Gupta seeks calls thrown out of U.S. insider trial

May 8, 2012

CNBC on May 8, 2012 released the following:

“NEW YORK (Reuters) – Former Goldman Sachs board member Rajat Gupta, the most prominent corporate figure indicted in a U.S. crackdown on insider trading, has asked a judge to throw out more than two dozen phone conversations that the government has sought to present as evidence at his trial.

Gupta’s lawyers argued in court papers filed Monday night that as many as 26 recorded calls had nothing to do with allegations that Gupta gave inside tips to his onetime friend, convicted Galleon Group hedge fund manager Raj Rajaratnam.

Gupta’s trial starts on May 21 in U.S. District Court in Manhattan. A onetime head of McKinsey & Co, he is accused of giving Rajaratnam secrets of Goldman and Procter & Gamble board meetings in 2007 and 2008. In addition to sitting on the Goldman board, Gupta also was a director at P&G.

Gupta, 63, has denied the charges, which include five counts of securities fraud and one count of conspiracy. He says he lost money investing with Rajaratnam and that as many as four other Goldman personnel could have tipped off Galleon. Gupta could face up to 25 years in prison if convicted of securities fraud.

Rajaratnam is serving an 11-year prison term, the longest sentence handed down for insider trading in the United States, after being convicted in the same court a year ago. Much of the evidence against him was gathered in FBI wiretaps, revealing a network of contacts providing inside information.

“It appears that the government seeks to reprise the Rajaratnam trial in order to shore up its weak circumstantial case against Mr. Gupta, resorting to evidence about other companies and other alleged conspiracies,” Gupta’s lawyers said in the court papers.

They said the calls “likely are extremely prejudicial, likely to focus the jury’s attention on matters outside the indictment.”

A spokeswoman for the office of the Manhattan U.S. Attorney declined to comment. The office’s prosecutions of insider trading at hedge funds in recent years have led to dozens of people either pleading guilty or being convicted at trial.

U.S. District Judge Jed Rakoff will rule on which evidence may be heard by the jury.

A pre-trial hearing is scheduled for May 16.

Prosecutors say Gupta gave Rajaratnam advance knowledge of a $5 billion investment in Goldman by Warren Buffett’s Berkshire Hathaway Inc at the height of the 2008 financial crisis, Goldman’s surprise fourth-quarter 2008 loss, and P&G’s quarterly earnings in late January 2009. Gupta was also charged with providing non-public information about Smucker’s acquisition of Folgers from P&G in 2008.

The case is USA v Gupta, U.S. District Court for the Southern District of New York, No. 11-907.

(Reporting By Grant McCool; Editing by Martha Graybow, Dave Zimmerman)

(This story corrects Gupta’s age to 63 in the 4th paragraph)”

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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.


FBI sees more hedge fund trading probe informants

February 27, 2012

The Baltimore Sun on February 27, 2012 released the following:

“Grant McCool
Reuters

NEW YORK (Reuters) – The FBI says it has enough informants lined up to keep its investigations of suspected illegal insider trading at hedge funds going for at least five more years.

In a briefing on Monday with reporters at the New York office of the Federal Bureau of Investigation just blocks away from Wall Street, agents who manage squads of investigators likened the probes to penetrating a secret society.

The investigations are building on a mission dubbed “Perfect Hedge” that have led to the prosecutions of multimillionaire Galleon Group hedge fund founder Raj Rajaratnam and dozens of traders, executives and research consultants since late 2009.

“We have cooperators set up for years to come,” said David Chaves, a supervisory special agent for securities and commodities fraud investigations.

He told reporters that the informants include cooperating witnesses — people who have been identified as conducting illegal trading but who have agreed to assist authorities to catch others in the hopes of receiving a lighter sentence — and sources within hedge funds.

“I don’t want to say it’s infinite, but clearly in five years we think we will be working it,” Chaves said.

The Galleon prosecution and other recent insider-trading cases have used secretly-recorded telephone conversations to gather evidence, an investigatory tool traditionally used in organized crime or narcotics cases.

The use of wiretaps sent a chill through the hedge fund industry closed to outsiders and what the FBI calls “undercover resistant.”

Investigators have tracked mobile phone calls, instant messaging and social media to collect evidence.

The FBI says it is alert to new ways in which people may try to exchange information on publicly traded companies to gain an illegal edge.

