“End Of The Silk Road: FBI Says It’s Busted The Web’s Biggest Anonymous Drug Black Market”

October 3, 2013
Ross William Ulbricht
“Ross William Ulbricht, alleged to be the “Dread Pirate Roberts” behind Silk Road’s drug black market.”

Forbes on October 2, 2013 released the following:

By: Andy Greenberg, Forbes Staff

“After two and a half years running the booming anonymous narcotics bazaar known as the Silk Road, the drug kingpin who called himself the Dread Pirate Roberts has allegedly been unmasked.

On Wednesday, the FBI announced that they arrested 29-year-old Ross William Ulbricht, the Silk Road’s accused administrator, in the Glen Park branch of the San Francisco Public Library at 3:15 Pacific time on Tuesday. Ulbricht has been charged with engaging in a money laundering and narcotics trafficking conspiracy as well as computer hacking. The Department of Justice has seized the website of the Silk Road’s as well as somewhere between $3.5 to 4 million in bitcoins, the cryptographic currency used to buy drugs on the Silk Road.

Earlier this summer, the Silk Road’s administrator calling himself by the Dread Pirate Roberts pseudonym gave his first extended interview to Forbes over the same Tor anonymity network that has hosted the Silk Road and its users since the site’s creation in early 2011.

Forbes estimated at the time that the Silk Road was earning between $30 and $45 million in annual revenue. In fact, the number may have been far larger: The criminal complaint against Ulbricht states that the Silk Road turned over $1.2 billion in revenue since its creation, and generated $80 million commissions for its operator or operators.

“This is supposed to be some invisible black market bazaar. We made it visible,” says an FBI spokesperson, who asked not to be named. “When you interviewed [Ulbricht], he said he would never be arrested. But no one is beyond the reach of the FBI. We will find you.”

The FBI hasn’t yet revealed how it managed to track down Ulbricht in spite of his seemingly careful use of encryption and anonymity tools to protect his identity and those of his customers and vendors who visited Silk Road as often as 60,000 times per day. The FBI spokesperson declined to offer details about the investigation, but told me that “basically he made a simple mistake and we were able to identify him.”

One clue mentioned in the criminal complaint against Ulbricht was a package seized from the mail by U.S. Customs and Border Patrol as it crossed the Canadian border, containing nine seemingly counterfeit identification documents, each of which used a different name but featured Ulbricht’s photograph. The address on the package was on 15th street in San Francisco, where police found Ulbricht and matched his face to the one on the fake IDs.

The complaint also mentions security mistakes, including an IP address for a VPN server used by Ulbricht listed in the code on the Silk Road, mentions of time in the Dread Pirate Roberts’ posts on the site that identified his time zone, and postings on the Bitcoin Talk forum under the handle “altoid,” which was tied to Ulbricht’s Gmail address.

In his conversation with me, which took place on July 4th, the Silk Road administrator calling himself the Dread Pirate Roberts espoused Libertarian ideals and claimed that the use of Bitcoin in combination with Tor had stymied law enforcement and “won the State’s War on Drugs.”

He also said he intended to bring his marketplace into mainstream awareness, and had recently launched the first non-Tor website for the Silk Road known as SilkRoadlink, which remains online. “Up until now I’ve done my best to keep Silk Road as low profile as possible … letting people discover [it] through word of mouth,” Roberts says. “At the same time, Silk Road has been around two and a half years. We’ve withstood a lot, and it’s not like our enemies are unaware any longer.”

One remaining mystery in Ulbricht’s criminal complaint is whether he was in fact the only–or the original–Dread Pirate Roberts. In his July interview with me, Roberts said that he had in fact inherited the Dread Pirate title from the site’s creator, who may have also used the same pseudonym.

As of around noon Wednesday, the Silk Road’s forum for users also remained online, and the site’s loyal users were grieving over the Silk Road takedown and mourning the arrest of Ulbricht, whose apparent persona as the Dread Pirate Roberts was a widely respected figure in the online drug community.

“jesus christ this is TERRIBLE!!” wrote one user named danceandsing. Others suggested that users migrate to other, smaller but similar anonymous black markets such as Black Market Reloaded–another popular alternative to the Silk Road known as Atlantis went offline last week, with its administrators saying only that they shut down the business for “security reasons.”

Another user blamed the Dread Pirate Roberts’ carelessness, including his decision to raise his profile by giving an interview to Forbes. “Sorry, but when he gave the fucking Forbes interview I imagined this would be coming,” wrote a user calling himself Dontek. “Should have kept all this shit on the down low rather than publicly bragging about it.”

Ulbricht’s LinkedIn profile describes his background as a graduate researcher in materials science at Pennsylvania State University, as well as an undergrad degree in physics from the University of Texas at Dallas.

According to Ulbricht’s grandmother, Martha Ulbricht, who was reached by phone, the younger Ulbricht received a full scholarship to UT Dallas. “Ross has always been an upstanding person as far as we know and a rather outstanding person,” she said.

