Seventeen Members of an Alleged North Carolina Racketeering Enterprise Indicted on Investment Fraud, Mortgage Fraud, and Related Charges

October 25, 2012

The Federal Bureau of Investigation (FBI) on October 24, 2012 released the following:

“Fourteen Others to Plead Guilty on Related Charges; Total of 81 Defendants Have Been Charged to Date in Operation Wax House

CHARLOTTE, NC— A federal indictment charging 17 defendants in Charlotte and elsewhere with racketeering, investment fraud, mortgage fraud, bank bribery, and money laundering was unsealed today in U.S. District Court, announced the U.S. Attorney’s Office for the Western District of North Carolina. Fourteen additional defendants have agreed to plead guilty in connection with the latest round of criminal charges resulting from Operation Wax House, a mortgage fraud investigation that began in the Western District of North Carolina in 2007.

Chris Briese, Special Agent in Charge of the FBI, Charlotte Division; Jeannine A. Hammett, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation (IRS-CI); and Elaine Marshall, North Carolina Secretary of State join the U.S. Attorney’s Office in making today’s announcement.

The federal racketeering indictment was returned by a federal grand jury sitting in Charlotte on July 26, 2012, but remained sealed until today. The indictment alleges that the 17 defendants and others were part of a criminal organization (the Enterprise) that operated principally in the cities of Charlotte and Waxhaw, North Carolina, and stole more than $75 million from investors and mortgage lenders. The indictment was unsealed following the arrests this week of 11 members of the Enterprise, including three of its leaders, James Tyson, Jr.; his mother, Carrie Tyson; and Victoria Hunt. James Tyson, Jr. was arrested on Sunday, October 21, 2012, at Washington Dulles International Airport upon arrival in the United States from a flight originating in Dakar, Senegal, which is Tyson’s last known residence.

The racketeering charges contained in the indictment are the result of Operation Wax House, an ongoing investigation into securities and mortgage fraud targeting communities in the Mecklenburg and Union Counties of North Carolina’s Western District. The investigation was conducted jointly by the FBI and IRS-CI, along with the North Carolina Secretary of State, Securities Division.

According to allegations contained in the unsealed indictment:

The Enterprise, which operated from about 2005 through the present, engaged in an extensive pattern of racketeering activities, consisting of investment fraud, mortgage fraud, bank fraud, money laundering, and distribution of illegal drugs. Members of the Enterprise also bribed bank officials and committed perjury before the grand jury. The co-conspirators targeted professional athletes and doctors as well as their personal and professional acquaintances and convinced them to invest in a series of sham corporations controlled by the Enterprise. The co-conspirators stole over $27 million from more than 50 investor victims, including money that the investor victims were induced to obtain as loans from financial institutions. Rather than investing victims’ money as promised, the Enterprise diverted victims’ money to finance its mortgage fraud operations and to support its members’ lifestyles. For example, members of the Enterprise used the stolen money to purchase luxury vehicles, take lavish vacations, organize extravagant dinners and parties, and invest in other sham businesses or investments. In addition, the conspirators made Ponzi-style payments to other victims.

The Enterprise’s mortgage fraud operations involved acquiring luxury homes in neighborhoods in Charlotte and Waxhaw. One member of the Enterprise would agree with a builder to purchase a property at the “true price.” The Enterprise would then arrange for a buyer to purchase the property at an inflated price. In most circumstances, the buyer would agree to purchase the property in his or her own name and sign whatever documents were necessary, in exchange for a hidden kickback. The builder would sell the property at the inflated price, the lender would make a mortgage loan on the basis of that inflated price, and the difference between the inflated price and the true price would be extracted at closing by the Enterprise.

The 17 defendants charged in today’s indictment and the 14 defendants who have agreed to plead guilty bring the total number of defendants charged to date in connection with Operation Wax Houseto to 81. Charged in the indictment are:

