U.S. Immigration and Customs Enforcement has set up a Foreign Corruption Task Force (fact sheet here) in Miami to locate and seize properties in South Florida owned by officials of foreign governments who use funds from corruption in their home countries to purchase assets in the U.S. An AP story (here) describes the Task Force and its seizure of a Key Biscayne condominium purchased by a former Nicaraguan tax official, and how the $2.7 million in proceeds from the sale will be used to build and equip four schools in Nicaragua. (ph)
Category: Corruption
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As discussed in a previous post (here) about a number of arrests of public officials in Monmouth County, New Jersey, charges against three additional defendants for money laundering were filed on March 10 as part of a widening crackdown on public corruption resulting from an extensive undercover FBI operation. A press release issued by the U.S. Attorney’s Office details charges against the defendants:
Criminal complaints were unsealed today charging a Monmouth County truck and equipment contractor, a transportation service owner and a Far Hills councilman with laundering large sums of cash in exchange for kickbacks from undercover agents in an FBI corruption investigation, U.S. Attorney Christopher J. Christie announced.
One of the complaints charges Stephen Appolonia, 52, of Colts Neck, the co-owner of International Trucks of Central Jersey, based in Howell and Hillside. The company sells International-brand trucks and other equipment to Monmouth County and various municipalities in Monmouth and elsewhere.
The same complaint charges Far Hills Councilman and police commissioner Thomas A. Greenwald, 52, a friend of Appolonia whom Appolonia introduced to undercover agents when Greenwald also wanted to participate in the money-laundering scheme, according to the criminal complaint. Greenwald and Appolonia ultimately laundered more than $350,000, according to the criminal complaint.
The indictment quotes the third defendant as describing his limousine business as "the greatest washing machine in the world" — that may be tough to explain to a jury. The criminal complaints filed in the case are here and here. (ph)
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The U.S. Attorney’s Office in New Jersey announced last week the arrests of a number of local public officials in Monmouth County (home of Asbury Park for the Bruce fans in the crowd), including the mayors of Keyport, Hazlet, and West Long Branch, on corruption charges. According to a press release by the USAO discusses a contractor who cooperated with the government and who "[d]uring many tape-recorded and videotaped conversations, cash in amounts of between $1,000 and $9,000 – and in one case a $5,000 home driveway repaving – was exchanged with the public officials, some of whom assured the cooperating witness that they would continue to send work his way as long as the money kept coming, according to the Complaints. In one case, a Monmouth County official took cash in exchange for assisting what he believed to be a money laundering operation." The defendants were charged in criminal complaints with Hobbs Act violations, although it is likely that the government will add additional charges (including honest services fraud and Section 666 violations) in subsequent indictments. Corruption in New Jersey? The press release notes that the "arrests are an outgrowth of an earlier investigation, which led to the convictions of other Monmouth County public officials, including former Asbury Park Mayor Butch Saunders and Saunders’ advisor Rayfield James, former Ocean Township Mayor and Asbury Park City Manager Terrence Weldon, former Asbury Park Councilman James Condos, and former executive director of the Asbury Park Housing Authority, the late Kenneth Nixon." (ph)
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UPDATE: An article in the Asbury Park Press (Feb. 28) discusses the claim by some of the defendants charged with in the Monmouth County corruption case that they were entrapped by the FBI into accepting the cash payments (story here). Think back to the Abscam investigation in the late 1970s for a good example of how that defense does not work very well when public officials take cash.
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Los Angeles Mayor James Hahn faces a primary election on Tuesday, March 8, amidst significant publicity about federal and county corruption investigations involving possible bribery and kickbacks. Federal prosecutors have issued subpoenas for office e-mail and have called witnesses to testify before the grand jury. An executive at a public relations firm with ties to Hahn was indicted in January for allegedly overbilling the city’s Department of Water & Power $250,000 (press release here), and several city officials have resigned, although those resignations have not been linked specifically to the corruption investigations. With the election so close, it will be interesting to see if Hahn, who denies any knowledge or involvement in the alleged corruption, can survive the publicity. An AP story here discusses the investigations. (ph)
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During the government’s investigation of former Connecticut Governor John Rowland, the grand jury subpoenaed the counsel to the Governor to testify regarding conversations she had with Rowland and members of his staff about the receipt of gifts, which was the focus of the investigation and the basis for the charge to which Rowland eventually pled guilty. The district court enforced the subpoena, but on appeal the Second Circuit (on Aug. 26, 2004) issued a summary order quashing the subpoena on attorney-client privilege grounds. On Feb. 22, the court issued its written opinion in In re: Grand Jury Investigation (available here on court website) explaining the basis for its decision. The Second Circuit rejected the approach of the Seventh, Eighth, and D.C. Circuits and upheld the attorney-client privilege assertion by a government attorney advising an official in relation to that person’s duties. The other circuits have found the government’s interests in investigating wrongdoing through the grand jury overcame the protections of the privilege when the investigation concerned the conduct of officials in the office. The D.C. and Eighth Circuit cases involved the Independent Counsel investigation of Whitewater (and "related" conduct) and the consultation by the President and First Lady with White House counsel. The Second Circuit rejected a balancing test, explaining
In arguing that we ought not "extend" the attorney-client privilege to the present situation, the Government asks us, in essence, to assign a precise functional value to its protections and then determine whether, and under what circumstances, the costs of these protections become too great to justify. We find the assumptions underlying this approach to be illusory, and the approach itself potentially dangerous. The Government assumes that "the public interest" in disclosure is readily apparent, and that a public official’s willingness to consult with counsel will be only "marginally" affected by the abrogation of the privilege in the face of a grand jury subpoena. Because we cannot accept either of these assumptions, we decline to abandon the attorney-client privilege in a context in which its protections arguably are needed most.
