S.E.C. Told to Share Notes in Insider Trading Case

March 28, 2012

The New York Times on March 27, 2012 released the following:

“BY PETER LATTMAN

A federal judge has ordered Securities and Exchange Commission lawyers to turn over their notes to federal prosecutors handling the criminal case against Rajat K. Gupta, a former director of Goldman Sachs.

The ruling was part of a flurry of pretrial orders from Judge Jed S. Rakoff, who is presiding over the case.

Mr. Gupta, who is charged with leaking Goldman’s boardroom secrets to his friend, the convicted hedge fund manager Raj Rajaratnam, is scheduled to go on trial May 21.

Among the more significant orders, Judge Rakoff said federal prosecutors must review the S.E.C.’s notes about 44 interviews of witnesses during its investigation of Mr. Gupta and disclose any exculpatory evidence to the defense. Federal prosecutors in the United States attorney’s office in Manhattan, who jointly conducted the 44 interviews with the S.E.C., argued that they had no obligation to review the S.E.C.’s notes because the two investigations were separate.

Judge Rakoff disagreed with the government’s position.

“That separate government agencies having overlapping jurisdiction will cooperate in the factual investigation of the same alleged misconduct makes perfect sense; but that they can then disclaim such cooperation to avoid their respective discovery obligations makes no sense at all,” Judge Rakoff wrote.

The S.E.C. and the Justice Department have long run parallel investigations, but the line between them can often become blurred. Judge Rakoff noted that there was a constitutional duty for prosecutors to disclose any exculpatory evidence — called Brady material — to the defense, regardless of whether the notes came from the S.E.C.

“To hold that these memoranda were not created as part of a joint factual investigation would make a mockery of the ‘joint investigation’ standard as applied to the defendant’s constitutional right to receive all information the government has available to it that tends to show his innocence,” Judge Rakoff wrote.

In other rulings, Judge Rakoff ordered that Lloyd C. Blankfein, the chief executive of Goldman Sachs, must sit for an additional two hours of depositions to be taken by Mr. Gupta’s lawyers. Mr. Blankfein was deposed for seven hours last month, and is expected to be a witness at Mr. Gupta’s trial.

The dispute over Mr. Blankfein’s testimony arose when, during the February deposition, Mr. Gupta’s lawyer asked Mr. Blankfein whom he had met with to prepare for the deposition. He responded that he had met with both federal prosecutors, S.E.C. lawyers and an F.B.I. agent. When Mr. Gupta’s lawyer asked Mr. Blankfein what the government asked at these meetings, the S.E.C. objected, citing work product protections.

Judge Rakoff ruled that Mr. Blankfein must answer these questions.

“By asking Blankfein what topics he recalls were discussed, what questions he was asked and what documents he was shown, defendants seek to discover how the preparation sessions affected Blankfein’s testimony, and do not demonstrate a mere naked attempt to obtain the S.E.C.’s and the U.S.A.O.’s legal opinions and strategy,” the judge wrote.

Judge Rakoff also issued several rulings that went against Mr. Gupta. He denied his lawyers’ motion to suppress the use of wiretaps at trial and to dismiss three of the counts in the government’s complaint that were claimed to be either vague or duplicative.

On the wiretap issue, Judge Rakoff said: “The simple truth is that, in both this and numerous other cases, insider trading cannot often be detected, let alone successfully prosecuted, without the aid of wiretaps.””

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

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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 C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


U.S. presents evidence to grand jury in Avon case: report

February 13, 2012

Reuters on February 13, 2012 released the following:

“(Reuters) – Federal prosecutors have presented evidence to a grand jury against U.S. executives of cosmetics company Avon Products (AVP.N), in a case that probes whether those executives broke foreign bribery laws, the Wall Street Journal said.

In 2008, Avon said that it had started an internal investigation into whether it had violated the Foreign Corrupt Practices Act, which bars U.S.-linked companies from paying bribes to officials of foreign governments.