  • Ramin Amini, 44, of Tehran, Iran, is charged with racketeering conspiracy, mortgage fraud, and money laundering conspiracy. Role: Leader and promoter in the scheme. Status: Fugitive.
  • Vonetta Tyson Barnes, 38, of Wahiawa, Hawaii, is charged with racketeering conspiracy, securities fraud, wire fraud to defraud investors, and money laundering conspiracy. Role: Promoter. Status: Released following arrest and initial appearance.
  • Travis Bumpers, 36, of Charlotte, is charged with racketeering conspiracy, securities fraud, mortgage fraud, wire fraud to defraud investors, bank bribery, and money laundering conspiracy. Role: Promoter. Status: Fugitive.
  • Glynn Hubbard, 35, of Charlotte, is charged with racketeering conspiracy, mortgage fraud, and money laundering conspiracy. Role: Promoter. Status: In federal custody, pending release on conditions, following arrest and initial appearance.
  • Victoria Hunt, 36, of Charlotte, is charged with racketeering conspiracy, securities fraud, mortgage fraud, wire fraud to defraud investors, and money laundering. Role: Leader and promoter. Status: Currently in federal custody pending detention hearing.
  • Toby Hunter, 37, of Fort Mill, South Carolina, is charged with racketeering conspiracy, securities fraud, wire fraud to defraud investors, and money laundering. Role: Promoter. Status: Released following arrest and initial appearance.
  • Steven Jones, 44, of Waxhaw, is charged with securities fraud, wire fraud to defraud investors, and money laundering conspiracy. Role: Promoter. Status: Currently in federal custody pending detention hearing.
  • John McDowell, 40, of Dunn, North Carolina, is charged with racketeering conspiracy, securities fraud, mortgage fraud, wire fraud to defraud investors, and money laundering. Role: Promoter. Status: Arrest warrant issued.
  • Kurosh Mehr, 52, of Charlotte, is charged with racketeering conspiracy, mortgage fraud, and money laundering. Role: Promoter and buyer. Status: Currently in federal custody pending detention hearing.
  • Ann Tyson Mitchell, 61, of Charlotte, is charged with racketeering conspiracy, mortgage fraud, and money laundering. Role: Facilitator. Status: Released following arrest and initial appearance.
  • John Wayne Perry, Jr., 31, of Charlotte, is charged with racketeering conspiracy, and money laundering conspiracy. Role: Promoter. Status: Released following arrest and initial appearance.
  • Donte Thorogood, 34, of Durham, North Carolina, is charged with racketeering conspiracy, mortgage fraud, and money laundering. Role: Promoter. Status: To appear for an initial appearance pursuant to a summons.
  • Carrie Tyson, 58, of Winterville, North Carolina, is charged with racketeering conspiracy, securities fraud, mortgage fraud, wire fraud to defraud investors, and money laundering. Role: Leader and promoter. Status: Released following arrest and initial appearance.
  • James Tyson, Jr., 32, of Dakar, Senegal, is charged with racketeering conspiracy, securities fraud, mortgage fraud, wire fraud to defraud investors, bank bribery, and money laundering. Role: Leader and promoter. Status: Currently in federal custody pending detention hearing.
  • James Tyson, Sr., 61, of Charlotte, is charged with racketeering conspiracy, securities fraud, wire fraud to defraud investors, and money laundering. Role: Promoter. Status: Currently in federal custody pending detention hearing.
  • Nathan Shane Wolf, 41, of Charlotte, is charged with racketeering conspiracy, mortgage fraud and money laundering. Role: Real estate agent. Status: To appear for an initial appearance pursuant to a summons.
  • Purnell Wood, 41, of Palmyra, New Jersey, is charged with racketeering conspiracy, mortgage fraud, and money laundering. Role: Promoter. Status: Arrest warrant issued.

Today, the U.S. Attorney’s Office also filed criminal bills of information and plea agreements against 14 other defendants who acted as mortgage brokers, real estate agents, straw buyers, and a home builder in the scheme. They acknowledge taking part in the mortgage fraud conspiracy and have agreed to plead guilty. They are:

  • Crystal Goodson-Hudson, 44, of Kannapolis, North Carolina, is charged with mortgage fraud conspiracy and money laundering conspiracy. Role: Mortgage broker. Status: To appear for initial appearance upon a summons.
  • Shannon Lee (Somer Bey), 47, of Charlotte, is charged with mortgage fraud conspiracy and money laundering conspiracy. Role: Real estate agent. Status: To appear for initial appearance upon a summons.
  • Robert Mahaney, 52, of Ridgeway, South Carolina, is charged with mortgage fraud conspiracy and money laundering conspiracy. Role: Mortgage broker. Status: To appear for initial appearance upon a summons.
  • George Moore, 44, of Charlotte, is charged with mortgage fraud conspiracy. Role: Buyer. Status: To appear for initial appearance upon a summons.
  • Kevin Smith, 46, of Oxford, North Carolina, is charged with mortgage fraud conspiracy. Role: Buyer. Status: To appear for initial appearance upon a summons.
  • Holly Pasut, 56, of Charlotte, is charged with mortgage fraud conspiracy and money laundering conspiracy. Role: Real estate agent. Status: To appear for initial appearance upon a summons.
  • Danielle Vaughn, 34, of Greenbelt, Maryland, is charged with mortgage fraud conspiracy and money laundering conspiracy. Role: Mortgage broker. Status: To appear for initial appearance upon a summons.
  • Mary Vaughn, 58, of Charlotte, is charged with mortgage fraud conspiracy. Role: Buyer. Status: To appear for initial appearance upon a summons.
  • Jamaine Wallace, 41, of Conyers, Georgia, is charged with mortgage fraud conspiracy. Role: Buyer. Status: To appear for initial appearance upon a summons.
  • Phillip Wellington, 46, of Charlotte, is charged with mortgage fraud conspiracy and money laundering conspiracy. Role: Promoter. Status: To appear for initial appearance upon a summons.
  • William Wellington, 30, of Amityville, New York, is charged with mortgage fraud conspiracy. Role: Buyer. Status: To appear for initial appearance upon a summons.
  • Marcia Williams, 36, of York, South Carolina, is charged with mortgage fraud conspiracy and money laundering conspiracy. Role: Mortgage broker. Status: To appear for initial appearance upon a summons.
  • Sean Williams, 41, of Orangeburg, South Carolina, is charged with mortgage fraud conspiracy and money laundering conspiracy. Role: Mortgage broker. Status: To appear for initial appearance upon a summons.
  • Mark, Wittig, 41, of Matthews, North Carolina, is charged with mortgage fraud conspiracy. Role: Builder. Status: To appear for initial appearance upon a summons.