Ulbricht’s half-brother Travis Ulbricht, also reached by phone in Sacramento, described him as an “exceptionally bright, smart kid” who had no criminal history to his knowledge.

Asked what he did for a living before moving to San Francisco, Ulbricht’s grandmother said, “Something on the computer…a little technical for me. He was good with computers.””

Federal Criminal Case 1: New York Federal Criminal Complaint
Northern District of California, Case No.: 3:13-mj-71218-JCS-1 (Proceedings on Out-of-District Criminal Charges Pursuant to Rules 5(c)(2) and (3)) and lists the following case on the docket sheet: Southern District of New York, Case No.: 13-mj-2328

21 U.S.C. 846 – Drug Conspiracy
18 U.S.C. 1030(a)(2) – Computer Hacking Conspiracy
18 U.S.C. 1956(a)(1)(A)(i) and (B)(i) – Money Laundering Conspiracy

Ross William Ulbricht New York Criminal Complaint

Federal Criminal Case 2: Maryland Federal Indictment
District of Maryland, Case No.: 1:13-cr-00222-CCB-1

21 U.S.C. 846 – Conspiracy to Distribute a Controlled Substance
18 U.S.C. 1512(a)(1)(C) – Attempted Witness Murder; 18 U.S.C. 2 – Aiding and Abetting
18 U.S.C. 1958(a) – Use of Interstate Commerce Facilities in Commission of a Murder-for-hire; 18 U.S.C. 2 – Aiding and Abetting

Ross William Ulbricht Maryland Superseding Indictment

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Suspended West Virigina Judge Michael Thornsbury Due in Federal Court for a Plea Hearing on a Federal Conspiracy Charge

October 2, 2013

San Francisco Chronicle on October 2, 2013 released the following:

“CHARLESTON, W.Va. (AP) — A suspended Mingo County judge is due in court for a plea hearing on a federal conspiracy charge.

Prosecutors say Circuit Judge Michael Thornsbury is expected to plead guilty Wednesday in U.S. District Court in Charleston.

Thornsbury is accused of participating in a scheme to protect the reputation of Mingo County Sheriff Eugene Crum from revelations he’d bought drugs from a campaign sign-maker.

Prosecutors allege Thornsbury and others offered a lighter sentence if the man fired his lawyer and hired one they preferred.

Crum died in April in an unrelated shooting.

In exchange for a guilty plea, prosecutors say they would dismiss charges against Thornsbury in a separate federal case. Prosecutors say Thornsbury repeatedly tried to frame his secretary’s husband for false crimes to eliminate him as a romantic rival.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

Federal Crimes – Appeal

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


“Sentencing Commission in sweeping review of prison terms for drug dealers”

August 16, 2013

The Guardian on August 15, 2013 released the following:

By: Dan Roberts in Washington

“The US Sentencing Commission has voted unanimously to begin a sweeping review of federal sentences for drug dealers in a move that could herald long-awaited reductions in America’s prison population.

Just days after attorney general Eric Holder called for a new approach to the so-called “war on drugs”, the commission met in Washington to agree a new policy priority that potentially goes far further than the Department of Justice can in lowering sentences.

As anticipated, the independent government agency, which issues sentencing guidelines to federal judges, will now spend the next few weeks reviewing its “drug quantity table” – the grid that determines prison lengths for dozens of different categories of offence – before publishing new recommendations in January.

A reduction in sentencing guidelines could still be blocked by Congress, but Holder’s speech on Monday has coincided with a new mood of reform in Washington that reverses decades of political pressure to increase penalties for drug dealers. His comments were welcomed by Senate judiciary committee chair Patrick Leahy and leading Republicans such as senator Rand Paul.

Currently the guidelines in the commission’s drug quantity table can result in first-time offenders facing sentences of 19 to 24 years, with no parole, for possession of the maximum quantities of heroin, crack or methamphetamine. Even dealers caught with 100g of cocaine can face between 27 and 33 months, according to the table.

A number of specific offences are also subject to mandatory minimum sentences prescribed by Congress, although Holder instructed US prosecutors on Monday to begin circumventing such automatic terms by changing the way they bring charges.

The seven commissioners who voted on the sentencing panel, including five senior judges, are now thought likely to go much further than this by formulating across-the-board changes to the recommended sentences.

Speaking afterwards, Dabney Friedrich, a former associate counsel in the Bush White House who sits on the commission, told the Guardian she thought that pressure in Congress to control the cost of the US prison system would be a key factor in ensuring political support for such a move.

The Department of Justice also issued a supportive statement on Thursday, which welcomed the commission’s progress.

“As the attorney general expressed earlier this week, we think there is much to be done to improve federal sentencing and corrections,” said DOJ official Jonathan Wroblewski. “Moreover, we think the US Sentencing Commission has a very big role to play in shaping that reform.”

In a statement issued after its meeting, the commission noted that drug offenders account for nearly half of all federal inmates, and that “an adjustment to the drug quantity tables in the sentencing guidelines could have a significant impact on sentence lengths and prison populations.”

