“Belmokhtar Indictment Unsealed by U.S. Prosecutor”

July 22, 2013

The Wall Street Journal on July 21, 2013 released the following:

By Margaret Coker

“U.S. prosecutors have unsealed an indictment charging Mokhtar Belmokhtar with masterminding the deadly terrorist attack earlier this year at a southern Algerian gas plant that killed dozens of workers, including three Americans.

Mr. Belmokhtar, an Algerian national who leads an al-Qaeda-inspired Islamist militia in anti-Western attacks across North Africa, is described in the indictment which was announced Friday by the Federal Bureau of Investigation and the U.S. Attorney Preet Bharara as a “fanatical jihadist” who “unleashed a reign of terror … in furtherance of his self-proclaimed goal of waging bloody jihad against the West.”

Mr. Belmokhtar, who was not known to be present during the gas plant attack, is currently at large. The U.S. government has put a $5 million reward for information leading to his capture or death.

The legal charges, described in an eight-count complaint, are related to this year’s attack on the gas plant operated by British Petroleum, Norway’s Statoil, Japan’s JGC Corp. and Algeria’s Sonatrach, as well as other terrorist attacks allegedly committed by al Qaeda-linked organizations and Mr. Belmokhtar over several years. The charges include conspiracy to provide material support to al-Qaeda, kidnapping of internationally protected persons and conspiring to use a weapon of mass destruction.

U.S. authorities have been pursuing charges against Mr. Belmokhtar primarly because of the loss of American lives in the Jan. 16 incident whereby a militia under Mr. Belmokhtar’s control invaded the Tiguentourine gas plant in southern Algeria. After a four-day siege, the Algerian military sent anti-terrorist troops to free the hostages, sparking heated battles with Mr. Belmokhtar’s men. A total of 37 hostages were killed, including three U.S. citizens.

On the day after the siege ended, Mr. Belmokhtar appeared in an online video claiming responsibility for the attack on behalf of al-Qaeda.

U.S. officials said that this claim was confirmed by three of the hostage-takers involved in the siege who were arrested and detained by Algerian authorities and later separately interviewed by U.S. law enforcement officers. The hostage-takers each acknowledged their membership in an al Qaeda group, of which Mr. Belmokhtar was the “emir,” and further stated that they had received military training in another country prior to traveling to Algeria to conduct the attack in the name of al Qaeda, according to a press release issued by the FBI on Friday.

“Belmokhtar brought terror and blood to these innocent people and now we intend to bring Belmokhtar to justice,” Manhattan U.S. Attorney Preet Bharara said in a statement.

Mr. Belmokhtar was designated as a foreign terrorist by the U.S. Department of Treasury in 2003 for his participation in al Qaeda-linked organizations across North Africa, but until the January attack he was not known to have killed any Americans. According to the indictment, Mr. Belmokhtar orchestrated terror attacks including the kidnapping of U.N. diplomats and other Western hostages.”

Mr. Belmokhtar is also on Interpol’s Red Notice List here.

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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

————————————————————–

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

————————————————————–

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.


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

January 19, 2012

Reuters on January 18, 2012 released the following:

“By Basil Katz and Grant McCool

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

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

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

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

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

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

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

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

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

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

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

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

A Dell representative said the company had cooperated with authorities.

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

SEC: SYSTEMIC DISHONESTY

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

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

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

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

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

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

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

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

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

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

MORE HEADACHES FOR SAC

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

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

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

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

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

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

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

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

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

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

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN Sanctions Removal.

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


US set to try soldier Pfc. Bradley Manning, over leaks, targets Assange

December 15, 2011

The Associated Press (AP) on December 15, 2011 released the following:

“By RAPHAEL G. SATTER
Associated Press

LONDON (AP) — As the suspected source for the biggest intelligence leak in American history faces his first hearing Friday, U.S. prosecutors have their eye on another prize: the man who disclosed the documents to the world.

When WikiLeaks’ spectacular disclosures of U.S. secrets exploded onto the scene last year, much of Washington’s anger coalesced around Julian Assange, the silver-haired globe-trotting figure whose outspoken defiance of the Pentagon and the State Department riled politicians on both sides of the aisle. Pfc. Bradley Manning, long under lock and key, hasn’t attracted the same level of ire.

The pair’s fates have been intertwined, however, even if the Australian-born computer hacker says he didn’t know the private’s name until after news of his arrest emerged in June 2010. Manning’s alleged disclosures put Assange at the epicenter of a diplomatic earthquake.