U.S. authorities are studying a 2005 internal audit report by the company that concluded Avon employees in China may have been bribing officials in violation of the Foreign Corrupt Practices Act, the Journal said, citing three people familiar with the matter.

The federal authorities are probing whether current or former executives ignored the audit’s findings or actively took steps to conceal the problems, both potential offences, the newspaper said.

“We’re not aware that a federal grand jury is investigating this,” an Avon spokeswoman told the Journal.

She declined to confirm to the paper whether there had been an audit in 2005 and declined to discuss how executives handled any such audit.

Avon could not immediately be reached for comment by Reuters outside regular U.S. business hours.

In January, Avon’s former CFO Charles Cramb left the company amidst a probe initiated by the U.S. Securities and Exchange Commission.

(Reporting by Sakthi Prasad; Editing by Muralikumar Anantharaman)”

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Douglas McNabb – McNabb Associates, P.C.’s
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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.


A Quick Look At How The FBI Turns Insider Traders Into Informants

January 20, 2012
FBI
Wikimedia Commons

Business Insider on January 19, 2012 released the following:

“Yesterday, three people were arrested and seven people were charged in a hedge fund insider trading scandal that prosecutors are calling, “the circle of friends.”

At the press conference U.S. Attorney General Preet Bharara showed an infographic depicting the circle of four guys in New York, Boston, and San Francisco sharing information about Dell, and then passing that knowledge up to their supervisors at hedge funds Diamondback Capital and Level Global.

It was a “tight knit circle of greed,” said Bharara, where these men got an “illegal inside edge over law abiding investors.”

Okay, tight knit. But if it’s so tight knit, what does the FBI do to get inside?

Business Insider spoke to attorney Jeffrey Smith, a partner at DeCotiis, FitzPatrick & Cole. A former assistant U.S. Attorney, Smith is now in private practice specializing in the defense of individuals in cases against the Department of Justice, the Securities and Exchange Commission and the Commodity Futures Trading Commission.

In short, white collar crime.

“The government’s got a good run here,” said Smith. In this case, “they probably have cooperating witnesses, tapes…” all a defense lawyer can do is go through discovery and try to find the holes in the government’s evidence.”

It’s a tough job that becomes a lot tougher if the FBI has flipped someone on the inside. That’s what happened in this case, as two analysts from the hedge funds (Spyridon “Sam” Adondakis and Jesse Tortora), and the man who was passing them information from Dell (Sandeep Goyal) were/are cooperating with authorities.

Smith explained how that might happen.

“A pair of agents might show up at your house really early in the morning or late at night when no one is around,” he said. “They’ll use a combination of threats and inducements… They’ll say there’s overwhelming evidence against you. Overwhelming force is their first technique.”

Basically, the agents will say, we have such and such information on you, but if you’re willing to help us out we can help you. They may also say they have information on a friend of family member’s insider trading activity, though that’s less common.

Smith also said that the fact that prosecutors are revealing the identities of informants means that the government has probably gotten all the useful information they can out of them.

On the other hand that doesn’t mean that all the information connected to this case is out. There could be more informants who remain unknown because they still have information to share. Specifically, in this case, we still don’t know who was passing Goyal information from inside of Dell — that could be nothing, but its an example of a big, important question that remains unanswered here. When reporters asked about that at the press conference, Bharara just said he wasn’t sharing any information beyond what could be found in the complaint.

“There’s every indication that the government has more in the pipeline,” said Smith. “Things have changed a lot. Five or ten years ago it (insider trading) was little prosecuted, sentences were like tax offenses. I don’t think they (insider traders) have illusions about that anymore.””

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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 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.


Executives Facing US Accusations Under FCPA May Be Encouraged to Fight Charges

January 13, 2012

Bloomberg Businessweek on January 13, 2012 released the following:

“(Updates with SEC broker fiduciary rule and Hong Kong ‘professional investor’ in Compliance Policy, French stock-ADRs in Compliance Action, Alliance One in Courts, Keneally and Kerr in Interviews and Vaughan and Kim Hak Heon in Comings and Goings/Notable Passings.)