“With a growing crisis in federal prison populations and budgets, it is timely and important for us to examine mandatory minimum penalties and drug sentences, which contribute significantly to the federal prison population,” added Judge Patti Saris, chair of the commission.

“The Commission is looking forward to a serious and thoughtful reconsideration of some of the sentencing guidelines which most strongly impact the federal criminal justice system,” she said. “I am glad that members of Congress from both parties and the Attorney General are
engaged in similar efforts.”

The Commission also pledged to work with Congress to reduce the “severity and scope of mandatory minimum penalties and consider expanding the ‘safety valve’ statute which exempts certain low-level non-violent
offenders from mandatory minimum penalties”. It will pass its final amendments to Congress in May.

Political reaction to the recent sentencing developments has been broadly positive. Senator Leahy said was pleased at Holder’s call for a review of mandatory minimum sentences.

Although he believes long sentences are appropriate in some cases, but the veteran Democrat said it believes judges should be given more flexibility rather than relying on mandatory requirements.

Others have expressed concern however at the new mood sweeping Washington.

William Otis, a former federal prosecutor at Georgetown University, said stiffer sentences in recent decades had contributed to lower crime rates.

“Two generations ago, in the 1960s and 1970s, our country had the wholly discretionary sentencing system Holder admires. For our trouble, we got a national crime wave,” he wrote in a USA Today op-ed.

“We have every right to instruct judges that some offenses are just too awful to allow an overly sympathetic jurist to burst through a congressionally established floor.””

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

Federal Crimes – Appeal

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


“Federal public defenders warn of dire budget cuts”

July 3, 2013

Seattle PI on July 2, 2013 released the following:

By GENE JOHNSON, Associated Press

“SEATTLE (AP) — The lawyers who represent poor people charged with federal crimes across the country say they already face an unfair fight when they head into court against the resources of the Justice Department — and that’s only going to get worse if draconian budget cuts occur as planned next year.

As a result of the automatic cuts known as sequestration, federal public defender offices have recently been told they must reduce spending by 14 percent for fiscal year 2014, on top of the roughly 9 percent suffered this year.

The result, the lawyers say, will be drastic layoffs for public defenders, expensive case delays and costly appeals — all for nothing, as pricier private attorneys are expected to step in to fill the void at government expense.

“Absent some immediate action, federal defenders will begin the process this summer of laying off between a third and half of their staff,” said a memo prepared by several federal public defenders. “They will begin closing many offices. The cuts will result in irreparable damage to the criminal justice system, and paradoxically, greater expense to the taxpayer as indigent defendants are increasingly assigned private counsel.”

Congress provides about $1 billion for the representation of criminal defendants who can’t afford their own lawyer. The money is split evenly between federal public defender program, which was established in 1970, and private attorneys, who are generally paid $125 an hour to represent defendants who can’t be represented by the public defenders because of conflicts of interest or other reasons.

Because the right to counsel is a constitutional guarantee, the federal defenders have no control over their workloads. When someone is charged and needs a lawyer, they’re appointed. If public defenders have to take fewer cases due to staffing cuts that work will fall to the private lawyers — who cost substantially more than full-time federal defenders, studies have shown.

“There are no actual savings here,” said Tom Hillier, the chief federal public defender in Seattle. “Sooner or later Congress is going to have to come to grips with the fact that they’re destroying institutions, and they’re not saving money.”

Under this year’s cuts, some public defenders lost their jobs and the rest are taking up to 20 days of unpaid leave. The federal public defender’s office in Los Angeles is simply closing for three weeks in September. The chief federal defender in southern Ohio laid himself off.

In New York, the trial of Osama bin Laden’s son-in-law was delayed because the public defenders who were representing him had to take furloughs, and in Boston, the lawyers for the surviving marathon bombing suspect have had to do it amid unpaid time off.

When staffing cuts force public defenders to ask for delays in cases or withdraw from cases altogether, it means defendants have to spend more time in pretrial custody — increasing jail costs and raising concerns about the right to a speedy trial, the defenders’ memo noted. The offices have also cut spending on training, travel, expert witnesses and case investigators — all of which can affect the quality of representation and give rise to appeals.

The cuts being required next year are even starker.

—In Seattle, Hillier said he will have to lay off nine employees or his entire office will have to take more than nine weeks of unpaid time off.

—In San Francisco, Federal Public Defender Steven Kalar said he will have to close at least one branch office — possibly Oakland, San Jose, or both — and stop working on certain types of complex cases.

—In the District of Columbia, Federal Public Defender A.J. Kramer said that his office would have to withdraw from a large number of cases. He’s already down 10 positions, out of 35 he would normally be authorized to fill.

“We’re headed to a huge fiscal crisis,” said Seattle U.S. Attorney Jenny Durkan, whose office has added lawyers recently but also remains below historic staffing levels. “If the federal public defender closes shop, we can’t do our work. Everybody we charge, they’re entitled to a lawyer.”

