A beneficial owner can try to use a nominee, (i.e. intermediary), to hide money with complete anonymity in a bank account. As the website of www.offshoresimple.com essentially explains, a beneficial owner may hire a nominee incorporation service to supply a bank signatory for a nominee bank account. This suggests that a beneficial owner may use a nominee to circumvent the know your customer / customer identification procedures at a bank. For example, through the bank signatory service offered by www.offshoresimple.com, a beneficial owner might use a nominee to:
- Open / manage an offshore bank account.
- Act as an account’s bank signatory.
- Supply a bank with the necessary customer identification documents.
- Execute the incorporation documents needed to form an offshore corporation.
The above-described use of nominee incorporation services is widespread. As page 64 of the 2007 National Money Laundering Strategy mentions, nominee incorporation services that arrange U.S. bank accounts and shell companies are believed to annually launder as much as $36 billion just from the former Soviet Union.
Instead of retaining a nominee incorporation service, some beneficial owners hide assets by using friends or relatives as nominees. According to his twenty-one count forty-four page July 26, 2005 indictment, Mr. Edwards for example, had stolen insurance premiums and then concealed them in nominee financial accounts in the names of his wife and two shell companies. Mr. Edwards had also used his wife as the nominee purchaser of his mountain chalet and a “palatial” home– both of which were bought with stolen insurance premiums.
All of the foregoing had been part of Mr. Edward’s insurance and tax fraud scheme which lasted from about January, 1999 through April 30, 2001. Via his indictment, Mr. Edwards was charged with: mail fraud (18 U.S.C. § 1341 & 18 U.S.C. § 1342); wire fraud ( 18 U.S.C. § 1343); making false statements to a financial institution (18 U.S.C. § 1014); theft from a health care benefit program (18 U.S.C. § 669); money laundering (18 U.S.C.§ 1957 [a] & [b]); and tax evasion (26 U.S.C. § 7201).
Mr. Edwards was specifically accused of collecting insurance premiums from various employers while unlicensed to do so. Instead of providing thousands of employees with workers’ compensation insurance, he converted their insurance premiums for his own use. Between January 1, 2000 and April 30, 2001 Mr. Edwards also allegedly stole $2.5 million from his company Fidelity Group, Inc., which was a health care benefit group as mentioned by 18 U.S.C. § 24 (b). Furthermore, when Mr. Edwards actually did apply for some workers’ compensation insurance coverage, he allegedly understated payroll and the type / number of employees to fraudulently secure lower insurance premiums.
When Mr. Edwards administered an employer’s self-insured health insurance plan, he also allegedly delayed or wrongfully denied medical benefits the employees were entitled to. Mr. Edwards indictment additionally alleged that he had filed a false joint Income tax return for 1999, by underreporting taxable income. In 2000, Mr. Edwards had supposedly underreported income in a false joint tax return and paid just $724 in taxes. He was similarly accused of failing to file any tax return for the year 2001.
As the Court’s June 26, 2006 Judgment demonstrates, Mr. Edwards ultimately pleaded guilty to four of the twenty-one counts mentioned by his indictment: two counts of mail fraud; one count of theft from a health care benefit program; and one count of tax fraud. Pursuant to his plea agreement, Mr. Edwards was sentenced to serve 150 months in prison and ordered to pay fines, make restitution, etc. As Mr. Edwards’ motion executed on August 13, 2007 however indicates, he seeks to vacate his guilty plea / sentence pursuant to 28 U.S.C. § 2255 by alleging ineffective assistance of counsel among other things.
(Edited March 28, 2010)
Copyright 2007-2010 Fred L. Abrams