“We will go to whatever lengths we have to keep up with changes in technology,” said Richard Jacobs, another FBI supervisory special agent for white-collar crime cases.

Both officials emphasized that law enforcement believes that the overwhelming majority of hedge funds and their traders are law-abiding and run their firms responsibly.

A similar briefing was given to reporters in Washington on Monday, where officials discussed the agency’s shift in focus of the past 10 years to financial fraud cases involving larger amounts of money than in the past.

For example, out of the 2,600 mortgage fraud investigations open nationally, 70 percent involve more than $1 million, compared with smaller bank frauds under $25,000 that were previously typical of the caseload.

In New York, the FBI said that to date, out of 64 arrests made in “Perfect Hedge,” 59 people have been convicted or have pleaded guilty. These prosecutions, in partnership with the office of the Manhattan U.S. Attorney and the U.S. Securities and Exchange Commission, have been an important deterrent, the agents said.

Another tool for deterrence is the publicity the cases have generated in the United States and abroad.

To that end, Michael Douglas, the Academy Award-winning star of the 1987 movie “Wall Street,” agreed to a request from the FBI to record a public service announcement.

“In the movie ‘Wall Street’ I played Gordon Gekko, who cheated to profit while innocent investors lost their savings,” Douglas, 67, says in the video recording released on Monday.

“The movie was fiction but the problem is real,” Douglas says in the video. “Our economy is increasingly dependent on the success and integrity of the financial markets. If a deal looks too good to be true, it probably is.””

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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 Crimes Watch 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 and OFAC SDN Sanctions Removal.

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


Gupta Faces New Charges in Insider Trading Case

February 1, 2012

The New York Times on January 31, 2012 released the following:

“BY PETER LATTMAN

Federal prosecutors expanded their case against Rajat K. Gupta on Tuesday, filing a new indictment that broadens what they claim was an insider trading conspiracy between the former director of Goldman Sachs and Raj Rajaratnam.

In a new charge, the government contends that Mr. Gupta called in to a Goldman board meeting in March 2007 from Mr. Rajaratnam’s offices at the Galleon Group hedge fund. Minutes after the call, he leaked secret information about the bank to Mr. Rajaratnam, the government says.

Gary P. Naftalis, a lawyer for Mr. Gupta, denied the new accusations, saying, “As we have stated from the onset, the government’s allegations are totally baseless.”

Last October, the government charged Mr. Gupta with leaking to Mr. Rajaratnam boardroom secrets about Goldman and Procter & Gamble, where he also served as a director. It was a stunning blow to Mr. Gupta, who as the former global head of the consulting firm McKinsey & Company was one of the world’s most respected businessmen.

His trial is set for April 9 before Judge Jed S. Rakoff in Federal District Court in Manhattan. Mr. Rajaratnam, who was convicted by a jury last May of leading a huge insider trading ring, is serving an 11-year prison term.

The new charges seem to counter one of Mr. Gupta’s main lines of defense. At pretrial hearings, Mr. Gupta’s lawyers have said that the relationship between Mr. Gupta and Mr. Rajaratnam, once close friends and business associates, had soured by 2008, which is when the government said that Mr. Gupta leaked corporate secrets to Mr. Rajaratnam. The lawyers attribute the falling out to a $10 million loss on an investment with Mr. Rajaratnam.

By stretching the conspiracy back to 2007, when the markets were still soaring and Galleon’s investments were performing well, the government appears to be countering the defense that Mr. Rajaratnam had fallen out of Mr. Gupta’s good graces.

In addition, the accusation that Mr. Gupta participated in a Goldman board call from Galleon’s offices suggests a coziness between the two men that Mr. Gupta’s lawyers have sought to debunk.

The additional charges against Mr. Gupta involve both Goldman and Procter & Gamble.

In one new count, prosecutors assert that Mr. Gupta, then a Goldman director, participated in a telephone meeting of the board’s audit committee in March 2007 from Galleon. Mr. Gupta heard a preview of Goldman’s earnings, which were strong and set for release the next morning, the government contends. About 25 minutes after the call, Galleon bought at least $70 million worth of Goldman shares, allowing the fund to profit when the bank’s shares rose the next morning.

In the other added charge, the government asserts that Mr. Gupta called Mr. Rajaratnam from Switzerland after participating in a Procter & Gamble board call and leaked information about the company’s coming earnings release.