“The fact that we are not fully funded makes it an unfair fight in court,” Hillier said. “The government has full resources and full staff, and we don’t.”

Nationally, more than 900 of the public defender program’s approximately 2,700 staff members are expected to be cut over the next two years. Defenders in more than 20 states are planning to close offices. Because it costs money to lay people off — in terms of severance, benefits and unemployment insurance claims — many offices have to lay off more than one-third of their staff to reach the 23 percent budget reduction.

Several federal defenders have argued that the cuts could be eased by delaying payments to the private attorneys until the next fiscal year, but U.S. District Judge Robert Lasnik of Seattle said that wasn’t a good option. Lasnik serves on the Executive Committee of the U.S. Judicial Conference, a group of seven judges that oversees the budget for public defense.

“It’s almost like deficit spending,” Lasnik said. “That only works if we get money to replace the money we’re spending.”

He added: “This is not a defense-versus-prosecutors thing, or judges-verses-defense thing. The system doesn’t work if any one of the legs of the stool is not able to hold things up. We have a need for the funding of federal defenders.”

To ease the burden on the federal defenders, the Judicial Conference might have to reduce rates for private attorneys appointed to represent poor defendants, even though “they don’t make very much as it is,” Lasnik said.

That could result in experienced private lawyers declining to take cases, some attorneys argue.

The only real solution, said U.S. Sen. Patty Murray, D-Wash., is to replace sequestration, which was supposed to be so unpalatable that Congress would never let it happen.

“From children getting cut from Head Start, to workers being furloughed at our military bases, to the significant cuts federal public defenders across the country are facing and so much more,” she said, “the impacts of sequestration continue to grow in our communities, and it’s only going to get worse.””

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


“Number of federal wiretaps rose 71 percent in 2012”

July 1, 2013

The Washington Post on June 28, 2013 released the following:

By Peter Finn

“The number of wiretaps secured in federal criminal investigations jumped 71 percent in 2012 over the previous year, according to newly released figures.

Federal courts authorized 1,354 interception orders for wire, oral and electronic communications, up from 792 the previous year, according to the figures, released Friday by the Administrative Office of the United States Courts. There was a 5 percent increase in state and local use of wiretaps in the same period.

The office collects the figures from federal and local jurisdictions at the request of Congress, but does not interpret the statistics. There is no explanation of why the federal figures increased so much, and it is generally out of line with the number of wiretaps between 1997 and 2009, which averaged 550 annually. A large number of wiretaps was also reported in 2010, when 1,207 were secured.

“This is just one more piece of evidence demonstrating the need for a full, informed public debate about the scope, breadth, and pervasiveness of government surveillance in this country,” Mark Rumold, a staff attorney at the Electronic Frontier Foundation, said in an e-mail. “We have a secret surveillance program churning in the background, sweeping in everyone’s communications, and, at the same time, in the shadows (and frequently under seal), law enforcement is constantly expanding its use and reliance on surveillance in traditional criminal investigations.”

The Justice Department did not respond to requests for comment.

A single wiretap can sweep up thousands of communications. One 30-day local wiretap in California, for instance, generated 185,268 cellular telephone interceptions, of which 12 percent were incriminating, according to the report.

The vast majority of the wiretaps in both federal and state cases were obtained as part of drug investigations, and they overwhelmingly were directed at cellphones, according to the report. Only 14 court orders were for personal residences.

Most jurisdictions limit the period of surveillance to 30 days, but extensions can be obtained. In one case, a narcotics investigation in Queens, the wiretap continued for 580 days. The longest federal wiretap was also a drug case and lasted 180 days in the Western District of Washington state, which includes Seattle.

There were 25 authorized federal wiretaps in the District in 2012, 18 in Virginia and 12 in Maryland. Local authorities in Maryland reported 50 wiretap orders issued by state judges, including 34 in Harford County. Virginia’s attorney general reported nine orders.

The amount of encryption being encountered by law enforcement authorities is also increasing, and for the first time, “jurisdictions have reported that encryption prevented officials from obtaining the plain text of the communications,” the report noted.

Officials said 3,743 people were arrested as a result of the interceptions in 2012, and so far 455 have been convicted.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


“US Supreme Court to consider Florida couple’s fight to use frozen assets for criminal defense”

July 1, 2013

The Washington Post on June 30, 2013 released the following:

“By Associated Press, Published: June 30

MIAMI — When Kerri and Brian Kaley came under federal investigation for allegedly stealing medical devices, they took out a $500,000 line of credit on their New York house to hire lawyers. Yet after their indictment in 2007, prosecutors sought to prevent the Kaleys from using the money because the government intended to seize the house.

The Kaleys insisted they were legally reselling the medical items. At the very least, they wanted a hearing to determine whether the government’s case was strong enough to justify freezing most of their assets and denying them the right to hire the attorney of their choice.

It’s an issue federal courts around the country are deeply divided over. Now, the U.S. Supreme Court has a chance to settle the matter after agreeing earlier this year to hear the Kaleys’ appeal.