Jan. 13 (Bloomberg) — Executives facing trial in U.S. courts over accusations of bribing foreign officials may be encouraged to fight charges as prosecutors regroup after two courtroom setbacks and await a verdict in their largest overseas corruption probe targeting individuals.

One of two cases hailed by the government as milestones in its enforcement of the Foreign Corrupt Practices Act was dismissed last year by a judge who said the jury verdict convicting two men at an electricity tower company of bribing Mexican officials was tainted by prosecutor misconduct in “a sloppy, incomplete and notably over-zealous investigation.”

In the first prosecution under the FCPA based on a sting operation, a judge declared a mistrial for four of 22 defendants accused of participating in a fake $15 million weapons deal involving Gabon. A separate trial is under way for a second group of defendants.

The 2011 outcomes will make individual defendants in FCPA cases more confident in contesting charges. This is so in particular because they may face long prison terms under the plea deals the Justice Department offers, even as corporations continue to self-report and settle, said Philip Urofsky, a former FCPA prosecutor who now defends cases at Shearman & Sterling LLP.

In a crackdown on overseas bribery that started during the Bush administration, the government settled 57 cases against companies from 2005 through 2011 without trial, reaping $4.1 billion for the U.S. treasury, according to Justice Department data. A push to prosecute more individual defendants during the same period has produced mixed results, with some beating charges outright and others getting less punishment than prosecutors sought.

Laura Sweeney, a spokeswoman for the Justice Department, said the government has had “great success” against individuals since increasing its enforcement actions in 2009.

The 1977 law bars companies or individuals regulated or based in the U.S. from paying bribes to foreign officials to win business. Foreign companies and nationals also can be prosecuted if their corrupt acts were committed in the U.S.”

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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 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.


Manhattan U.S. Attorney Announces Guilty Plea of Former Controller at Bernard L. Madoff Investment Securities LLC

December 20, 2011

The Federal Bureau of Investigation (FBI) on December 19, 2011 released the following:

“Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ENRICA COTELLESSA-PITZ, the former Controller at Bernard L. Madoff Investment Securities LLC (“BLMIS”), pled guilty in Manhattan federal court to a fourcount Superseding Information charging her with conspiracy, as well as substantive counts of falsifying books and records of a broker-dealer, falsifying books and records of an investment adviser, and making false filings to the Securities and Exchange Commission (“SEC”). COTELLESSA-PITZ pled guilty before U.S. District Judge Laura Taylor Swain. As part of her guilty plea, COTELLESSA-PITZ has agreed to cooperate with the Government in its ongoing investigation of the fraud that occurred at BLMIS.

According to the Superseding Information, plea agreement and other documents filed in connection with the case:

COTELLESSA-PITZ was employed at BLMIS from 1978 through December 11, 2008. In 1998, COTELLESSA-PITZ became the Controller of BLMIS. Beginning in the late 1990s until the collapse of BLMIS in 2008, COTELLESSA-PITZ, allegedly along with other coconspirators, created false and misleading entries in the books and records of BLMIS and in reports filed with the SEC. The false and misleading entries were used to disguise transfers of funds from the BLMIS Investment Advisory (“IA”) business to BLMIS’s Market Making and Proprietary Trading operations. The transfers made the Market Making and Proprietary Trading operations of BLMIS appear profitable when they were not.

In addition, COTELLESSA-PITZ, allegedly along with other co-conspirators, created false and fraudulent documents that were given to the SEC in connection with its audit of BLMIS. COTELLESSA-PITZ, and allegedly other co-conspirators, also created false and fraudulent documents in connection with tax audits of Bernard L. Madoff.