The conspiracy to participate in the racketeering activities charge carries a maximum term of 20 years in prison and a $250,000 fine or twice the gross profits or other proceeds. The securities fraud charge carries a maximum term of 20 years in prison and a $250,000 fine. The bank fraud charge carries a maximum term of 30 years in prison and a $1 million fine. The wire fraud charge carries a maximum term of 20 years in prison and a $250,000 fine. The money laundering conspiracy charge carries a maximum term of 20 years in prison and a $500,000 fine or twice the amount of criminally derived proceeds. The bank bribery conspiracy charge carries a maximum term of five years in prison and a $250,000 fine.

An indictment is merely an allegation, and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law. In addition, the guilty plea of any other person is not relevant to the guilt of any indicted person.

Operation Wax House in the Western District of North Carolina is being handled by the Charlotte Division of the FBI, the Criminal Division of the IRS for the Financial Fraud Enforcement Task Force, and the Securities Division of the North Carolina Secretary of State. The prosecution for the government is being handled by Assistant United States Attorneys Kurt W. Meyers and Maria K. Vento and Special Assistant United States Attorney Kevin M. Harrington.

The President’s Financial Fraud Enforcement 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 on the task force, visit http://www.stopfraud.gov.

The names and case numbers of all the defendants charged to date in Operation Wax House are listed below, organized by their alleged role in the scheme.

Attorneys and Paralegals
Crawford/Mallard, Michelle 3:11cr374
Gates, Christine 3:09cr100
Norwood, Kelli, 3:09cr162
Rainer, Demetrius 3:08cr239/241
Smith, Troy, 3:08cr264

Bank Insiders
Brown, Jamilia, 3:10cr124
Eason, Danyelle, 3:10cr116
Henson, Vic. F., 3:10cr124
Jackson, Mitzi, 3:11cr374
Ramey, Bonnie Sue, 3:10cr124

Builders and Sellers
Fink, James, 3:11cr374
Jackson, Jennifer, 3:09cr241
Smith, Kelvis, 3:12cr238
Viegas, Jeffrey, 3:12cr298
Wittig, Mark, 3:12cr335
Wood, Gary, 3:09cr208

Facilitators and Financiers
Hickey, Denis, 3:09cr103
McClain, Landrick, 3:10cr124
Mitchell, Ann Tyson, 3:12cr239
Panayoton, Sherrill, 3:11cr176
Taylor, Alicia Renee, 3:10cr124
Wilson, Willard, 3:09cr161

Buyers
Banks, Arketa, 3:12cr297
Hillian, Kirk, 3:12cr83
Mathis, Charles, 3:10cr1
Mobley, Sarena, 3:10cr124
Moore, George, 3:12cr337
Richards, Dan, 3:10cr119
Smith, Kevin, 3:12cr341
Tyler, Glenna, 3:11cr200
Vaughn, Mary, 3:12cr329
Wallace, Jamaine, 3:12cr330
Wellington, William, 3:12cr333

Notary Public
Willis, Anthony, 3:09cr218

Appraiser
Darden, Clinton 3:10cr108

Mortgage Brokers
Bradley, Bonnette, 3:12cr299
Clarke, Linda, 3:10cr120
Flood, Ericka, 3:10cr124
Goodson-Hudson, Crystal, 3:12cr339
Mahaney, Robert, 3:12cr34-0
Scagliarini, Coley, 3:11cr374
Staton, Walter, 3:10cr113
Vaughn, Danielle, 3:12cr329
Williams, Marcia, 3:12cr334
Williams, Sean, 3:12cr336

Woods, Joseph, 3:09cr178

Real Estate Agents
Belin, Chris, 3:11cr374
Clark, Christina, 3:09cr44
Lee, Shannon, 3:12cr338
Pasut, Holly Hardy, 3:12cr331
Wolf, Nathan Shane, 3:12cr239
Wood, Gary, 3:09cr208

Promoters
Amini, Ramin, 3:12cr239
Barnes, Vonetta Tyson, 3:12cr239
Bumpers, Travis, 3:12cr239
Carr, Stephen, 3:10cr124
Clarke, Reuben, 3:10cr120
Coleman, Gregory, 3:10cr118
Hitchcock, Jimmy, 3:11cr374
Hubbard, Glynn, 3:12cr239
Hunt, Victoria, 3:12cr239
Hunter, Toby, 3:12cr239
Jones, Steven, 3:12cr239
Jones, Tyree, 3:10cr230
Marshall, Michael, 3:07cr283
McDowell, John, 3:12cr239
McPhaul, Elizabeth, 3:10cr114
Mehr, Kurosh, 3:12cr239
Mitchell, Ann Tyson, 3:12cr239
Perry, John Wayne, Jr., 3:12cr239
Perry, Kim, 3:10cr25
Phillips, Rick, 3:10cr115
Sharreff-El, Drew, 3:10cr124
Sherald, Kiki, 3:10cr117
Simmons, Aaron, 3:09cr240
Snead, Todd, 3:10cr124
Staton, Lisa, 3:10cr113
Thorogood, Donte, 3:12cr239
Tyson, Carrie, 3:12cr239
Tyson, James, Jr. 3:12cr239
Tyson, James, Sr., 3:12cr239
Wellington, Phillip, 3:12cr332
Wood, Purnell, 3:12cr239″

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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.