The case involves both the Fifth Amendment’s due process clause and the Sixth Amendment’s right to counsel, and could potentially affect thousands of cases each year in which the Justice Department seeks to seize defendants’ property. Such cases typically range from alleged drug dealers and Mafia figures to Ponzi schemers and Medicare fraudsters, but also could ensnare people who are wrongly accused.

To property rights advocates, the Kaleys’ case is an opportunity for the court to tip the scales of justice slightly more in the favor of defendants who are routinely deprived of their assets without being convicted. The ruling would not directly impact state courts, which operate under their own forfeiture laws, but lawyers could cite the Supreme Court decision to help a client.

“People who are indicted on criminal charges in the United States are presumed innocent,” said Larry Salzman, an attorney with the Institute for Justice, an Alexandria, Va.-based nonprofit law firm involved in forfeiture and property seizure cases nationwide. “Seizing their assets on the basis of an indictment alone turns the presumption of innocence on its head. It follows the rule of punishment first, evidence later.”

Prosecutors, however, say a grand jury’s decision to bring criminal charges shows the case has enough merit to enable them to freeze assets that may have been obtained through illegal activity.

In fiscal 2012, more than $4.2 billion was deposited in the Justice Department’s asset forfeiture fund. That compares with about $1.6 billion in each of the two previous years.

Prosecutors say adding a hearing to allow a defendant to attack the validity of the grand jury’s indictment would force prosecutors to prematurely lay out their case and might even endanger witnesses.

“No reason exists to think that an extra layer of procedure on that score — one that could be undertaken only at significant cost — would be beneficial, much less that it is constitutionally mandated,” the U.S. solicitor general’s office wrote in Supreme Court papers.

The office, which represents the administration of President Barack Obama before the Supreme Court, also asked the justices to settle the question nationally so there would be a single standard in federal courts.

The Kaleys, who live in Cold Spring Harbor, N.Y., have been battling the government for more than six years. They declined an interview request through their Miami-based attorneys, Howard Srebnick and Richard Strafer.

It all started when the Food and Drug Administration began an investigation in 2005 into what appeared to be a highly lucrative but unregulated market of resale of various medical devices, from hardware to sutures. The probe led investigators to a Delray Beach middleman in South Florida who was buying the devices from the Kaleys and others and then selling them to other medical providers. He did some $10 million in business in one year.

At the time, Kerri Kaley was a sales representative for Ethicon Endosurgery, a subsidiary of medical supplies giant Johnson & Johnson. She and her lawyers insist that she was legally allowed to resell the medical items she was given because Johnson & Johnson would not accept them as returns after a certain date and because hospitals wanted to clear out space for newer products. Hospitals also traded the older items for newer, free devices from the sales force.

Another sales representative, Jennifer Gruenstrass, was charged along with the Kaleys but went to trial separately. She was acquitted in November 2007. Gruenstrass’s assets were not frozen before the trial.

“There is a vibrant trading culture that exists between reps and between hospitals,” Gruenstrass’ attorney Robert Casale said. “Nobody is reporting a theft at any of the hospitals. Nobody at Ethicon is saying, ‘We were missing stuff.’ No theft.”

The prosecutor, Assistant U.S. Attorney Thomas Watts-Fitzgerald, said there was evidence the Kaleys and Gruenstrass knew what they were doing was illegal. For example, he said, Brian Kaley set up two shell construction businesses that actually acted as only conduits for the checks his wife was getting through the device sales. And, he said, the Kaleys hastily cleaned out their garage of the devices when they were first contacted by the FDA.

“Those were stolen devices,” Watts-Fitzgerald said. “She had no right, title and interest in any of the equipment they were selling.”

Still, the acquittal of Gruenstrass could indicate the Kaleys have a point in questioning the strength of the federal case. What they want from the Supreme Court is a chance to show that weakness to a federal judge so they can win access to the money they need to pay the lawyers they choose.

The $500,000 line of credit the Kaleys took out on their house was based on their lawyers’ estimate of their fees and expenses to take the case all the way through trial.

The 11th U.S. Circuit Court of Appeals, which handles cases from South Florida, said the Kaleys were only entitled to a hearing on whether their frozen assets were connected to the alleged crimes. Three other circuits have similar standards, while five others do require prosecutors to show at least some evidence of guilt.

The Kaleys face an eight-count indictment on conspiracy, transportation of stolen property, money laundering and obstruction of justice charges that carry maximum combined penalties of 85 years in prison. If convicted, they would likely lose their New York house and the $500,000 line of credit.

“With so much at stake in a criminal case, we believe due process requires a pretrial hearing to determine the propriety of the restraint of assets needed to retain counsel of choice at trial,” said Srebnick, one of the Kaley attorneys.

