The Department of Justice announced the indictment of Walter Anderson, a telecom entrepreneur, for failing to pay over $200 million in taxes from over $500 million in profits he earned from various mergers of companies he owned by forming off-shore companies in the British Virgin Islands and Panama to hide the true ownership of the profits. According to a press release issued by the Tax Division, "Anderson allegedly failed to report this income on either his federal or District of Columbia tax returns and failed to pay approximately $170 million in federal income taxes and $40 million in D.C. income taxes." (ph)
Category: Prosecutions
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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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How time flies when you’re getting ready for trial! U.S. District Judge Sim Lake has set the start of the criminal prosecution of former Enron CEOs Ken Lay and Jeffrey Skilling, along with former chief accounting officer Richard Causey, for January 2006 to accommodate the busy schedules of the various defense lawyers. The judge, who said he appreciated the lawyers "giving me the time of day," said that December 2005 appeared to be the earliest available trial date, and to avoid any holiday conflicts set the trial to start on Jan. 17, 2006. Lay initially sought a "speedy trial" (motion here)and for severance from the other defendants (motion here), which the judge denied, but now professes to be comfortable with the trial date that has been set. At least now we have something to look forward to next year. A Houston Chronicle story here discusses the judge’s ruling on setting the case for trial. (ph)
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Miami attorney Sam Burstyn appeared in federal court in the Southern District of Florida this past week to face an indictment charging money laundering and obstruction of justice. Burstyn has represented celebrity clients, including Robin Givens and the wife of tennis player Boris Becker, and is known for his penthouse office on Brickell Ave. in addition to his criminal defense work. The government alleges that he was the "house counsel" for a marijuana importation enterprise led by Jeffrey Tobin. The charges against Burstyn include a $500,000 money laundering charge related to a loan that was made with alleged drug profits, and that Burstyn obstructed justice by advising Tobin to flee the United States and organized meetings with grand jury witnesses to provide false testimony. According to a press release issued by the U.S. Attorney’s Office:
On or about October 22, 1998, Burstyn lent approximately $498,250, in the form of a counter check, to an owner of the business, Auto Fund of Atlanta, Georgia, at a substantial interest rate. This check was drawn on the lawyer’s trust account of Samuel I. Burstyn, P.A. Burstyn obtained the proceeds to make this loan from the financial accounts of his relatives. Burstyn used a fictitious company named “J.B. Partners” as an entity to make the loan. As a condition for making the loan, defendant Burstyn obtained collateral of $500,000 in drug proceeds from Jeffrey Tobin.
An AP story here discusses Burstyn’s law practice and his attorney’s statement that "If you were to see him now, you would be struck by how confident he is that he will be acquitted." (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 United States Attorneys Office for E.D. Missouri indicted the former director of Support Dogs, Inc. a service organization that trains support dogs. The allegations go to "fraud charges in connection with an alleged embezzlement of over $400,000." The press release of the U.S. Attys. Office states:
"According to the indictment, between September 1998 and January 2004, Hansen was the Executive Director of Support Dogs, Inc. As part of his responsibilities, Hansen oversaw fund raising activities at Support Dogs and regularly made presentations and passed out brochures soliciting donations for Support Dogs. Between January 1999 and January 2004, the indictment alleges that Hansen wrote checks on Support Dogs’ operating accounts and used these funds for his personal use. Hansen concealed this fraud on the books and records of Support Dogs in several ways, including using "white out"to alter cancelled checks, removing cancelled checks, and creating phony receipts in Support Dogs’ files.
As a further part of the scheme, as alleged in the indictment, in July 2002, Hansen opened a bank account in the name, "Support Dogs for the Handicapped, Inc." Hansen then allegedly intercepted donations mailed to Support Dogs and deposited them into this new account, which he used for his own benefit.
Finally, the indictment states that in May 2001, Hansen added his wife to the Support Dogs payroll, even though she was not an employee. Between May 2001 and January 2004, ADP created checks payable to Hansen’s wife drawn on Support Dogs’ payroll account."
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Ebbers – It was probably not a day that witness Scott Sullivan truly enjoyed, as defense attorney Reid Weingarten was asking the questions. This appears to be the witness that will make or break the government’s case. (see more AP) And it may come down to whether the jury thinks Scott Sullivan was doing everything at the direction of Bernie Ebbers. (see more here) So far we have Sullivan admitting that he "knew it was against the law."
Scrushy– More talk about "family," although not the kind with parents and children. The defense continued to place the blame on a group referred to as the "family" with claims that this group "hid [the conduct] from Scrushy." (See more here)
Kozlowski – The jury head the testimony of Mark D. Foley, a former senior vice president of finance. (See more here)
Addendum to Ebbers- Title of Wall Street Journal article of this a.m. says it all – "Burden of Proof
Linking Ebbers to the Fraud At WorldCom Proves Difficult."(esp)
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Bill Rankin of the Atlanta Journal Constitution reports on a conviction of a former lawyer in "a $20 million mortgage fraud operation called the largest of its kind in metro Atlanta." When the indictment was handed down, the U.S. Attorneys Office for the Northern District of Georgia stated that this defendant:
"owned and operated The McFarland Law Firm located first at 4820 Redan Road, Stone Mountain, Georgia, and later at 900 North Hairston Road, Stone Mountain, Georgia. She acted as agent for title insurance companies, and was the closing attorney for various lenders. MCFARLAND caused HUD-1 Settlement Statements (HUD-1s) to be signed certifying that she received and disbursed loan proceeds as reflected on the HUD-1s when she closed mortgage loans for various lenders on the properties for which she wrote title insurance, with the actual McFarland receipts and disbursements not as reflected on the Settlement Statements. The indictment alleges that McFarland paid the identity thief $10,000 per identity, the primary appraiser who inflated property values over $400,000, and other coconspirators from her escrow account without reflecting such payments on the settlement statements."
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While Attorney General Spitzer is investigating activities on a state level, the federal government is also busy with white collar cases. The trial of a former chief executive of American Tissue continued with the testimony of the former chief financial officer. Former CFO Stein pleaded guilty and is now testifying as a government witness in a trial that charges the defendant with "fraud, conspiracy to commit perjury and obstruction of justice." See Newsday for more.
In addition to criminal charges, the SEC also brought a civil action. (Complaint) (Litigation Release No. 18022). According to the New York State Society of CPA’s website, the accused "has gone to extraordinary lengths to block efforts aimed at selling its network of paper mills and warehouses to pay hefty debts. He allegedly instructed employees to forge ownership documents for machinery he didn’t own and the told them to lie to a Delaware bankruptcy court." The same website reports that the defendant’s attorney states that, "[a]ny dispute with the bankruptcy court is really a business dispute, not a criminal dispute."
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Kozlowski -The former head of human resources at Tyco has now spent four days on the stand being cross-examined. For more see the Wall Street Journal article titled, "Tyco Ex-Official Discusses LoansTo Executives, Key Panel’s Moves" (see also Atlanta Journal Constitution article here).
Scrushy– The defense cross-examined a former HealthSouth finance chief, Bill Owens. The defense continued to present testimony aimed to show that Owens was acting without approval from the accused. For more see here.
It is always fascinating how murder cases can often be over with in a very short period of time, but white collar cases can take weeks and months.
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MattBray.net 