. Zinnel concealed assets four ways, through:

  1. lawyers;
  2. shell companies;
  3. a business associate who Mr. Zinnel employed as his nominee/intermediary;
  4. nominee bank account[s] (i.e. accounts maintained in the name of others).

On March 4, 2014 Mr. Zinnel was sentenced to 17 years & 8 months of prison for bankruptcy fraud & money laundering. This case is perhaps best summarized by these two sentences prosecutors wrote at a June 14, 2013 court filing:

The Government’s theory of this case is that Defendant Zinnel wanted to commit bankruptcy fraud and money laundering for reasons of greed and spite. Zinnel loved money and hated his ex-wife [Michelle Zinnel]. USA v. Zinnel, Gov’t Opposition Paper filed 6/14/13, Docket No. 179, at p. 1.

Image:  Nikolai Moiseenko/Shutterstock.com

Copyright 2016 Fred L. Abrams

Laundry List Post:ImageGovernmental authorities follow money trails in order to interdict assets hidden by narco-traffickers; money launderers; Ponzi schemers; tax fraudsters & other determined criminals. During your asset search, you can similarly follow a money trail to track assets which have been hidden from you. You might detect a money trail by scrutinizing data related to the person or business entity suspected of hiding assets.

You can collect this data in some situations, by issuing subpoenas; using compelled consent forms; or through additional legal tools. Below is the “Financial Investigations Checklist” & it includes a laundry list of items which contain data.¹ You may be able to collect some of the items the list mentions: bank account records; telephone records; utility company records; credit card statements & many others. Data at these kinds of items could conceivably help you follow a money trail to assets hidden from you.

(To Read The Financial Investigations Checklist, Click On The Following Image)


Financial Investigations Checklist

 

¹Financial Investigations Checklist, Courtesy of The United States Department of Justice.

First image: Picsfive/Shutterstock.com

Copyright 2016 Fred L. Abrams

Trade-Based Laundering Photo

If your adversary is using a business entity to conceal assets from you, one thing to look for is trade-based money laundering. A June 2006 report by the Financial Action Task Force explains that trade-based laundering schemes can include: the over or under-invoicing of goods or services; the over or under-shipping of goods; falsely describing goods or services; or multiple invoicing.¹ You can search for assets hidden via trade-based laundering by spotting the red flags. Page 24 of the June 2006 report describes the red flags and some of them are:

  • a disparity between a shipped commodity’s bill of lading and its invoice.
  • a disparity between a commodity’s value as recorded on its invoice and fair market value.
  • the shipping of goods although there is no profit/economic benefit.
  • a shipment with a nexus to shell companies.
  • letters of credit related to a shipment that have been amended or extended repeatedly.
  • the type of shipped commodity is inconsistent with the importer’s/exporter’s ordinary business activities.
  • shipping to or from a high-risk geographical location (i.e. a jurisdiction especially vulnerable to money laundering).

Pages 9-20 of the June 2006 report also provide 12 case studies showing how trade-based money laundering can be used to conceal one’s assets. The August 24, 2007 plea agreement of Gene Haas might describe another case of trade-based money laundering. Mr. Haas entered this plea agreement after his arrest on June 19, 2006 for suspected tax fraud. Attachment A at the plea agreement says the Enmark Aerospace and Supermill companies had provided Mr. Haas with invoices for fictitious purchases.

According to Attachment A, Mr. Haas paid Enmark & Supermill millions of dollars pursuant to these invoices; and Mr. Haas then took business deductions for “cost of goods sold.” Attachment A also indicates that Enmark and Supermill eventually returned the millions, (less a 2% kick back fee), to Mr. Haas through Mr. Haas’ intermediary, CNC Associates, Inc. Stated differently, it seems that Enmark, Supermill and CNC Associates could have been employed as laundering links in a money laundering circuit. After Mr. Haas’ plea agreement, Mr. Haas was sentenced on November 5, 2007 to two years in prison for violating 18 U.S.C § 371. Mr. Haas additionally paid a $5 million dollar fine and over $70 million dollars in back taxes owed for 2000 and 2001.

¹ See p.4 at “Trade-Based Money Laundering,” Copyright © FATF/OECD. All rights reserved.