The criminal prosecution is on hold in federal court in West Palm Beach until the Supreme Court makes its decision. Oral arguments are not expected until October, with a ruling likely in late 2013 or early 2014.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Appeal

————————————————————–

To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Man Allegedly Claiming to be the Son of the President of the Congo Indicted for Federal Wire Fraud Crimes

May 10, 2013

The Federal Bureau of Investigation (FBI) on May 9, 2013 released the following:

“SAN FRANCISCO— Earlier this week, a federal grand jury in San Francisco indicted Blessed Marvelous Herve, a/k/a Rodrigue Herve Ngandou, a/k/a Herve Rodrigue Ngandou, a/k/a Blessed Roll Herve, of San Francisco, for wire fraud, United States Attorney Melina Haag announced.

According to the indictment, Herve, 41, devised and executed a scheme to defraud victims of approximately $1.6 million. Herve claimed that his father was the president of the Congo and a multi-billionaire, but that the United States government had seized Herve’s assets, in excess of $43,000,000. Herve promised to pay bonus sums of more than $1,500,000 to victims in exchange for the victims’ financial support of Herve’s quest to obtain the $43,000,000 that the government purportedly had seized.

Herve also claimed that as a result the federal court case involving his seized funds, he was sent to federal prison from 2009 through 2012. During this time, Herve solicited funds from victims to assist with his alleged ongoing court proceedings and his incarceration. Herve again promised full repayment of victims’ money plus large bonuses upon the completion of his federal case and release of his funds. Specifically, in October 2012, Herve solicited and received $47,000 from a victim by falsely claiming that he needed the money to pay the Internal Revenue Service to satisfy the final judgment entered against him.

According to a criminal complaint filed in the same matter further, one of the victims was a real estate agent to whom Herve promised that his father, the multi-billionaire president of the Congo, would purchase tens of millions of dollars in real estate. That victim gave Herve tens of thousands of dollars to assist in the purported father’s real estate tours, such as the rental of bulletproof limousines. The criminal complaint alleges that to lure in the victims and bolster his credibility, Herve showed various documents, such as a letter written to him from a United States Senator, copies of awards of recognition he received from the City and County of San Francisco, and a certificate of Special Congressional Recognition from a Member of Congress. When the victims ran out of money, Herve claimed that he was being deported to Puerto Rico and was not heard from again.

Herve, born in the Republic of Congo, was granted asylum in the United States in 1999 and became a United States citizen earlier this year.

Herve was arrested on a criminal complaint on April 24, 2013, in San Francisco, and he made his initial appearance in federal court in San Francisco the following day. He is currently being held in custody. The defendant’s next scheduled appearance is May 22, 2013, at 11:00 a.m. for further detention proceedings before Magistrate Judge Nathanael Cousins. Herve’s first appearance in district court is scheduled before Judge John Tigar on May 31, 2013 at 9:30 a.m.

The maximum statutory penalty for wire fraud, in violation of 18 U.S.C. § 1343, is 20 years’ imprisonment and a fine of $250,000. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Hallie Hoffman is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Elizabeth Garcia. The prosecution is the result of an investigation by the Federal Bureau of Investigation and the United States Department of Homeland Security.

Please note, an indictment contains only allegations against an individual and, as with all defendants, Herve must be presumed innocent unless and until proven guilty.”

Federal Wire Fraud Crimes – 18 U.S.C. 1343

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


“Prosecutors: Ex-comptroller accused of stealing $53M from small Illinois city to plead guilty”

November 14, 2012

The Washington Post on November 13, 2012 released the following:

“By Associated Press

CHICAGO — A former comptroller accused of stealing $53 million from her small northern Illinois city to fund a lavish lifestyle, including one of the nation’s foremost horse-breeding operations, is expected to plead guilty on Wednesday, federal prosecutors said.

Rita Crundwell will plead guilty to a federal charge that accuses her of stealing the public money while overseeing the public finances of Dixon, U.S. attorney’s spokesman Randall Samborn said. Prosecutors allege that she stole the money over several years and siphoned it into a secret bank account.

Crundwell had previously pleaded not guilty to the wire fraud count, which carried a maximum sentence of up to 20 years in prison.

Dixon Mayor James Burke welcomed her apparent change of heart, saying it should clear the way for the city to recoup more of its losses. A guilty plea in the federal case enables U.S. Marshals to start selling off millions of dollars of assets still in Crundwell’s name, including around $450,000 worth of diamonds and other jewels, ranch land and a house in Florida, he said.

“This is very good news,” he told The Associated Press in a telephone interview from his office Tuesday. “If she wanted to continue with not guilty pleas, she could have dragged this out for two or three years.”

Burke said Crudwell’s assets probably amounted to several million dollars, though he didn’t have a specific figure.

Crunwell’s federal public defenders, Paul Gaziano and Kristin Carpenter, did not immediately return messages seeking messages Tuesday afternoon. Crundwell, who is free on a recognizance bond, is scheduled to appear before U.S. District Judge Philip G. Reinhard in Rockford federal court on Wednesday.