Separately, Richard J. Holwell, the federal judge who presided over the trial of Mr. Rajaratnam, is retiring from the bench, according to two people with direct knowledge of the matter who requested anonymity because they were unauthorized to discuss it.

The timing of Judge Holwell’s retirement is unclear, but he is expected to return to private practice. He was a partner at the law firm White & Case before becoming a judge in 2003.

Judge Holwell did not respond to a request for comment.”

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To find additional federal criminal news, please read Federal Crimes Watch 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 and OFAC SDN Sanctions Removal.

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


U.S. charges 7 in Alleged $62 million Dell insider-trading case

January 19, 2012

Reuters on January 18, 2012 released the following:

“By Basil Katz and Grant McCool

(Reuters) – U.S. prosecutors charged seven people, described as a circle of friends who formed a criminal club, with running a $62 million insider trading scheme – the latest salvo in a years-long probe of suspicious trading at hedge funds.

The FBI in New York arrested four people on Wednesday and authorities announced previously secret charges against three others, making it one of the largest sweeps in the government’s investigation.

The seven charged worked for five different hedge funds and investment firms and reaped nearly $62 million in illegal profits on trades in Dell Inc, the prosecutors said. That is similar in magnitude to insider trading gains made by Raj Rajaratnam, the convicted founder of the Galleon Group hedge fund.

The charging document told “by now, a sadly familiar story,” Manhattan U.S. Attorney Preet Bharara said at a news conference.

“It describes a circle of friends who essentially formed a criminal club, whose purpose was profit and whose members regularly bartered lucrative inside information,” Bharara said.

Dubbed “Operation Perfect Hedge” by the FBI, the probe has examined suspected sharing of confidential business information with hedge fund managers and analysts. Rajaratnam was arrested as part of the investigation and is now serving an 11-year prison term following his conviction by jury trial last year.

The defendants arrested on Wednesday include Anthony Chiasson, who co-founded the Level Global Investors hedge fund. He turned himself in to the FBI in New York, an agency spokesman said. A U.S. magistrate judge released him on $5 million bail during a brief appearance in Manhattan federal court. Chiasson was not asked to enter a plea, but his lawyer, Gregory Morvillo, said his client denied the charges.

Todd Newman, who headed technology trading for hedge fund Diamondback Capital Management from Boston, was also arrested. Diamondback said in a letter to investors on Wednesday that it had been “proactively assisting” criminal prosecutors and the U.S. Securities and Exchange Commission in the case against Newman and another former employee, Jesse Tortora.

Chiasson and Newman are accused of illegally trading ahead of computer maker Dell’s earnings announcements for the first and second quarters of 2008, netting them profits, respectively, of $57 million and $3.8 million. Another defendant, Jon Horvath, is accused of making an illegal $1 million trade in Dell. Horvath was released on $750,000 bail after a court appearance in New York.

In a parallel civil action, the SEC said investment analyst Sandeep “Sandy” Goyal of Princeton, New Jersey, obtained Dell quarterly earnings information and other performance data from an insider at Dell in advance of earnings announcements in 2008.

Goyal tipped then Diamondback analyst Tortora of Pembroke Pines, Florida, with the inside information, and Tortora in turn tipped several others, leading to insider trades on behalf of Diamondback and Level Global hedge funds.

The fourth man arrested was California-based hedge fund manager Danny Kuo, officials said.

A Dell representative said the company had cooperated with authorities.

The SEC charged Diamondback Capital and Level Global as well as the individuals.

SEC: SYSTEMIC DISHONESTY

At Wednesday’s news conference, SEC Enforcement Division chief Robert Khuzami said the cases, along with Galleon and prosecutions of some so-called expert network firms, “reflect systemic dishonesty and exposes a deeply-embedded level of corruption.”

Newman had been placed on leave of absence from Diamondback in 2010 and subsequently was let go by that firm. Reuters in November reported the government’s interest in Newman.

Chiasson, Newman, Horvath and Kuo were charged in U.S. District Court in Manhattan with one count each of conspiracy to commit securities fraud and securities fraud, according to court documents.

Horvath, who was also arrested on Wednesday, is currently employed at Sigma Capital management, a unit of Steven Cohen’s $14 billion hedge fund SAC Capital, said a person familiar with the case who is not authorized to speak publicly. A spokesman for SAC Capital could not immediately be reached for comment.