Image: Nomad_Soul/Shutterstock.com

Copyright 2007-2016 Fred L. Abrams

Your Search For Assets Hidden Offshore

When naming offshore havens for opening secret bank accounts, people usually mention Switzerland, the Cayman Islands, Liechtenstein, etc.  Meanwhile, bank accounts in almost any country can be put to work to hide & place assets out of reach. “Using Multiple Jurisdictions To Launder Money” discussed a suspected scheme to bribe judges in Italy.  According to prosecutors, illicit proceeds from this offshore scheme were hidden in bank accounts located in the U.S. & elsewhere. “Money Laundering, Marital Assets & Divorce” outlines another scheme which relied on cross-border elements to conceal assets. The scheme involved a divorcing spouse in the U.S. who hid undeclared revenue in a Swiss bank & then “washed” it through a bank in Germany.¹

As the above essentially suggests, tracking assets offshore can become a critically important part of your asset search. How do you search for assets hidden offshore? One way is by employing legal tools. The following article discusses the tools federal prosecutors may use to collect evidence from witnesses residing offshore.² Two of the tools the article mentions are compelled consent forms & letters rogatory.  These two tools are not just for use by prosecutors. They are sometimes used by divorcing spouses, judgment creditors & others searching for offshore bank accounts/assets hidden offshore:

Click On The Image To Read The Entire Article

¹The fact pattern supplied at “Money Laundering, Marital Assets & Divorce,” has been changed & sanitized for privacy reasons.

²“Obtaining Foreign Evidence Outside of The Mutual Legal Assistance Treaty Process,” U.S. Attorneys’ Bulletin March 2007, is supplied courtesy of the Executive Office for United States Attorneys.

Image of offshore banking & tax haven concept: ChameleonsEye/Shutterstock.com

Copyright 2016 Fred L. Abrams

Bank Deposit Image

In some situations, the transfer of large sums of cash is a red flag that assets have been hidden by money laundering. Government authorities therefore require banks to report their customers who transfer or exchange large sums of cash. For example, banks in the United States are required to report bank customers who deposit or withdraw more than $10,000 in cash. The banks fulfill this requirement by electronically filing a Currency Transaction Report.

A bank customer trying to evade the filing of a Currency Transaction Report can be prosecuted for structuring, (a.k.a “smurfing”), in violation of 31 U.S.C. § 5324. Opinion blogger Radley Balko talks about some of these prosecutions at “The federal ‘structuring’ laws are smurfin’ ridiculous.” As discussed by “An Asset Search Over Corruption Proceeds,” prosecutors accused former Russian diplomat Vladimir Kuznetsov of violating structuring law(s).

At Count Two pp. 6-9 of Mr. Kuznetsov’s superseding indictment, prosecutors alleged Mr. Kuznetsov had structured deposits he made in New York City at Chase Manhattan Bank & the United Nations Federal Credit Union. The following case study also discusses structuring.¹  It analyzes how a group of criminals hid illicit drug proceeds by structuring deposits, smuggling cash & going offshore:

Image Egmont Case 06082

Image of hand with money: Africa Studio/Shutterstock.com

¹Case Study/Case Ref: 06082 Courtesy Of The Egmont Group of Financial Intelligence Units

Copyright 2016 Fred L. Abrams

Detective Looking Through Magnifying Glass

This is the 10th post in my series about what private investigators can and cannot do legally when searching for assets. The post discusses “K.C.” who was defrauded out of at least $500,000.00 by Patricia Walker-Halstead, a private investigator “K.C.” hired to investigate a suspected stalker. The post discusses wire fraud & bribery—which are issues that sometimes arise during an asset search or other private investigation:

“K.C.” a resident of Nebraska, thought she was being stalked. She therefore hired Patricia Walker-Halstead, (“Walker”), to investigate the alleged stalker. Between March 11, 2011 & November 28, 2012 “K.C.” made 59 payments to Walker Investigations, Walker’s private detective agency. Walker represented to “K.C.” that some of the payments would be given to “Scott.” Walker told “K.C.” that “Scott” was a Captain with the Nebraska State Patrol who could help with the investigation.

Walker even supplied “K.C.” with e-mails purportedly sent by “Scott” & represented that “Scott” was a potential romantic suitor for “K.C.” Walker however, never paid anyone at the Nebraska State Patrol named “Scott”, to investigate on behalf of “K.C.” As part of Walker’s scheme to defraud “K.C.”, Walker fabricated “Scott” &  Walker had not performed any investigation. Given all of the foregoing, federal prosecutors in USA v. Walker-Halstead charged Walker with 11 counts of wire fraud. Walker’s indictment alleged the 11 counts were based on false e-mails Walker sent to “K.C.” about “Scott.”