* * *

COTELLESSA-PITZ, 53, faces a statutory maximum sentence of 50 years in prison. The statutory maximum sentences for each of the charged offenses are set forth in the attached chart. COTELLESSA-PITZ is also subject to mandatory restitution and criminal forfeiture and faces criminal fines up to twice the gross gain or loss derived from the offense. Pursuant to the agreements entered into with the Government, COTELLESSA-PITZ has agreed to forfeiture of more than $97 billion. The net proceeds from the sale of the forfeited property will be used to compensate victims of the fraud, consistent with applicable Department of Justice regulations.

Following the guilty plea, Judge SWAIN released COTELLESSA-PITZ on a $2.5 million bond on the condition that the bond be co-signed by eight financially responsible individuals and secured by $800,000 in cash and property. In addition, COTELLSSA-PITZ’s travel is restricted to the Southern and Eastern Districts of New York. COTELLESSA-PITZ has surrendered her passport.

Judge Swain set a sentencing date for COTELLESSA-PITZ of June 22, 2012.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Securities and Exchange Commission and the Internal Revenue Service, Criminal Investigations Division for their assistance.

These cases were brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Lisa A. Baroni, Julian J. Moore, Arlo Devlin-Brown, Barbara A. Ward, and Matthew L. Schwartz are in charge of the prosecution.”

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

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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. Inquiry Grows Over Olympus Payout

October 28, 2011

The New York Times on October 27, 2011 released the following:

“BY BEN PROTESS AND HIROKO TABUCHI

Federal authorities are intensifying an investigation into the large fees that the Japanese company Olympus paid to an obscure American brokerage firm. The Securities and Exchange Commission and other regulators have now begun their own inquiries into the $687 million payout, according to people briefed on the inquiries.

The Federal Bureau of Investigation opened the case only two weeks ago, but the inquiry has now grown to touch nearly every corner of the federal law enforcement arsenal. Federal prosecutors in Manhattan have jumped on the case, while the S.E.C. has begun an examination of the now-defunct brokerage firm, Axes America.

An S.E.C. spokesman declined to comment.

While the focus of the investigation is not yet clear, securities lawyers speculate that investigators will potentially examine whether the steep fees were kickbacks to Olympus officials involved in the deal. So far, it is believed that federal authorities are possibly interested in whether the fees amounted to money laundering or other illicit acts. A spokesman for the F.B.I. in New York declined to comment.

The F.B.I. began its examination soon after Olympus fired its chief executive, who had confronted the company’s chairman about the suspect payouts. Japanese regulators are now looking into the matter as well.

The questions arose from Olympus’s 2008 takeover of a British medical device company, the Gyrus Group. Olympus, which runs both a medical equipment business and a less lucrative digital camera business, has described the $687 million payout as a fee to Axes America for advising on that deal.

But when Olympus announced the acquisition, it said only that Perella Weinberg, an independent investment bank, advised on the deal. The company made no mention of Axes America, according to a recent PricewaterhouseCoopers report.

By any measure, the fees were eye-popping. The funds amounted to 36 percent of the value of the Gyrus deal, the PricewaterhouseCoopers report said. Olympus later doled out the bulk of the $687 million to a Cayman Islands company linked to Axes, a firm called Axam Investments.

At a news conference in Tokyo on Thursday, the newly installed president of Olympus, Shuichi Takayama, defended the funds paid to Axes and Axam, saying that Olympus had determined that the fee “would fully pay off.” He said the advisers were hired to give wide-ranging guidance to Olympus, including identifying potential takeover targets in the medical field.

“Olympus sought acquisitions as part of a strategy to find new growth areas and reduce our dependency on endoscopes,” Mr. Takayama said. “These acquisitions were part of that effort.”

Mario Takeno, an official at Japan’s securities watchdog, the Securities and Exchange Surveillance Commission, told a parliamentary committee on Thursday that the agency would “closely watch” the findings of a third-party committee set up by Olympus to investigate the payments.