Rajat Gupta Gets Two-Year Sentence for Insider Trading

October 25, 2012

Bloomberg on October 24, 2012 released the following:

“By Patricia Hurtado, David Glovin and Bob Van Voris

Former Goldman Sachs Group Inc. (GS) director Rajat Gupta was sentenced to two years in prison for insider trading, marking the downfall of a man who rose to the top of corporate America after being orphaned as an 18-year-old in Kolkata.

Gupta, who ran McKinsey & Co. from 1994 to 2003, was sentenced today by U.S. District Judge Jed Rakoff in Manhattan for leaking stock tips to Galleon Group LLC co-founder Raj Rajaratnam. Gupta, 63, was convicted in June of securities fraud and conspiracy. He is set to report to prison on Jan. 8. He was also fined $5 million.

The evidence that Gupta passed illegal information about Goldman Sachs to Rajaratnam was “not only overwhelming, it was disgusting in its implications,” Rakoff said in court today before handing down the sentence.

Prosecutors had sought a prison term for Gupta of as long as 10 years. Gupta requested probation and community service, and his lawyer had proposed that he work with needy children in New York or the poor in Rwanda.

In his 17 years as a judge, Rakoff has sentenced at least nine defendants other than Gupta for insider trading, including seven who pleaded guilty and two whom he jailed after they were found guilty by juries. Rakoff has a track record of imposing sentences that are half what the government recommends.

Insider Probes

From Jan. 1, 2011 to July of this year, federal judges in Manhattan sent the average insider-trading violator to prison for more than 22 months, according to an analysis of sentencing data by Bloomberg News. That was a 20 percent increase from the average term of 18.4 months during the previous eight years.

Over the same 18-month period, the average sentence after trial was 58 months, compared with 22 months during the same time for 18 defendants who pleaded guilty. Of the dozen defendants who pleaded guilty and agreed to cooperate with the U.S. insider-trading probe during that time, 11 avoided prison altogether. One got six months.

“With today’s sentence, Rajat Gupta now must face the grave consequences of his crime — a term of imprisonment,” Manhattan U.S. Attorney Preet Bharara said in a statement. “His conduct has forever tarnished a once-sterling reputation that took years to cultivate.”

‘Innovative’ Proposal’

During today’s hearing, Rakoff said the Rwanda community service proposal was “very innovative.”

“I thought, ah, this was the Peace Corps for insider traders,” the judge said to Gupta’s lawyer, Gary Naftalis. “But I think if everything you told me about Mr. Gupta’s character is correct, and I think it is, he would be doing this regardless of a court order or not. So looking at it in a cynical kind of way, it is not punishment.”

Before he was sentenced, Gupta told the judge that “I lost my reputation that I built over a lifetime. The last 18 months have been the most challenging period of my life since my parents died when I was a teenager.”

Gupta served on the boards of Procter & Gamble Co. (PG) and AMR Corp. (AAMRQ) and won praise for his charity from Microsoft Corp. (MSFT) Chairman Bill Gates and former United Nations Secretary-General Kofi Annan. As McKinsey’s youngest managing director, he almost tripled the firm’s revenue.

Helped ‘Many’

Gupta’s life “has been an extraordinary one,” Naftalis said today in court. He said his client has made “extraordinary contributions that have tangibly helped many, many people on this planet.” His crimes are a “total aberration in an otherwise laudatory life.”

Gupta was convicted by a jury of leaking tips to Rajaratnam, his friend and business partner, about New York- based Goldman Sachs. Gupta leaked information including a $5 billion investment by Warren Buffett’s Berkshire Hathaway Inc. (BRK/B) on Sept. 23, 2008, and a tip on a quarterly loss.

The jury acquitted Gupta of charges that he leaked information that Cincinnati-based P&G’s organic sales growth would fall below estimates and that he tipped Rajaratnam, 55, about Goldman Sachs’s earnings in the first quarter of 2007.

Unlike the Rajaratnam prosecution, which was based on dozens of wiretaps of his mobile-phone conversations, the case against Gupta was circumstantial and built on trading records, business relationships and comments by Rajaratnam or others about Galleon’s sources of information. The jury heard one wiretapped conversation between Gupta and Rajaratnam. Naftalis told the judge today that he would challenge Rakoff’s decision to admit the recording and other evidentiary rulings he made during the trial on appeal.

The case is U.S. v. Gupta, 11-cr-907, U.S. District Court, Southern District of New York (Manhattan).”

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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

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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.


Ex-CIA man likely to plead guilty in leak case

October 23, 2012

The Associated Press on October 22, 2012 released the following:

“By MATTHEW BARAKAT
Associated Press

WASHINGTON (AP) — A former CIA officer accused of leaking the names of covert operatives to journalists is expected to enter a guilty plea as part of a plea deal.