The court acknowledged that its decision conflicted with the Seventh Circuit’s position and was in "sharp tension" with the Eighth and D.C. Circuit analysis, but it decided that the protections of the privilege outweighed the need of the grand jury to obtain evidence. While uncommon, cases involving the governmental attorney-client privilege do arise — especially with the federal government’s efforts to combat state and local corruption– so that at some point the Supreme Court may have to intervene to settle the scope of the privilege.(ph)
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The corruption trial of former Philadelphia City Treasurer Corey Kemp, two Commerce Bank executives, and two other defendants began in U.S. District Court on Tuesday with opening statements by the government and three of the five defense counsel. Kemp was one of 12 defendants indicted (here) on honest services fraud charges in June 2004 as part of a wide-ranging corruption investigation by the FBI that included a bug placed in Mayor Street’s office. The allegations involve a claimed "pay-to-play" scheme in which, among other things, Commerce Bank made a mortgage loan to Kemp in exchange for receiving $150 million in city deposits. Defense counsel assailed the government investigation in the opening statements, with Kemp’s lawyer asserting that the government’s case is a "situation where the elephant has given birth to the mouse. And it’s a dead mouse at that." I’m not sure how the biology of that one works. The Philadelphia Inquirer has extensive coverage of the trial here. (ph)
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The U.S. Attorney’s Office for the Eastern District of Virginia issued a white paper on Feb. 18, "Combating Procurement Fraud: An Initiative to Increase Prevention and Prosecution of Fraud in the Federal Procurement Process." The district is home to the Pentagon and, more importantly, thousands of government defense consulting firms in Crystal City, Rosslyn, and Alexandria; the revolving door spins rather quickly in D.C. The recent scandal involving Boeing (see previous post here) that led to the sentencing of the company’s former CFO and a senior Air Force procurement officer has led to a large-scale initiative by the U.S. Attorney’s Office, which is already well-known for the Ill-Wind investigation of the 1980s. The white paper discusses the reasons for the formation of a new Procurement Fraud Working Group:
In addition to increasing DoD contracts, these contractors are expanding operations to acquire and service contracts from the State Department, DHS, and other federal agencies. For example, the President and Chief Operating Officer of one of DHS’s top ten contractors recently announced the company’s intent to grow 15 per cent each year. With increased procurement, including a rise in the outsourcing of particular services, there is also the potential for an increase in procurement fraud, which includes product substitution, defective pricing or other irregularities in the pricing and formation of contracts, misuse of classified or other sensitive information, labor mischarging, accounting fraud, fraud involving foreign military sales and ethical and conflict of interest violations. This puts the United States Attorney’s Office, as chief law enforcement agency for this district, in a unique position to act.
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As discussed in an earlier post (here), former Georgia School Superintendent and 2002 gubernatorial candidate Linda Schrenko was charged in a federal indictment with corruption charges involving the misappropriation of over $600,000 in federal education funds that were used for her campaign and also for cosmetic surgery. Her top deputy entered a plea agreement on Jan. 10 (see post here), and his cooperation may have led to new charges. The U.S. Attorney’s Office for the Northern District of Georgia (Atlanta) upped the ante on Feb. 8 when the grand jury issued a superseding indictment alleging an additional 20 counts of money laundering, which could substantially affect the sentence if she is convicted of those charges. Among the methods alleged by the government to disguise the source and use of the funds were the issuance of 104 blank checks for $590 each that were to be used for "focus groups" related to the campaign. An article in the Atlanta Journal-Constitution describes the new allegations against Schrenko and her codefendants. (ph)
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A post on Nov. 12 (here) discussed the indictment of Linda Schrenko, the first woman elected School Superintendent in Georgia and a one-time rising star in the state Republican party who was charged with defrauding over $600,000 in education funds from the federal government that she used for her failed campaign for the nomination for governor and to pay for, among other things, her cosmetic surgery. On Monday, Jan. 10, Merle Temple, Jr., Schrenko’s top deputy and a co-defendant in the case, agreed to plead guilty and cooperate in the government’s prosecution. An article in the Atlanta Journal-Constitution states that Temple has agreed to pay a fine of $199,500, and will be sentenced on April 7. (ph)
MattBray.net 