“It’s clearly worth investigating,” said J. Mark Ramseyer, a professor of Japanese legal studies at Harvard Law School, who added that the fees were “bizarrely huge.” While the PricewaterhouseCoopers report did not identify “improper conduct,” it said that “given the sums of money involved and some of the unusual decisions that have been made, it cannot be ruled out at this stage.”

Axes America itself presents a curious case.

Just weeks after Olympus closed the deal for Gyrus, the firm shuttered its doors. And after the affiliated Cayman Islands company, Axam Investments, scooped up its portion of the bounty, it too shut down.

It was a peculiar end for both firms. In its 10-year history, Axes America never drew much notice on Wall Street. The firm, run by a longtime Japanese banker, Hajime Sagawa, generated mediocre revenue and never drew the ire of regulators.

Mr. Sagawa could not be reached for comment. A relative in Boca Raton, Fla., said he had planned to return from a business trip late last week, potentially to meet with the F.B.I. But the relative said on Wednesday that Mr. Sagawa had not yet returned to Florida. He has not been accused of any wrongdoing.

Michael C. Woodford, the recently fired Olympus chief, who is British, was in New York on Wednesday meeting with F.B.I. agents and federal prosecutors. He declined to provide specifics of the meeting. As Mr. Woodford flew to New York, Olympus fell deeper into turmoil. On Wednesday, the company’s chairman, Tsuyoshi Kikukawa, resigned.

At Thursday’s news conference, the executive vice president, Hisashi Mori, did most of the talking.

Mr. Mori said he had been introduced to the advisers by a person in Japan whom he declined to name. The advisers had worked with Olympus in an informal capacity for no fee since around 2004 before being formally hired two years later ahead of the 2008 Gyrus deal, he said.

An official said there had been no discussion of Mr. Woodford’s concerns over the acquisitions before the board voted to oust him.

Tensions flared at the news conference, as reporters berated Mr. Takayama and his colleagues for long-winded responses. “What is the point of this press conference if you are not going to address the main issues?” one reporter asked.”

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

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

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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.


Former McKinsey CEO Gupta pleads not guilty to insider-trading charges

October 27, 2011
Rajat K. Gupta
Image from The Washington Post

The Washington Post on October 26, 2011 released the following:

“By David S. Hilzenrath, Published: October 26

From Kolkata, India, Rajat K. Gupta rose to the heights of international business, leading the global consulting firm McKinsey & Co. and serving on the boards of companies such as Goldman Sachs, Procter & Gamble and the parent of American Airlines.

But on Wednesday, Gupta turned himself in at the New York office of the FBI, where he was fingerprinted, photographed and subjected to a DNA swab before going to court to face criminal charges that he participated in an insider trading scheme.

Gupta, 62, became the most prominent figure charged in a federal crackdown on insider trading that recently led to an 11-year prison sentence for his alleged co-conspirator, hedge fund billionaire Raj Rajaratnam.

The indictment alleges that Gupta divulged boardroom secrets to Rajaratnam, who then traded on them.

Gupta pleaded not guilty and was released. He was given until Nov. 11 to surrender his passport and post a $10 million bond secured by his Connecticut home.

Gupta’s attorney, Gary P. Naftalis, issued a statement saying that the charges “are totally baseless.”

“The facts in this case demonstrate that Mr. Gupta is innocent of any of these charges and that he has always acted with honesty and integrity,” Naftalis said.

Gupta had been under a cloud for months. The government declared him an unindicted co-conspirator during its prosecution of Rajaratnam, and shortly before Rajaratnam’s trial began, the Securities and Exchange Commission charged him administratively, laying out the allegations against him.

After losing a procedural battle, the SEC withdrew the administrative case in August, but on Wednesday it filed a civil suit against Gupta that paralleled the criminal charges.

According to the government, the conspiracy played out in 2008 and 2009. Sometimes, Gupta passed secrets to Rajaratnam, founder of Galleon Management, so quickly that his tips “could be termed instant messaging,” Janice K. Fedarcyk, assistant director in charge of the FBI’s New York office, said in a statement.