A change of plea hearing was scheduled for Tuesday in U.S. District Court in Alexandria, Va., for John Kiriakou. He initially pleaded not guilty to the charges that he disclosed the names of two covert CIA operatives.

The apparent change comes shortly after Kiriakou lost a key pre-trial ruling that established a lower legal burden for prosecutors to prove their case. Kiriakou’s lawyers had argued unsuccessfully that prosecutors should have to prove that Kirkiakou intended to harm the United States through his alleged leaks. Such a strict legal standard had been imposed recently on a leaks prosecution against two pro-Israel lobbyists.

But U.S. District Judge Leonie Brinkema ruled last week that such a high standard should not apply to Kiriakou, a government employee with top-secret security clearances who knew well the dangers of disclosing classified information.

Instead, prosecutors would only have to show that Kiriakou had “reason to believe” that the information could be used to injure the U.S.

Court records do not make clear exactly what charges Kiriakou would plead to. When he was indicted in April, he was charged with one count of disclosing classified information identifying a covert agent, three counts of illegally disclosing national defense information and one count of making false statements. He faced up to 45 years in prison if convicted on all counts in the indictment.

Kiriakou, who wrote a book detailing his CIA career, had tried to argue after the charges were filed that he was a victim of vindictive prosecution by government officials who believed he portrayed the CIA negatively, but the judge rejected those arguments as well.

Peter Carr, a spokesman for U.S. Attorney for the Eastern District of Virginia Neil MacBride, whose office is prosecuting the case, declined comment Monday. Kiriakou’s attorney, Robert Trout, also declined comment.

Kiriakou was a CIA veteran who played a role in the agency’s capture of al-Qaida terrorist Abu Zubaydah in Pakistan in 2002. Abu Zubaydah was waterboarded by government interrogators and eventually revealed information that led to the arrest of “dirty bomb” plotter Jose Padilla and exposed Khalid Sheikh Mohamed as the mastermind of the Sept. 11, 2001 terror attacks.

Accounts conflict, though, over whether the waterboarding was helpful in gleaning intelligence from Zubaydah. Kiriakou, who did not participate in the waterboarding, expressed ambivalence in news media interviews about use of the tactic.

Court papers indicate that the investigation of Kiriakou began in 2009 when authorities became alarmed after discovering that detainees at Guantanamo Bay possessed photographs of CIA and FBI personnel. The investigation eventually led back to the alleged leaks by Kiriakou, according to a government affidavit.

The papers indicate prosecutors believe Kiriakou leaked the name of one covert operative to a journalist, who subsequently disclosed the name to an investigator working for the lawyer of a Guantanamo detainee.

Kiriakou had planned to subpoena three journalists connected to the case. Those journalists had filed motions to quash the subpoenas, but that issue will now be rendered moot by the apparent plea deal.”

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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

————————————————————–

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.


Accused Military Tech Exporter Pleads Not Guilty in N.Y.

October 22, 2012

Bloomberg Businessweek on October 22, 2012 released the following:

“By Christie Smythe

Alexander Fishenko, owner of Houston-based Arc Electronics Inc., pleaded not guilty in a Brooklyn, New York, federal court to illegally exporting microelectronics to Russian military and intelligence agencies.

Fishenko, a U.S. citizen formerly of Kazakhstan, appeared today before U.S. District Judge Sterling Johnson. He’s accused in a 25-count indictment of violating the International Emergency Economic Powers Act and the Arms Export Control Act, obstructing justice and operating as an unregistered agent of the Russian government.

Arc shipped at least $50 million worth of technology goods to Russia without an export license, the government alleged. Ten other individuals, most of whom were employees of either Arc or a Moscow-based procurement firm Apex System LLC, were charged in the indictment, which was unsealed on Oct. 3.

The computer chips supplied by Arc appear similar to those used in missiles and fighter jets, the government said in court papers. One of the end users of the electronics was the Federal Security Service, successor to the KGB spy agency, according to the filings.

A lawyer for Fishenko, Richard Rosenberg, who was appointed by the court today, said in a phone interview after the hearing that he wasn’t sure whether his client will seek bail. He declined to comment further.

The case is U.S. v. Fishenko, 1:12-cr-626, U.S. District Court, Eastern District of New York (Brooklyn).”

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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

————————————————————–

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.


Gupta to Urge Probation From Judge Who Once Defended Insiders

October 22, 2012

San Francisco Chronicle on October 22, 2012 released the following:

“Patricia Hurtado and David Glovin, ©2012 Bloomberg News

Oct. 22 (Bloomberg) — As a lawyer, Jed Rakoff once persuaded a judge to give probation to a client convicted at an insider-trading trial alongside former Wall Street Journal reporter R. Foster Winans. Now a federal judge himself, Rakoff must weigh Rajat Gupta’s similar request to stay out of prison.

Gupta, a former Goldman Sachs Group Inc. director, will come before Rakoff in Manhattan federal court on Oct. 24 to be sentenced for leaking stock tips to Galleon Group LLC co-founder Raj Rajaratnam. Prosecutors say Gupta, convicted by a jury in June, deserves as long as 10 years in prison. Gupta seeks probation.