Crundwell, 58, is accused of using her modestly paid town hall job to steal tax dollars, support an extravagant lifestyle and win national fame as a breeder. Prosecutors allege that since 1990, Crundwell stole more than $53 million from Dixon, where she oversaw public finances as the city comptroller since the 1980s. The small city is about 100 miles west of Chicago.

Authorities say Crundwell bought luxury homes and vehicles, and spent millions on her horse-breeding operation, RC Quarter Horses LLC, which produced 52 world champions in exhibitions run by the American Quarter Horse Association.

Prosecutors say Crundwell’s scheme unraveled only after a co-worker filling in for her while she was on an extended vacation stumbled upon the secret bank account.

Federal prosecutors alleged Crundwell created phony invoices that she characterized as being from the state of Illinois. She then allegedly put that money from a city account into another account, which she repeatedly used for personal use.

Her arrest stunned Dixon, a small city along a picturesque vein of the Mississippi River in Illinois farm country and the boyhood home of the late President Ronald Reagan. Its 16,000 residents are largely lower-middle class, working at factories, grain farms, the local prison and a hospital, among other places.

Crundwell also has pleaded not guilty to 60 separate but related felony theft counts in Lee County. The selling of the assets was held up only by the federal case, said Burke.

Since the case broke, the U.S. Marshals Service auctioned dozens of Crundwell’s horses. Officials have said that if Crundwell was found guilty, the proceeds would go toward restitution for the city.

Crundwell grew up in Dixon, playing baseball and surrounded by the outdoors and animals on her family’s farm. At 17, she started at City Hall in a work program for high school students. She stayed, serving as treasurer before becoming comptroller.

According to the mayor, the horses could be sold — unlike the jewelry and other property — before a guilty plea because Crundwell agreed to it.

But otherwise, he added, “there is no indication that she has remorse over this whole thing.””

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Miami feds fight defense plan to question witnesses in Pakistan for South Florida terrorism case

October 22, 2012

The Miami Herald on October 21, 2012 released the following:

“Federal prosecutors are fighting the defense’s plan to question key witnesses in Pakistan in a Miami case accusing two South Florida Muslim clerics of aiding the Taliban.

BY JAY WEAVER []

Two South Florida Muslim clerics — a father and son separated by more than 50 years in age — are struggling to persuade a Miami federal judge to allow their lawyers to travel to Pakistan to question alleged Taliban sympathizers who might help their defense against terrorism charges.

Lawyers for Hafiz Khan and Izhar Khan, former imams of mosques in Miami and Margate, have already lost their first bid to travel with federal prosecutors to the U.S. Embassy in Islamabad to take depositions from five witnesses who do not want to come to Miami to testify at the upcoming trial.

Among the potential witnesses are two other Khan family members and another suspected Taliban supporter who were accused in the same case of conspiring to aid the Taliban with money and guns.

Last week, U.S. District Judge Robert Scola rejected the defense’s initial deposition plan — which was strongly opposed by federal prosecutors — as “unsafe and impractical.” But Scola left open the possibility for the defense’s alternative: allowing the Khans’ lawyers to question the witnesses at a hotel such as the Marriott in Islamabad in a live, videotaped deposition with the prosecutors participating from Miami.

“If there is a way for you to take their deposition, I’m going to let you do it,” Scola said, setting the stage for a final hearing Oct. 29.

The clock is ticking, however, because the “material-support” trial that initially drew national headlines is scheduled for early January. Bottom line, the defense said: No deposition, no fair trial.

“These witnesses are so important if we’re going to have any defense,” Izhar Khan’s lawyer, Joseph Rosenbaum, told the judge. “Without [the deposition], we don’t have a shot.”

Rosenbaum argued that that the prosecutors oppose any deposition of the Pakistani witnesses because their testimony could poke holes in the government’s case, which is built on phone recordings of the Khan family’s alleged network of fundraising for the Taliban, a U.S.-designated terrorist group.

He further argued that witnesses would provide “context” for the phone calls, proving that the defendants wired about $50,000 from Miami to Pakistan to aid schools and families in the embattled northwest territory known as the Swat Valley — not to fund the Taliban’s violence against the U.S. government interests in the region.

Assistant U.S. Attorneys Pat Sullivan and John Shipley said in court they were opposed to any deposition, even if it were taken at a modern hotel in Islamabad. They declined to say why at Thursday’s hearing.

In court documents, they opposed the defense’s initial deposition plan, saying Pakistan is dangerous and that the witnesses could not be questioned at the U.S. Embassy because of their involvement in the alleged crime of aiding the Taliban. A fourth witness for the defense, Noor Mohammed, is suspected of being a Taliban soldier, and a fifth is a Pakistani pharmacist who received some of the money transfers from Hafiz Khan’s foreign bank accounts.

On Thursday, the prosecutors called an FBI witness who served at the U.S. Embassy in Islamabad over the past year to testify about the safety risks of taking the deposition there as well as outside the diplomatic zone.

In court papers, they argued: “The entirety of the government’s case against these defendants concerns the Pakistani Taliban’s hostility, animosity and lethality towards United States citizens.”