For example, on Sept. 23, 2008, as Wall Street teetered on the brink of collapse, Gupta participated by phone in a meeting in which the Goldman Sachs board approved a $5 billion infusion from Warren Buffett’s Berkshire Hathaway. At about 3:54 p.m., approximately 16 seconds after Gupta disconnected his phone from the Goldman call, his assistant phoned Rajaratnam and patched in Gupta, the indictment said. Gupta then told Rajaratnam about the Berkshire investment, the government said.

With two minutes to spare before the market closed, Rajaratnam then caused some of Galleon’s funds to buy Goldman shares, the government said. Goldman announced the deal with Berkshire after the market closed, and the next day Galleon sold the Goldman shares at an illegal profit of about $840,000, the government charged.

Similarly, in October 2008, Gupta and other Goldman directors were told that the Wall Street firm had lost almost $2 per share that quarter in what would be the first quarterly loss in Goldman’s history, the government said. Approximately 23 seconds after disconnecting from that call, Gupta called Rajaratnam, the indictment said. By selling Goldman shares, Galleon funds avoided millions of dollars of losses, the government said.

Entrusted with confidential information, Gupta “became the illegal eyes and ears in the boardroom for his friend and business associate,” Preet Bharara, U.S. attorney for Manhattan, said in a statement.

Naftalis, the defense lawyer, said that there were legitimate reasons for Gupta’s communications with Rajaratnam and that the accusations “are based entirely on circumstantial evidence.”

Rajaratnam was convicted largely on the basis of government wiretaps, and verbatim excerpts of secretly recorded calls have figured prominently in other recent insider trading cases. The Gupta indictment does not explicitly cite recordings of Gupta passing inside information to Rajaratnam.

But in a July 2008 call captured by the government, Gupta talked to Rajaratnam about a Goldman board discussion and a rumor that Goldman might try to buy a commercial bank, according to a transcript.

“This was a big discussion at the board meeting,” Gupta allegedly said, adding that it was a “divided discussion in the board.”

Gupta’s fall from the top of the business world followed a dramatic rise.

In a 1994 interview with Business Today, the native of India said his father was a journalist and freedom fighter who had been jailed many times, and his mother taught at a Montessori school. He went from the Indian Institute of Technology in Delhi to Harvard Business School, where his classmates were surprised to learn he earned excellent grades.

“I never said much, you know,” he told the interviewer.

At age 45, he was running McKinsey, a post he held from 1994 to 2003.

He served on a board of advisers to the dean of Harvard Business School and on a similar panel at MIT’s Sloan School of Management. He chaired an advisory panel for the Bill and Melinda Gates Foundation, and he became a special adviser to the secretary general of the United Nations.

Gupta’s trial is scheduled to begin in April.”

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

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

————————————————————–

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.


Henry Fecker, III, and Steven Steiner Indicted by a Federal Grand Jury in a Fifty-Four Count Federal Indictment

August 25, 2011

The U.S. Attorney’s Office Southern District of Florida on August 24, 2011 released the following:

“TWO FT. LAUDERDALE MEN INDICTED FOR MONEY LAUNDERING AND OBSTRUCTION OF JUSTICE IN CONNECTION WITH MUTUAL BENEFITS CORPORATION FRAUD

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office, and José A. Gonzalez, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division (IRS-CID), announced the unsealing of a fifty-four count indictment against defendants Henry Fecker, III, 57, and Steven Steiner, a/k/a “Steven Steinger,”59, for their participation in a scheme to launder and conceal proceeds in connection with the Mutual Benefits Corporation (“MBC”) fraud. More specifically, Fecker and Steiner are charged with receiving more than $10 million into the account of Camden Consulting, a company they controlled, and then hiding and concealing assets from the U.S. Securities and Exchange Commission (“SEC”) and the United States District Court. Both defendants were arrested and appeared in court earlier today. A pre-trial detention hearing is scheduled for Tuesday, August 30, 2011 at 1:30 p.m. before U.S. Magistrate Judge Andrea M. Simonton.