Gary Naftalis, a lawyer for Gupta, argued his client’s crime was an “aberrational” event in a “lifetime of good works” that merited a punishment for a man who has suffered an extraordinary fall from grace. He asked Rakoff to impose a term of community service, suggesting Gupta work with troubled youth in New York or with the poor in Rwanda.

“Good works help, but on their own they are rarely a ‘Get out of jail free card,’” said Gordon Mehler, a former federal prosecutor who’s now in private practice in New York. “So, it seems as if probation, even in Rwanda, is unlikely.”

Gupta, 63, is the most prominent of 70 people convicted since a nationwide insider-trading crackdown by U.S. prosecutors began four years ago. Gupta also served as managing partner of McKinsey & Co. from 1994 to 2003 and on the board of Procter & Gamble Co. from 2007 to March 2011, when he also resigned from the boards of Goldman Sachs, AMR Corp. and two other companies.

Buffett’s Berkshire

After a four-week trial in June, jurors found Gupta guilty of tipping Rajaratnam about dealings at New York-based Goldman Sachs, including a $5 billion investment by Warren Buffett’s Berkshire Hathaway Inc. Rajaratnam, 55, is serving 11 years in prison for trading on tips from Gupta and others.

In his 17 years as a judge, Rakoff has sentenced at least nine defendants for insider trading, including seven who pleaded guilty and two whom he jailed after they were found guilty by juries. Rakoff has a track record of imposing a sentence that is half what the government recommends.

“If there is any judge who’s sensitive to the draconian impact of the sentencing guidelines with respect to white-collar offenders, it’s Judge Rakoff,” said J. Bruce Maffeo, a former federal prosecutor now in private practice. “That being said, he’s equally sensitive to the need to fashion a sentence that takes into account both the defendant’s personal background and the need to deter others in the financial world, where this kind of activity appears to be more prevalent than previously assumed.”

Winning Leniency

Rakoff, a former federal prosecutor in New York who headed the office’s securities-fraud unit, was a white-collar criminal- defense lawyer before taking the bench.

As a defense lawyer, Rakoff won leniency for a client convicted of insider trading who was also facing prison.

Rakofff’s client, David Carpenter, went on trial in 1985 with his lover, journalist R. Foster Winans, and broker Kenneth Felis. Prosecutors said Winans leaked tips to Felis about forthcoming market-moving articles in his “Heard on the Street” column, Felis traded on the news and Carpenter allowed Winans to place trades through his account. All were convicted. Carpenter died in 1991.

Wife, Husband

At the sentencing, Rakoff compared Carpenter’s relationship with Winans to that of wife-and-husband and said Carpenter merely acquiesced to Winans’ trades, according to Winans’s lawyer, Don Buchwald. Carpenter got probation while Winans was given an 18-month prison term.

“He was following Foster,” Buchwald said in a phone interview last week. “Carpenter was a very sympathetic figure.”

This week, Gupta will be seeking sympathy of a different sort from Rakoff. Gupta’s lawyer, Naftalis, said in a court filing that Gupta deserves probation because his crime was an aberration in a life “defined by helping others.”

Naftalis cited Gupta’s work as chairman of the Global Fund, an initiative to fight AIDS, tuberculosis and malaria, as well as his work with the United Nations to improve world health. Naftalis declined to comment on a comparison of the Gupta and Carpenter cases. The defense submitted more than 400 letters to the judge describing Gupta’s accomplishments.

In their pre-sentencing court filings, prosecutors gave a different portrait of Gupta and asked Rakoff to consider the personal relationship between Gupta and Rajaratnam.

‘Very Close Friend’

In asking for a term of 97 months to 121 months, which they say are called for by U.S. sentencing guidelines, prosecutors say Gupta violated confidences and breached his duty as a senior corporate official by leaking news to his “very close friend” and business partner.

“Gupta’s interests often were aligned with those of Rajaratnam and Galleon such that Gupta stood to benefit if Galleon was successful,” prosecutors wrote in a filing, citing Gupta’s investment in Galleon and their partnership in another investment fund.

Richard Holwell, the former federal judge who presided over Rajaratnam’s trial and sentenced the fund manager, said judges consider “general deterrence,” or whether the sentence they impose will deter others from committing similar crimes.

“The nature and circumstances of the crime weigh in the government’s favor, because insider trading is a serious white- collar crime that undermines the integrity of the markets” said Holwell, who is now in private practice.

Deterrence

“The government will lean on general deterrence because insider trading has to be eradicated and one way to do that is by taking highly visible cases and making examples of them,” Holwell said. “That will weigh heavily on Rakoff.”

Other criminal defense lawyers said Gupta’s fall from grace may work in his favor. Kevin O’Brien, a former federal prosecutor in New York, said the judge must weigh Gupta’s achievements against his crimes.

“There is human drama there,” O’Brien said. “You can make the argument that for a guy like this who was on top of the world to have fallen so low and to have been so humiliated and exposed by a lengthy public trial, that is punishment enough.”

“What is smart about the Rwanda option is that it makes vivid Gupta’s commitment to public service and brings out with some clarity his history of good deeds,” he said. “It’s a creative approach.”