Assange in turn has worked energetically to drum up support for the imprisoned soldier – all while emphasizing that the way his anti-secrecy site was set up meant he could not be sure if Manning was his source.

U.S. investigators have been scrutinizing links between the two as they explore the possibility of charging the Australian with serious crimes under U.S. law. A Virginia grand jury is studying evidence that might link Assange to Manning, but no action has yet been taken.

In chat logs recorded by Adrian Lamo, the hacker who turned Manning in, the 23-year-old private allegedly poured his heart out, laying bare his disillusionment with the military and his decision to ship mountains of classified material to Assange. In the logs – which the military says are genuine – Manning tells Lamo that he’d “developed a relationship with Assange” and hinted at instant messages swapped via a server maintained by the Germany-based Chaos Computer Club.

But even according to the logs, Manning and Assange do not seem to have learned very much about each other. “He won(‘)t work with you if you reveal too much about yourself,” Manning is quoted as having said.

At least one media report suggested that prosecutors have struggled without success to flesh out the purported links between the pair. NBC News, citing unnamed military sources, said earlier this year that officials had turned up no evidence of direct contact between Assange and Manning.

In any case prosecutors face formidable obstacles. Experts say that a prosecution under the century-old Espionage Act would risk criminalizing practically any form of investigative journalism. A conspiracy charge, which some have floated as an alternative, would also be tough to prove.

“If Manning steals a bunch of information, and gives it to Julian Assange, I think that would be very difficult to show that that was a conspiracy,” said Benjamin Wittes, a senior fellow at the Brookings Institute. Even if it turns out that Assange had, hypothetically, pushed Manning to divulge the documents, Wittes said it would still be hard to distinguish that from a traditional reporter trying to work a source.

“Is that any different in principle from the relationship between Deep Throat and Bob Woodward?” he asked, referring to the source behind the Watergate scandal and one of the reporters, Woodward, who broke the story.

Inquiries into Assange and WikiLeaks are ongoing. The grand jury has been investigating for more than year and could continue for months or even years longer. Witnesses have been called, though the identities of most are unknown.

A Manning supporter, David House, refused to testify when he was called in June, citing his right against self-incrimination. House said nearly all the questions posed to him centered on Manning. He said he was not asked about Assange.

There remains pressure to haul the Australian before an American judge.

Both Democratic Vice President Joe Biden and Republican presidential hopeful Newt Gingrich described Assange as an information-age terrorist, with Gingrich saying that Assange should be “treated as an enemy combatant.” Others have been even more explicit, with pundits including former vice presidential candidate Sarah Palin calling on American officials to hunt him down.

The bloodthirsty rhetoric may have receded since last year, but the otherwise deeply divided U.S. political establishment remains nearly unanimous in its hostility to Assange.

“At a time when the political parties are polarized, WikiLeaks succeeded in uniting them,” said Steven Aftergood, director of the Project on Government Secrecy at the Federation of American Scientists.

No matter what happens at Manning’s court martial, Assange faces a host of other legal and financial problems.

His WikiLeaks website operation is running out of money and could close by next month. The British Supreme Court could rule on whether to extradite him to Sweden, where he is wanted on sex crimes allegations, as early as next week.

He has spent the last year fighting extraditon from a wealthy supporter’s country estate in southeastern England, where he lives under virtual house arrest.”

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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.


Kingpin’s Son: US Traded Immunity for Information

September 9, 2011

The Associated Press (AP) on September 8, 2011 released the following:

“By MICHAEL TARM
Associated Press

CHICAGO (AP) — The handsome, square-jawed young man held in isolation in a Chicago jail doesn’t deny he was a top lieutenant in his father’s Mexican drug cartel but instead has offered a novel defense for his drug-trafficking.

Vicente Zambada’s lawyers claim he and other cartel leaders were granted immunity by U.S. agents – and carte blanche to smuggle cocaine over the border – in exchange for intelligence about rival cartels engaged in bloody turf wars in Mexico.

Experts scoff at the claim, which U.S. prosecutors are expected to answer in a filing Friday in federal court. But records filed in support of his proposed defense have offered a peek at the sordid world of Mexico’s largest drug syndicate, the Sinaloa cartel, which is run by his father, Ismael Zambada, and Mexico’s most wanted man, Joaquin “El Chapo” Guzman.

It’s a world of brutality, greed and snitching, and federal agents would love to have the younger Zambada pass along more intelligence, especially if it could help bring down his family’s operation or lead to the capture of Guzman, a billionaire who escaped from a Mexican prison in a laundry truck in 2001.

