Seattle mansion dwellers charged in alleged welfare fraud

May 9, 2012 on May 9, 2012 released the following:


A Seattle couple accused of drawing welfare while living in a $1.2 million Lake Washington mansion has been charged with defrauding the government and is expected to plead guilty.

Accusing the couple of stealing more than $115,000 meant to subsidize housing for the poor, federal prosecutors have filed felony theft charges against chiropractor David Mark Silverstein and Lyudmila Shimonova.

Both are expected to appear in U.S. District Court next week to answer the felony charge of theft of government funds, which was filed by information Tuesday. Attorneys for both defendants said Tuesday their clients will be pleading guilty.

Noting that the thefts have cost Silverstein personally and professionally, attorney David Allen said his client will be paying back twice the amount of government assistance prosecutors allege the couple received.

“He’s very sorry for what he did,” said Allen, an attorney with the Seattle firm Allen, Hansen & Maybrown. “He takes full responsibility.”

Shimonova’s attorney Michele Shaw said her client is very sorry for the thefts and will be taking responsibility for her actions.

Federal investigators raided the couple’s Lake Washington home in late November looking for evidence that they’ve bilked government assistance programs for more than a decade.

At the time, investigators claimed Shimonova received $135,000 in federal housing assistance benefits that were paid to her “landlord” – Silverstein, described as her husband in court documents – for rent on the Island Drive South home. Shimonova was also alleged to have collected additional money through a federal program for destitute disabled Americans and state programs meant to feed needy families.

“All of these programs are need-based programs, meaning that a person can qualify for the programs only if he or she demonstrates that his or her income or resources fall below a certain level,” a Department of Housing and Urban Development special agent previously told the court. “The investigation has developed substantial evidence that the subjects defrauded theses programs by misrepresenting and concealing material information.”

Attorneys for the government previously filed a civil lawsuit aimed at recovering money they claim was taken from government coffers by fraud. That lawsuit remains ongoing; if the government prevails, Silverstein and Shimonova could be ordered to pay three times the amount of money they received in benefits.

The criminal charge was filed against the couple on Tuesday. Neither has been jailed in the case.

In November, HUD investigators and others searched the couple’s Island Drive South home, located on the shore of Lake Washington in Seattle’s Dunlap neighborhood. According to court documents, agents seized financial documents, Nordstrom receipts and framed photos of the couple.

Apparently following up on documents seized at the home, agents received a second search warrant and seized the couple’s safe deposit box.

In a search warrant affidavit, the HUD special agent noted Silverstein and Shimonova took numerous international trips together while Shimonova was collecting substantial amounts of money in government assistance. Among their destinations were the Dominican Republic, Moscow and Paris.

Government attorneys claim in civil filings that Shimonova had been receiving $1,272 a month in housing assistance payments since 2003. Those payments allegedly went to pay rent to her landlord, Silverstein.

In the civil lawsuit, Assistant U.S. Attorneys Harold Malkin and Kayla Stahman contended Shimonova told HUD officials that only she and her two children lived on the property, and that her total assets were less than $5,000. Agents watching the property noted that Silverstein’s Jaguar sedan was often parked at the home, and that his purported home address was actually his chiropractic clinic.

Beyond that, though, the prosecutors noted Silverstein and Shimonova are very likely married, despite claims to the contrary made to HUD. Silverstein describes himself as “happily married with two children” on his business website.

Since 1995, Shimonova has also been receiving disability payments meant to assist Americans with monthly incomes of less than $675, the assistant U.S. attorneys continued. Shimonova is alleged to have failed to disclose several savings accounts, holding tens of thousands of dollars, to which she had access.

At the same time, Shimonova was drawing food stamps and support checks from a program meant to keep poor families from starving, the government attorneys continued. She is also alleged to have received medical care through Medicaid.

Silverstein and Shimonova are expected to appear before U.S. District Judge Ricardo Martinez on Wednesday. Neither has been jailed.”


Douglas McNabb – McNabb Associates, P.C.’s
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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 or at one of the offices listed above.

Federal Judge Slams FBI, Prosecutors For Misconduct in Bribery Case

December 6, 2011
FBI Seal

Forbes on December 6, 2011 released the following:

“Daniel Fisher, Forbes Staff

A friend in Texas sent me this scorching ruling by a federal judge in California, throwing out the Foreign Corrupt Practices Act convictions of a couple of utility-equipment executives because of prosecutorial misconduct and downright false testimony by an FBI agent.

The 41-page ruling by U.S. District Judge Howard Matz in Los Angeles, issued Dec. 1, doesn’t spare criticism of anyone involved — including the judge himself. Stuck in the crossfire of prosecution and defense motions during the bitterly contested five-week trial, Motz says, he missed “the proverbial forest for the trees.”