By contrast, Rosenbaum called two female professors from the University of Colorado and University of Illinois who testified that Islamabad was a modern city of diplomats, business people and relative wealth. The witnesses said the city would be safe for both prosecutors and defense attorneys to conduct the deposition in an off-site hotel.

But Scola kept raising the question about whether it would be safe for U.S. prosecutors to travel to Pakistan if the public knew the purpose of the trip: Gathering testimony for a high-profile terrorism trial in Miami against alleged Taliban supporters.

“The question is whether it is safe for prosecutors to go to Pakistan,” said Scola, who also noted the well-known case of a teenage girl, Malala Yousufzai, who was recently shot in the head by the Taliban to silence her because she advocated education for girls.

The Miami terrorism indictment was filed with much fanfare in May 2011. Prosecutors charged Hafiz Khan, 77, former imam of the Flagler Mosque in Miami; Izhar Khan, 25, the one-time leader of the Masjid Jammat Al-Mumineen mosque in Margate; his sister, Amina Khan; her son, Alam Zeb; and Ali Rehman with conspiring to provide financial support for the Taliban from 2008 to 2010.

In June of this year, prosecutors dropped the charges against the elder Khan’s son, Irfan Khan, a one-time Miami cab driver, without explanation. Khan, a 39-year-old naturalized U.S. citizen, had been detained for almost a year before obtaining bail last April.

The FBI used a confidential informant, bank transfer records and more than 1,000 wiretapped phone calls to build the case against the Khan family and others.

In Pakistan, Hafiz Kahn’s daughter, Amina, and her son, Zeb, have said the federal case distorted the patriarch’s good deeds to help their family and relatives. Zeb, 20, said money sent from Miami was meant to repair a religious school founded by his grandfather and to help poor relatives rebuild houses damaged in fighting between the Pakistan army and the Taliban.

But the conspiracy indictment portrays Hafiz Khan as a talkative Muslim spiritual leader who solicited thousands of dollars from donors in the United States, directed family members to help disburse them and openly discussed deadly plots against foes who disagreed with strict Islamic law, or Sharia.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Judge won’t bar evidence of other crimes allegedly committed by defendant in death-penalty case

June 15, 2012

Chicago Tribune on June 15, 2012 released the following:

“Prosecutors plan to connect man charged with killing Navy officer to rape in Virginia, murders in Lake County

By Dan Hinkel

A federal judge has denied defense lawyers’ efforts to bar potentially damaging evidence at the sentencing phase of the death penalty case against Jorge Torrez, the former Lake County man charged last month with murdering two young girls in Zion in 2005.

Federal prosecutors plan to seek Torrez’s execution if he is convicted of killing 20-year-old Navy petty officer Amanda Snell in 2009 on the Virginia military base where they both lived. To aid that push, prosecutors plan to offer evidence that Torrez raped a woman in Virginia in 2010 and killed Laura Hobbs, 8, and Krystal Tobias, 9, seven years ago in Illinois.

Jerry Hobbs, Laura’s father, had confessed to the killings and spent five years in jail before DNA pointed to Torrez, according to court records. Hobbs was freed in August 2010, but nearly two more years passed before Lake County prosecutors tacitly acknowledged his confession was false when they charged Torrez with the crime last month.

Torrez, 23, is serving five life sentences for a series of attacks on women in Virginia, including the rape.

In the federal case, Torrez’s lawyers had asked the judge to bar prosecutors from using his convictions in those attacks as “aggravating factors” at sentencing, arguing that the attacks happened after the petty officer’s murder. His lawyers also asked the judge to strike other factors proposed by prosecutors, which range from the charge that he killed the Zion girls to contentions that he viewed violent pornography and tied up a female friend with a dog leash.

U.S. Judge Liam O’Grady put off ruling conclusively on whether he will allow the Zion killings and other alleged acts to be used as factors until after a hearing in December, though he denied the defense lawyers’ call to have the factors immediately stricken.

The judge denied Torrez’s lawyers’ attempt to block prosecutors from using Torrez’s convictions in the attacks in Virginia as factors at sentencing. O’Grady cited case law in ruling that prosecutors seeking to introduce aggravating factors can use crimes committed after the alleged crime that is the basis for the death penalty case.

Those aggravating factors are central to death penalty cases because of case law dictating that murder, absent circumstances adding to the horrific nature of the crime, does not justify execution, said David Bruck, a law professor at Washington and Lee University and an expert on the death penalty.

Even if a defendant has not been convicted of a crime — as Torrez has not been convicted of the Zion murders — prosecutors often can still introduce evidence of the alleged criminal act during the sentencing phase, Bruck said.

Federal authorities have only rarely executed defendants. In the past 35 years, federal courts have executed three men, one of whom was Oklahoma City bomber Timothy McVeigh, according to the Death Penalty Information Center.

Lake County authorities have said they plan to try Torrez in the Zion killings, though a spokesman for federal prosecutors said the death penalty trial will go forward first.

A lawyer for Torrez declined to comment.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.