“It comes down to whether he would be willing to give up his dad or Guzman,” said David Shirk, who heads the Trans-Border Institute at the University of San Diego. “Would he be willing to give up his own dad? It seems unlikely.”

Zambada, 35, has rarely been seen since his 2009 arrest in Mexico City, after which Mexican authorities paraded him before TV cameras in a stylish black blazer and dark blue jeans. His suave image was a sharp contrast to a photo of him with moustache and cowboy hat released by the U.S. Treasury Department in 2007.

He may have upgraded his look after he assumed control over cartel logistics in 2008 and, federal officials say, received authority to order assassinations. He was arrested and extradited to Chicago a year later to face trafficking conspiracy charges punishable by up to life in prison.

The Sinaloa cartel is one of Mexico’s most powerful. Named after the Pacific coast state of the same name, it controls trafficking on the border with California and is battling rival cartels in an effort to expand east along the 2,000-mile-long U.S.-Mexico border.

Accustomed to luxury in Mexico, Zambada has been held in a 10-by-6 foot cell in Chicago, is often served meals that have gone cold and hasn’t been outside in 18 months, his attorneys say. U.S. District Court Judge Ruben Castillo told the government Thursday to file a response to those complaints.

Armed marshals led the shackled Zambada into Thursday’s hearing. He appeared at-ease, even smiling and winking at woman sitting on a spectators’ bench.

Castillo will decide later whether Zambada’s provocative immunity claim has any credibility, but many experts said they were skeptical.

“Personally, I think it is a bunch of malarkey,” said Scott Stewart, who analyzes Mexico’s cartels for the Texas-based Stratfor global intelligence company. “I mean, what the defense is saying is that a huge amount of cocaine was allowed to pass into the United States unimpeded. Why would you even have sought his extradition if there was this potential backlash?”

U.S. prosecutors briefly discounted Zambada’s claim in one filing, but more details are expected in Friday’s documents. A spokesman for U.S. Atty. Patrick Fitzgerald would not comment on the allegation. Neither would a Washington spokesman for the U.S. Drug Enforcement Agency, whose agents Zambada claims to have dealt with in Mexico.

However, clandestine intelligence deals are not uncommon, and conspiracy theories abound in Mexico about the government going easy on one cartel to keep the others under control.

The Sinoloa cartel’s adept use of information has helped it gain power as some others waned, trafficking experts say. The government has had only limited success battling it since President Felipe Calderon declared war on the cartels five years ago. Since then, more than 35,000 Mexicans have died – mostly in cartel-on-cartel violence.

Zambada’s lawyers say the U.S. government believed turning a blind eye to the Sinaloa kingpins was an “an acceptable price to pay, because the principal objective was the destruction and dismantling of rival cartels.”

To bolster their claim, they point to the way the U.S. and Colombia fought that country’s once mighty cartels.

The Medellin and Cali cartels were laid low in the 1990s, in part by a divide-and-conquer strategy in which U.S.-backed authorities brought down the former before going after the latter, trafficking experts say. In some cases, they relied on informants.

The demise of Colombia’s cartels and U.S. successes in disrupting smuggling routes in the Caribbean contributed to the spectacular rise in influence and wealth of the Mexican cartels. Today, about 90 percent of U.S.-bound cocaine goes through Mexico, according to the DEA.

Mexican authorities arrested Zambada just hours after he supposedly met DEA agents in a Sheraton Hotel in Mexico City. He told the agents he wanted to start providing information directly to them rather than through a cartel attorney, according to the defense filings.

Experts, though, say the kind of collusion described by Zambada’s attorneys goes far beyond what U.S. authorities were likely to have contemplated.

“I know of no case where immunity like this has been granted,” said George Grayson, author of the book, “Mexico: Narco-Violence and a Failed State?”

However, Zambada and other Sinaloa leaders may have given information to U.S. or Mexican agents even if the immunity claim isn’t true, Stewart and other experts say.

“The Sinaloa cartel has been better than any other cartel in Mexico at framing rival cartels – leaking information that gets their enemies in trouble,” Shirk said.

Jorge Chabat, an international relations professor in Mexico City, said it’s also possible that Sinaloa continued to thrive simply because Mexican authorities decided to focus first on more violent cartels, including a notorious gang in northeastern Mexico known as the Zetas.

“By comparison, the Sinaloas aren’t exactly the Sisters of Charity – but they’re less violent,” he said. “Sinaloa is a little more rational about its violence.””

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.

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