‘Mirage’ Guidelines

Federal sentencing guidelines are advisory. Rakoff’s history has been one of imposing sentences well below the recommended federal guidelines, which he has called a “mirage of something that can be obtained with arithmetic certainty.”

Last year, he sentenced James Fleishman, a former executive at expert-networking firm Primary Global Research LLC, to 2 1/2 years in prison for passing tips to fund managers while the guidelines called for more than seven years. He also ordered Primary Global consultant Winifred Jiau to serve 48 months for selling information. Her guidelines suggested a term of 78 months to 97 months in prison.

Still, Rakoff has rarely been silent about the contempt he has for insider traders, often expressing his sentiments in open court. In Fleishman’s case, he said insider prosecutions over “the last 30 or 40 years” have not “done enough to deter this serious and sophisticated crime.”

With Jiau, whose scheme ran for two years, he said the leaks undermined “the integrity of the financial markets” and demanded a “meaningful sentence.”

Maffeo said he believes Rakoff will impose some term of incarceration upon Gupta.

Love Families

Rakoff has demanded prison in cases in which, unlike Gupta, the defendants have admitted trafficking in illicit information. He sentenced ex-SAC Capital Advisors LP manager Donald Longueuil to 30 months instead of the 46 months to 57 months urged by the guidelines. He ordered a former Taiwan Semiconductor Manufacturing Co. manager to spend 18 months behind bars.

“Why is it that defendants always remember how much they love their families after they’ve committed the crimes that place that relationship in jeopardy?” Rakoff said at the sentencing of former Galleon trader Adam Smith, who won probation largely because he cooperated with prosecutors and testified against Rajaratnam.

Rakoff imposed an 18-month prison term on Manosha Karunatilaka, a former Taiwan Semiconductor Manufacturing Co. manager who pleaded guilty to passing nonpublic information about his company’s orders to fund managers as part of an insider-trading scheme. Karunatilaka cooperated with the U.S. and accepted responsibility for his crimes.

Crying Infant

As Karunatilaka’s infant child cried in the courtroom, Rakoff rejected a bid by defense lawyer Brad Bailey to impose a term of six months’ in prison and six months of home confinement.

Gupta, after two days of deliberations by a jury, was found guilty of three counts of securities fraud and one count of conspiracy. The tips came in September and October 2008 and concerned Buffett’s $5 billion investment in Goldman Sachs and the bank’s losses in the fourth quarter of 2008.

Jurors acquitted Gupta of charges that he leaked information that Cincinnati-based P&G’s organic sales growth would fall below estimates and that he tipped Rajaratnam about Goldman Sachs’s earnings in the first quarter of 2007.

In his filing, Naftalis argued that Gupta deserves leniency because his crimes were limited to a two-month period in 2008.

Peter Henning, a professor at Wayne State University Law School in Detroit, said Rakoff will focus on the nature of the crime and Gupta’s background. Henning predicted that the former Goldman Sachs director will get a prison term of two years to three years.

“That’s not a deleterious prison term, but it is prison and it doesn’t mean he will get a free pass,” Henning said in a phone interview. “It has to be a term to get everyone’s attention, and by everyone, I mean Wall Street.”

The case is U.S. v. Gupta, 11-cr-00907, U.S. District Court, Southern District of New York (Manhattan).”

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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.


Bulger’s lawyers due in federal court on trial prep

October 22, 2012

7News whdh.com on October 22, 2012 released the following:

“BOSTON (AP) — Mobster James “Whitey” Bulger’s lawyers will be returning to federal court in Boston to give a judge a status report on preparation for his March trial.

The former leader of the Winter Hill Gang is accused of participating in 19 murders. He fled Boston in 1994 and remained one of the FBI’s most wanted fugitives until his capture in Santa Monica, Calif., last year.

Bulger’s lawyers have repeatedly complained that they won’t have enough time to prepare for trial, given that prosecutors have turned over more than 300,000 documents.

Bulger lawyer J.W. Carney Jr. has said that Bulger will testify about his claim that he was given immunity to commit crimes while he was an informant.

A status conference is scheduled Monday in U.S. District Court.”

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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

————————————————————–

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.


DuPont vs. Kolon fight results in indictments of top executives

October 19, 2012

Examiner.com on October 19, 2012 released the following:

“BY: JOEL HENDON

An FBI news release on Oct. 18, 2012 contains the latest developments in an ongoing legal fight over a suit filed by Dupont.

On Feb. 3, 2009, DuPont filed suit against Kolon for “for theft of trade secrets and confidential information” relating to its product, Heracron. After considerable legal moves and actions, on Sep. 14, 2011, a jury in the U.S. District Court for the Eastern District of Virginia found in favor of DuPont who was awarded damages of $919.9 million. Kolon appealed, which now appears to have been a grave mistake.

The FBI press release explains the results of their investigation since that decision was made. They report that Kolon Industries Inc. and several of its executives and employees have been indicted for allegedly engaging in a multi-year campaign to steal trade secrets related to DuPont’s Kevlar para-aramid fiber and Teijin Limited’s Twaron para-aramid fiber. The indictment seeks forfeiture of at least $225 million in proceeds from the alleged theft of trade secrets from Kolon’s competitors.