“There were so many motions that it was difficult to step back and look into whether what was going on reflected not isolated acts but a pattern of invidious conduct.”

The facts against manufacturing executives Keith E. Lindsey and Steve K. Lee of Lindsey Manufacturing were ugly, but then doing business in Mexico often is. According to the Justice Department, the men were frustrated about losing a contract to state-owned Mexican utility Comisión Federal de Electricida, so they hired the middleman they suspected had helped a rival company win the business. That firm, dubbed Grupo in the indictment, was run by Enrique and Angela Aguilar.

Over time Lindsey paid Grupo $5.9 million in “commissions” at an eyebrow-raising 30% rate. Money from Grupo’s account was used to pay for a $297,000 Ferrari, a luxury yacht, and $29,000 in private-school bills to the benefit of some CFE executives. A Lindsey bookkeeper testified she changed the accounting entry for the commissions to 15% in what prosecutors said was evidence Lee knew Grupo was a front.

A jury convicted Lindsey, Lee and the company on all counts on May 10, with Assistant Attorney General Lanny A. Breuer crowing “Lindsey Manufacturing is the first company to be tried and convicted on FCPA violations, but it will not be the last.”

But then things turned ugly for the prosecution. In Matz’s retelling this is a case of the government turning a sketchy, circumstantial case into a convincing one by manipulating the evidence. Those private-school tuition payments above? The same prosecutor had earlier accused a Texas subsidiary of European manufacturing conglomerate ABB of paying them, a conflict the government shrugged off as inconsequential.

Defense lawyers smelled a rat in the way the government linked the ABB case to theirs. In the Texas case ABB paid $28.5 million in fines for routing bribes it dubbed a “Third World Tax” through another Aguilar-linked entity called Sorvill. The same prosecutor, Nicola Mrazek, was in charge of both cases.

The Feds indicted the Aguilars and arrested Angela when she was across the border in Texas. Then they indicted Lindsey and its top executives in October 2010, based partly on evidence obtained in a search of Lindsey offices. The search warrant included an affidavit by FBI agent Farrell Binder stating that Lindsey had paid Sorvill, the front company in the ABB case.

Oops. The defense later proved that statement was false, and after a long delay got its hands on the string of 14 draft affidavits showing the first 12 versions didn’t have that claim. Agent Susan Guernsey compounded the problem by testifying twice to a grand jury about the nonexistent payments to Sorvill, as well as saying Lee executives took suspicious actions in 2006 in response to an IRS audit they didn’t learn about until later. She also testified that “pretty much all” the money in the second Aguilar-linked company, Grupo, came from Lee when in an earlier affidavit she’d accurately pegged the amount at 70% (leaving room for somebody else to provide the cash allegedly used to bribe Mexican officials).

Defense lawyers pressed for the documents to back up their suspicions but only got them in April 15 of this year, 10 days into the trial.

Matz, in his decision throwing out the case, was especially harsh with Guernsey, saying her testimony “does not necessarily establish that she knowingly committed perjury. Perhaps she was sloppy, or lazy, or ill-prepared.”

“In the Court’s considered opinion, once the prosecutors secured the First Superseding Indictment and certainly by the time they were gearing up to present their case at trial, they concluded not only that Guernsey would be an exceedingly poor witness – – as she turned out to be – – but also that its investigation was terribly flawed.”

Matz didn’t go as far as to say the defendants were “entitled to a finding of factual innocence; they are not.” They are entitled to dismissal, he said, to relieve them from “further anguish and anxiety” — and teach the government a lesson.

The Supreme Court has ruled that prosecutors are not typical courtroom advocates but representatives “of a sovereign whose obligation to govern impartially is as compelling as its obligation to govern at all,” Matz said. “He may prosecute with earnestness and vigor – – indeed, he should do so. But, while he may strike hard blows, he is not at liberty to strike foul ones.”

“In this Court’s experience, almost all of the prosecutors in the Office of the United States Attorney for this district consistently display admirable professionalism, integrity and fairness. So it is with deep regret that this Court is compelled to find that the Government team allowed a key FBI agent to testify untruthfully before the grand jury, inserted material falsehoods into affidavits submitted to magistrate judges in support of applications for search warrants and seizure warrants, improperly reviewed e-mail communications between one Defendant and her lawyer, recklessly failed to comply with its discovery obligations, posed questions to certain witnesses in violation of the Court’s rulings, engaged in questionable behavior during closing argument and even made misrepresentations to the Court.””


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 or at one of the offices listed above.