As alleged in the indictment, from approximately 1994 to May 2004, MBC purchased life insurance policies and sold them in fractionalized form to investors. MBC and its employees and agents eventually defrauded approximately 30,000 investors by, among other things, misleading them about the accuracy of life expectancies of the insureds and the expenses required to maintain the insurance policies via premium payments. New investor money was thus used to pay premiums on life insurance policies purchased by earlier investors. As the scheme continued, more investor money was required to prevent the Ponzi-scheme from collapsing. After the MBC business collapsed in 2004, investors eventually suffered more than $830 million in losses.

As charged in the indictment, Steiner was a founder and Vice President of MBC and was paid by MBC using the account of Camden Consulting. Fecker was the owner of Camden Consulting. In this way, the MBC funds were used to support a lavish lifestyle for Steiner and Fecker, who lived together and jointly owned waterfront homes in Ft. Lauderdale and Camden, Maine, and a luxury apartment in New York City.

According to the indictment, in May 2004, MBC was sued by the SEC in the civil action, S.E.C. vs. Mutual Benefits Corp., et al., No. 04-60573-CIV-MORENO (S.D. Fla.) (the “SEC Fraud Action”). The SEC obtained a restraining order to halt the alleged fraud at MBC, and thereafter a receiver was appointed by the United States District Court for the Southern District of Florida (the “MBC Receiver”), to identify and trace the assets of MBC. Steiner was a named defendant in the SEC Fraud Action and Fecker was a party due to his control of Camden Consulting.

According to the indictment, after 2004 when MBC was shut down, Fecker and Steiner engaged in a series of transactions to hide assets from the SEC and the MBC Receiver by placing funds attributable to Steiner with third parties or in Fecker’s name alone, and later by causing third parties to make payments of monies due to Steiner, instead to Fecker. In 2006, for example, Fecker obtained a refinance of the Maine property and placed the proceeds of approximately $480,000 into a series of certified checks to conceal their existence from authorities. Fecker began cashing these checks in 2008 and continued this through July 2011, using the funds to support a lavish lifestyle for Fecker and Steiner.

To obtain a favorable settlement of their liability with the SEC, the indictment alleges that in 2006 and early 2007, Fecker and Steiner submitted a series of false and misleading documents to conceal their true financial condition. Based on this documentation, around April 2007, the SEC agreed to settled their liability for $5 million and further agreed to a reduced penalty of $3.95 million, and the court in the SEC Fraud Action thereafter ordered that these sums be paid by order dated April 10, 2007. The indictment alleges that, to date, Steiner and Fecker have paid only $750,000.

The indictment further alleges in late 2009, to further conceal assets from the SEC and the SEC receiver, Steiner sold the luxury New York apartment for $1.3 million, but caused false documents to state that the sales price was $1.1 million and submitted these documents to the SEC and the MBC Receiver. To further thwart the SEC’s efforts to recover assets attributable to MBC, Steiner allegedly provided false and misleading testimony under oath to the MBC Receiver concerning his assets and financial condition.

Previously, in a separate case also in the Southern District of Florida, Steiner was charged in United States v. Joel Steinger, et al. (Case No. 08-CR-21158), with conspiracy to commit mail and wire fraud and money laundering, in relation to the MBC fraud scheme. Trial in that matter is scheduled for February 2013 before U.S. District Judge Adalberto Jordan.

United States Attorney Wifredo A. Ferrer stated, “Ponzi-schemes, like the MBC investment scheme, defraud unwitting investors out of their lives savings. These defendants compounded their legal troubles by then laundering the proceeds of the fraud and attempting to hide assets. Such abuse will not be tolerated.”