Walker ultimately pleaded guilty to one count of wire fraud. On April 1st, Walker was sentenced to 12 months & 1 day of imprisonment & Walker was ordered to pay restitution to “K.C.” in the amount of $500,000.00. Under a fact pattern different than what is written above, prosecutors might also consider whether someone like “K.C.” intended to have a stalker investigated by bribing the Nebraska State Patrol. Bribing a local law enforcement officer can violate the federal program bribery statute codified at 18 U.S.C. § 666. As a manual for federal prosecutors explains:

[A] charge under 18 U.S.C. § 666 may nonetheless be appropriate if the solicitor or intended recipient of the bribe is a person who acts as an agent of an organization that receives in one year $10,000 or more in Federal grant, loan, contract, or insurance funds. U.S. Attorney’s Manual, 2044 Particular Elements, Web. May 11, 2016.

Imagefile404/Shutterstock.com

Panama Papers 4 18 16 PostLast Wednesday, prosecutors in Panama seized dozens of computer servers belonging to the Panama Papers law firm, Mossack Fonseca. The prosecutors might be investigating whether Mossack Fonseca violated money laundering laws when it supposedly helped clients hide assets offshore. A U.S. State Department report published last month analyzed how money is laundered in Panama. The report said:

Money is laundered via bulk cash and trade by exploiting vulnerabilities at the airport, using commercial cover and free trade zones (FTZs), and exploiting the lack of regulatory monitoring in many sectors of the economy. The protection of client secrecy is often stronger than authorities’ ability to pierce the corporate veil to pursue an investigation. (U.S. Department of State International Narcotics Control Strategy Report for Panama, March 2016)

Money can also be laundered in Panama by putting shell companies to work, the same way shell companies are used to launder money in other parts of the world. Assets may be secretly transferred to a shell company &/or a shell company may be used to open a secret offshore bank account. In these situations, the shell companies may act as laundering links which wash assets in a money laundering circuit.

Mossack Fonseca was apparently in the business of establishing shell companies. Businesses that establish shell companies are usually called “nominee incorporation services,” as mentioned by the November 9, 2006 advisory from U.S. Treasury’s Financial Crimes Enforcement Network. The advisory essentially reveals that shell companies & nominee incorporation services can be a money laundering risk. The webpages of Panama Offshore Worldwide demonstrate the way one nominee incorporation service works.

At “Anonymous Panama Corporation” &/or “Panama Bank Secrecy,” Panama Offshore Worldwide seems to describe how you can open a secret offshore bank account by titling the account in the name of a Panamanian shell company. Panama Offshore Worldwide indicates that if you want additional anonymity, you should staff your Panama corporation with nominee directors (i.e. stand-ins/intermediaries):

We provide nominee directors for the corporation, so your name is not actually registered in the government’s documents and therefore cannot be traced back to you.  The corporation is controlled with shares, which are registered by date at a notary and not accessible online like the directors of a corporation. (Panama Offshore Worldwide’s “Panama Bank Secrecy” Webpage. Web. April 16, 2016.)

Image: leolintang/Shutterstock.com

Copyright Fred L. Abrams 2016

Image For Article About Panama Papers

2008 was the first time I wrote an article mentioning hiding assets via a lawyer in Panama. The article was called “Bearer Shares & An Asset Search.” Although the facts at the article were sanitized & changed for privacy reasons, it described a divorcing husband in the U.S hiding assets from both his wife & the I.R.S. through: a Panamanian lawyer, bearer shares, a shell company & other offshore elements.

Meanwhile, there have been many articles this week discussing the Mossack Fonseca Law Firm headquartered in Panama City, Panama. These articles arise out of the investigation of Mossack Fonseca which is detailed at the “Panama Papers” website published by the International Consortium of Investigative Journalists. Among other things, the website has a page of graphs, with one graph called “The hunt for bearer shares.” This particular graph seems to suggest that Mossack Fonseca employed bearer shares to help clients hide assets offshore.

At its own website, Mossack Fonseca says they are “Offshore Specialists since 1977.”  In this role, Mossack Fonseca is thought to have helped a large number of law-abiding clients transfer assets offshore for legitimate purposes. Mossack Fonseca could however, have also helped a large number of criminals seeking to conceal illicit assets. These criminals might have been tax cheats hiding undeclared revenue; corrupt government officials; & others seeking to conceal money by laundering it offshore.

Any criminals hiding assets through Mossack Fonseca will soon become known, since over 11 million documents at Mossack Fonseca were apparently hacked & leaked to the press. I suspect the hacked documents will show that assets were hidden offshore through elements commonly used to wash vast sums of money. Some of these elements are listed below & they should always be considered by anyone searching for valuable assets hidden from them.

Panama Papers Image: catwalker/Shutterstock.com

Copyright 2016 Fred L. Abrams