Headquartered in Seoul, South Korea, Kolon was indicted by a grand jury in Richmond, Virginia. The indictment charges Kolon with one count of conspiring to convert trade secrets, four counts of theft of trade secrets, and one count of obstruction of justice.

“Kolon is accused of engaging in a massive industrial espionage campaign that allowed it to bring Heracron quickly to the market and compete directly with Kevlar,” said U.S. Attorney MacBride. “This country’s greatest asset is the innovation and the ingenuity and creativity of the American people. The genius of free enterprise is that companies compete on the excellence of their ideas, products, and services—not on theft. This indictment should send a strong message to companies located in the United States and around the world that industrial espionage is not a business strategy.” (FBI press release)

“By allegedly conspiring to steal DuPont’s and Teijin’s intellectual property, Kolon threatened to undermine an economic engine at both companies,” said Assistant Attorney General Breuer. “Developing Kevlar and Twaron was resource-intensive work and required strategic investment and ingenuity. Kolon, through its executives and employees, allegedly acted brazenly to profit off the backs of others. The Justice Department has made fighting intellectual property crime a top priority, and we will continue to aggressively prosecute IP crimes all over the country.” (Ibid)

“It’s critical that law enforcement aggressively investigate crimes of intellectual property theft, such as this one,” said FBI Special Agent in Charge Mazanec. “If not, intellectual creativity and our economy will be compromised. As a member of the Department of Justice Task Force on Intellectual Property, our office will investigate any company, domestic or international, that steals confidential proprietary information for their own benefit. We will pursue those that prey on the originality and vision of hardworking businesses who conduct their own research, obtain patents, and market a successful product.” (Ibid)

Kolon makes a product called Heracron, which is a recent entrant into the para-aramid fiber market as a competitor to products called Kevlar and Twaron. Para-aramid fibers are used to make, for example, body armor, fiberoptic cables, and automotive and industrial products. Kevlar is produced by E.I. du Pont de Nemours and Company (DuPont), one of the largest chemical companies in the United States. For decades, Kevlar has competed against Twaron, a para-aramid fiber product produced by Teijin Limited, one of the largest chemical companies in Japan.

According to the indictment, from July 2002 through February 2009, Kolon allegedly sought to improve its Heracron product by targeting current and former employees at DuPont and Teijin and hiring them to serve as consultants, then asking these consultants to reveal information that was confidential and proprietary.

The indictment alleges that in July 2002, Kolon obtained confidential information related to an aspect of DuPont’s manufacturing process for Kevlar, and within three years, Kolon had replicated it. This successful misappropriation of DuPont’s confidential information, the indictment alleges, spurred Kolon leadership to develop a multi-phase plan in November 2005 to secure additional trade secret information from its competitors by targeting people with knowledge of both pre-1990 para-aramid technology and post-1990 technologies.

Kolon is alleged to have retained at least five former DuPont employees as consultants. Kolon allegedly met with these people individually on multiple occasions from 2006 through 2008 to solicit and obtain sensitive, proprietary information that included details about DuPont’s manufacturing processes for Kevlar, experiment results, blueprints and designs, prices paid to suppliers, and new fiber technology. In cases where the consultants could not answer Kolon’s specific and detailed questions, Kolon allegedly requested the consultants to obtain the information from current employees at DuPont.

In addition to the corporation itself, the following Kolon executives and employees from Seoul were charged with conspiring together to steal trade secrets and obstruction of justice for deleting information from their computers:

Jong-Hyun Choi, 56, was a senior executive overseeing the Heracron Business Team. He allegedly met with other top executives at Kolon to develop the directives to secure consultants and directly participated in carrying out the directives.

In-Sik Han, 50, managed Kolon’s research and development related to Heracron and was allegedly responsible for overseeing the “consulting” sessions with ex-DuPont employees.

Kyeong-Hwan Rho, 47, worked for Kolon for more than 25 years and served as the head of the Heracron Technical Team beginning in January 2008. He allegedly participated in the consulting sessions.

Young-Soo Seo, 48, reported to Choi and served as the general manager for the Heracron Business Team beginning in November 2006. He allegedly participated in the consulting sessions.

Ju-Wan Kim, 40, was a manager on the Heracron Business Team from September 2007 through February 2009 and reported to Seo. He was the main point of contact at Kolon for at least one of the ex-DuPont employees. He also participated in the consulting sessions.

The conspiracy and theft of trade secrets counts each carry a maximum penalty of 10 years in prison and a fine of $250,000 or twice the gross gain or loss for individual defendants and a fine of $5 million or twice the gross gain or loss for the corporate defendant. The obstruction of justice count carries a maximum penalty of 20 years in prison and a fine of $250,000 or twice the gross gain or loss for individual defendants and a fine of $500,000 or twice the gross gain or loss for the corporate defendant.

The indictment seeks at least $225 million in forfeiture, which represents the approximate gross proceeds of the sale of Heracron from January 2006 through June 2012, along with $341,000 in payments made to former DuPont employees in exchange for trade secret information.”

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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.