Criminal charges also were made public against Goyal, Tortora and Spyridon Adondakis, a former junior analyst at Level Global who all previously pleaded guilty and are cooperating.

Lawyers for the three men could not be reached to comment.

Lawyers for Newman and Kuo also could not be reached to comment.

FBI Assistant Director-in-Charge Janice Fedarcyk said in a statement that the agency has arrested more than 60 people in the crackdown.

“This initiative is far from over,” she said. “If you are engaged in insider trading, what distinguishes you from the dozens who have been charged is not that you haven’t been caught; it’s that you haven’t been caught yet.”

The criminal complaint – signed by FBI agent David Makol, who was assigned to the Galleon investigation – accused Newman and Chiasson of using information obtained by the three cooperators and their network of sources at companies to make illegal trades.

MORE HEADACHES FOR SAC

Horvath’s arrest creates more headaches for fund industry titan Cohen, who has not been accused of wrongdoing.

Federal investigators have been looking into allegations of wrongful trading at SAC for more than four years, Reuters has previously reported, and Horvath’s arrest comes after criminal cases of others who have been tied to SAC.

Donald Longueuil, a one-time SAC portfolio manager, last year was sentenced to 2-1/2 years in prison for insider trading while Noah Freeman, another former SAC portfolio manager, cooperated with the government and pleaded guilty.

The investigations of insider trading began at least eight years ago and were first made public in October 2009. Most of the dozens of defendants charged have pleaded guilty or been convicted.

Many of the cases have been based at least in part on the use of government wiretaps authorized by federal judges. Four hedge fund firms – Level Global, Diamondback, Loch Capital Management and Barai Capital Management – were raided by the FBI in late 2010. Level Global, Loch and Barai have since folded.

Rajaratnam remains the best-known investor implicated in the probe. Rajat Gupta, a former chief of the consulting firm McKinsey & Co and director of both Goldman Sachs Group Inc and Procter & Gamble Co, has been charged with providing illegal tips to Rajaratnam. He is fighting those charges.

The case is U.S.A v. Todd Newman et al, U.S. District Court for the Southern District of New York, No. 12-0124.”

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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

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To find additional federal criminal news, please read Federal Crimes Watch 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 and OFAC SDN Sanctions Removal.

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


Judges Rule Galleon Chief Must Go to Prison

December 2, 2011
Raj Rajaratnam

The New York Times on December 1, 2011 released the following:

“BY PETER LATTMAN

A federal court has denied Raj Rajaratnam’s request to remain free on bail while he appeals his insider-trading conviction, a ruling that forces the fallen hedge fund manager to report to prison on Monday.

Mr. Rajaratnam, the former head of the hedge fund Galleon Group, is set to serve his 11-year sentence — the longest prison term to date for insider trading — in a federal prison in Ayer, Mass.

In a last-ditch try to keep their client out of jail pending his appeal, his lawyers appeared at the United States Court of Appeals for the Second Circuit in Lower Manhattan on Wednesday. They argued that his case raised substantial questions of law that mandated his release until the appeal was resolved.

In a short order issued Thursday afternoon, the three-judge panel, without explanation, denied Mr. Rajaratnam’s request. During the hearing, the judges had expressed concern that Mr. Rajaratnam was a flight risk and could have an incentive to flee to his native Sri Lanka.

“Wouldn’t he rather be living as a centimillionaire in his own country rather than as a convict in a jail?” Judge Dennis Jacobs asked Patricia A. Millett, a lawyer for Mr. Rajaratnam, at the hearing on Wednesday.

Beginning Monday, Mr. Rajaratnam will be living at the Federal Medical Center Devens in Massachusetts. Mr. Rajaratnam, 54, was assigned there because of his health problems. He has diabetes that could lead to eventual kidney failure, according to medical records submitted to the court.

The Devens prison is located about 200 miles from his luxury apartment on Sutton Place in Manhattan, where he lives with his wife and three children.

Mr. Rajaratnam’s surrender to the Bureau of Prisons is a milestone in the government’s most prominent insider trading prosecution since the 1980s. Federal authorities arrested Mr. Rajaratnam in October 2009, charging him with orchestrating a multiyear insider trading conspiracy involving senior corporate executives, management consultants and other hedge fund managers.