“We will vigorously investigate and prosecute individuals who obstruct justice by making false statements and concealing assets from an agency of the United States attempting to carry out its mission, such as the SEC’s efforts to protect investors here,” said FBI Special Agent in Charge John V. Gillies.

“We will hold accountable those who engage in the laundering of funds derived from fraud, particularly through concealment and spending of funds through sophisticated transactions, like the ones employed here,” said IRS Special Agent in Charge José A. Gonzalez.

Mr. Ferrer commended the investigative efforts of the FBI and the IRS-CID, and the Miami Regional Office of the SEC, which previously brought a civil action against MBC and its principals. The matter is being prosecuted by Assistant U.S. Attorney Jerrob Duffy.

An indictment is only a charging document, and a defendant is presumed innocent unless and until proven guilty.”

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 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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Christopher Blackwell Indicted by a Federal Grand Jury on Two Counts of Wire Fraud in Relation to an Alleged Investment Fraud Scheme

June 24, 2011

U.S Immigration and Customs Enforcement (ICE) on June 23, 2011 released the following press release:

Defendant allegedly defrauded more than 20 victims out of more than $4 million

FORT WORTH, Texas – A north Texas man has been indicted by a federal grand jury on two counts of wire fraud in relation to an investment fraud scheme he operated since January 2007.

This indictment was announced by U.S. Attorney James T. Jacks of the Northern District of Texas (NDTX). The case is being investigated by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI).

Christopher Blackwell, 32, of Colleyville, Texas, was arrested in Phoenix, Ariz., earlier this month on a charge outlined in a related federal complaint filed in the NDTX. Blackwell remains in custody; a date has not yet been set for his arraignment in U.S. District Court in Fort Worth.

According to the indictment, Blackwell allegedly deceived investors by falsely telling them that he would invest their money in business ventures that would generate a high rate of return, and by fraudulently assuring them that the investments would involve little to no risk. He told investors that their money would be invested in specific business ventures. But when he received investors’ money, instead of investing it he used most of it for his own personal benefit. On occasion, he used some of the funds from new investors to make small payments to earlier investors to convince them that their money was generating a profit. However, not all investors received payments from Blackwell, and many lost all the money they invested.

According to the criminal complaint filed in the case, more than 20 victims, suffering more than $4 million in losses as a result of Blackwell’s scheme, have been identified. One investor, identified only by initials, lost all of the $325,000 he gave Blackwell to invest. In fact, after this investor wired the money as directed to Blackwell’s accounts, agents obtained Blackwell’s bank records and were able to determine that Blackwell didn’t invest the money as promised. Instead, he used it for personal expenditures, including automatic teller machine withdrawals, dining and entertainment, luxury vehicle expenses, and payments to family and business associates.

In February 2011, the U.S. Securities and Exchange Commission (SEC) filed a complaint against Christopher Love Blackwell, AV Bar Reg Inc. and Millers A Game LLC, two entities he controls. The SEC complaint claimed that Blackwell enticed investors by telling them that his trading program would generate highly impressive, guaranteed returns of 25 to 30 percent per month with regularity. He falsely claimed these profits were possible because of his academic pedigree, including Master’s and Ph.D. degrees acquired at a prestigious university in Spain (Blackwell holds no such degrees); his extensive experience as a trader (he has little, if any, such experience); and the know-how and connections he acquired while employed by Goldman Sachs and The Bank of Madrid (he never worked at either firm). In March 2011, the SEC and Blackwell and his entities entered into an agreed judgment.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force visit: http://www.stopfraud.gov.

An indictment is an accusation by a federal grand jury, and a defendant is entitled to the presumption of innocence unless proven guilty. If convicted, however, each of the wire fraud counts carries a maximum statutory sentence of 20 years in prison and a $250,000 fine. Restitution could be ordered.

Assistant U.S. Attorney Jay Stevenson Weimer is in charge of the prosecution.”

To find additional federal criminal news, please read The Federal Crimes Watch 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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