In May, a jury found him guilty of securities fraud and conspiracy. Between the criminal case and a parallel civil proceeding brought by the Securities and Exchange Commission, Mr. Rajaratnam has been ordered to pay about $157 million in fines, the largest penalty assessed so far in an insider trading case.

The pursuit of insider trading by federal prosecutors appears to be continuing unabated. Before year end, the government is expected to bring a new set of insider trading charges against traders at Diamondback Capital Management and Level Global Investors, according to a person with direct knowledge of the case who spoke on the condition of anonymity because he was not authorized to discuss it publicly.

The new cases are based in part on wiretapped conversations between the traders and illegal tipsters, this person said. Dozens of secretly recorded conversations between Mr. Rajaratnam and his accomplices also formed the core of the evidence against him at trial.

They will also form the core of Mr. Rajaratnam’s appeal, which could take as long as a year to resolve. His lawyers will argue that the government improperly obtained judicial authorization to wiretap his telephone, violating the law and Mr. Rajaratnam’s constitutional rights.”

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

Federal Crimes – Appeal

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To find additional federal criminal news, please read Federal Crimes Watch 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 and OFAC SDN Sanctions Removal.

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


Prosecutors Seek as Much as 24-1/2 Years for Raj Rajaratnam

August 10, 2011

Reuters on August 10, 2011 released the following:

“By Andrew Longstreth

(Reuters) – Prosecutors asked a federal judge to sentence Raj Rajaratnam to as much as 24-1/2 years in prison, calling the Galleon Group hedge fund founder “arguably the most egregious violator” of insider trading laws ever to be caught.

Rajaratnam, who was convicted of insider trading in May, should receive a sentence of between 235 to 293 months, or roughly 19-1/2 to 24-1/2 years, said prosecutors in a court filing Tuesday evening.

“Raj Rajaratnam’s criminal conduct was brazen, arrogant, harmful, and pervasive,” said the filing. “He corrupted subordinates. He corrupted entire markets. Day after day, month after month, year after year, Rajaratnam operated as a billion-dollar force of deception and corruption on Wall Street.”

Prosecutors argued that the sentence they seek, which they said is in accordance with the federal guidelines, is needed to reflect the seriousness of Rajaratnam’s criminal activity and to “deter others — particularly in the hedge fund and money management world from engaging a crime that is far too rampant.”

A spokeswoman for Rajaratnam declined to comment on the government’s filing.

In an earlier filing on Tuesday, lawyers for Rajaratnam sought a sentence “substantially below” what U.S. guidelines recommend, saying a long prison term would be tantamount to a death sentence.

Lawyers for the 54-year-old Rajaratnam said such a sentence would be unfair and overstate the seriousness of the offense.

“Mr. Rajaratnam’s failing health and the unique constellation of ailments ravaging his body mean, quite simply, that a lengthy period of imprisonment will constitute a death sentence and result in the permanent and final separation of Mr. Rajaratnam from his family,” said the filing.

U.S. District Judge Richard Holwell is expected to sentence Rajaratnam on September 27 and need not follow the federal guidelines.

In the memo, lawyers for Rajaratnam also sought to portray him as a philanthropist who has made a positive contribution to society. They noted he had donated more than $45 million of his personal wealth to charitable causes.

They also pointed to letters provided by Rajaratnam’s friends, family, business colleagues and others that they say “describe a man remarkable for his kindness, quiet manner, lack of pretense, and boundless generosity.”

One letter they cited came from a childhood friend from Sri Lanka, where Rajaratnam was born as the second oldest of five children and the son of a business executive and homemaker.

The letter said that as a boy Rajaratnam would help families with household chores in exchange for a monetary contribution to charities he was involved with.

“I remember my mother looking out of the window and feeling amazed by this boy born with a silver spoon in his mouth working our lawn in sweltering Colombo heat to raise a few rupees for his cause,” the letter said.

Rajaratnam’s lawyers argued that the evidence submitted to the court “bears scant resemblance to the greedy criminal kingpin the government attempts to portray.”

Rajaratnam was found guilty on five counts of conspiracy and nine counts of securities fraud in May.

Prosecutors accused him of trading on inside information from corporate executives, traders and others, resulting in $63.8 million of illegal profit.

The case is USA v Raj Rajaratnam et al, U.S. District Court for the Southern District of New York, No. 09-01184.”

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 extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN List Removal.

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

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