“Taiwanese Father and Son Arrested for Allegedly Violating U.S. Laws to Prevent Proliferation of Weapons of Mass Destruction”

May 7, 2013

The Federal Bureau of Investigation (FBI) on May 6, 2013 released the following:

“CHICAGO— A resident of Taiwan whom the U.S. government has linked to the supply of weapons machinery to North Korea, and his son, who resides in suburban Chicago, are facing federal charges here for allegedly conspiring to violate U.S. laws designed to thwart the proliferation of weapons of mass destruction, federal law enforcement officials announced today.

Hsien Tai Tsai, also known as “Alex Tsai,” who is believed to reside in Taiwan, was arrested last Wednesday in Tallinn, Estonia, while his son, Yueh-Hsun Tsai, also known as “Gary Tsai,” who is from Taiwan and is a legal permanent resident in the United States, was arrested the same day at his home in Glenview, Illinios.

Gary Tsai, 36, was ordered held in custody pending a detention hearing at 1:30 p.m. today before Magistrate Judge Susan Cox in U.S. District Court in Chicago. Alex Tsai, 67, remains in custody in Estonia pending proceedings to extradite him to the United States.

Both men were charged in federal court in Chicago with three identical offenses in separate complaints that were filed previously and unsealed following their arrests. Each was charged with one count of conspiring to defraud the United States in its enforcement of laws and regulations prohibiting the proliferation of weapons of mass destruction, one count of conspiracy to violate the International Emergency Economic Powers Act (IEEPA) by conspiring to evade the restrictions imposed on Alex Tsai and two of his companies by the U.S. Treasury Department, and one count of money laundering.

The arrests and charges were announced by Gary S. Shapiro, U.S. Attorney for the Northern District of Illinois; Cory B. Nelson, Special Agent in Charge of the Chicago Office of the FBI; Gary Hartwig, Special Agent in Charge of Homeland Security Investigations in Chicago; and Ronald B. Orzel, Special Agent in Charge of the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, Chicago Field Office. The Justice Department’s National Security Division and Office of International Affairs assisted with the investigation. U.S. officials thanked the Estonian Internal Security Service and the Estonian Prosecutor’s Office for their cooperation.

According to both complaint affidavits, agents have been investigating Alex and Gary Tsai, as well as Individual A (a Taiwanese associate of Alex Tsai) and a network of companies engaged in the export of U.S. origin goods and machinery that could be used to produce weapons of mass destruction. The investigation has revealed that Alex and Gary Tsai and Individual A are associated with at least three companies based in Taiwan—Global Interface Company Inc., Trans Merits Co. Ltd., and Trans Multi Mechanics Co. Ltd.—that have purchased and then exported, and attempted to purchase and then export, from the United States machinery used to fabricate metals and other materials with a high degree of precision.

On January 16, 2009, under Executive Order 13382, which sanctions proliferators of weapons of mass destruction and their supporters, the Treasury Department’s Office of Foreign Assets Control (OFAC) designated Alex Tsai, Global Interface, and Trans Merits as proliferators of weapons of mass destruction, isolating them from the U.S. financial and commercial systems and prohibiting any person or company in the United States from knowingly engaging in any transaction or dealing with Alex Tsai and the two Taiwanese companies.

In announcing the January 2009 OFAC order, the Treasury Department said that Alex Tsai was designated for providing, or attempting to provide, financial, technological, or other support for, or goods or services in support of the Korea Mining Development Trading Corporation (KOMID), which was designated as a proliferator by President George W. Bush in June 2005. The Treasury Department asserted that Alex Tsai “has been supplying goods with weapons production capabilities to KOMID and its subordinates since the late 1990s, and he has been involved in shipping items to North Korea that could be used to support North Korea’s advanced weapons program.” The Treasury Department further said that Global Interface was designated “for being owned or controlled by Tsai,” who is a shareholder of the company and acts as its president. Tsai is also the general manager of Trans Merits Co. Ltd., which was designated for being a subsidiary owned or controlled by Global Interface Company Inc.

After the OFAC designations, Alex and Gary Tsai and Individual A allegedly continued to conduct business together but attempted to hide Alex Tsai’s and Trans Merit’s involvement in those transactions by conducting business under different company names, including Trans Multi Mechanics. For example, by August 2009—approximately eight months after the OFAC designations—Alex and Gary Tsai, Individual A, and others allegedly began using Trans Multi Mechanics to purchase and export machinery on behalf of Trans Merits and Alex Tsai. Specifically, the charges allege that in September 2009, they purchased a Bryant center hole grinder from a U.S. company based in suburban Chicago and exported it to Taiwan using the company Trans Multi Mechanics. A Bryant center hole grinder is a machine tool used to grind a center hole, with precisely smooth sides, through the length of a material.

The charges further allege that by at least September 2009, Gary Tsai had formed a machine tool company named Factory Direct Machine Tools in Glenview, Illinois, which was in the business of importing and exporting machine tools, parts, and other items to and from the United States. However, the charges allege that Alex Tsai and Trans Merits were active partners in Factory Direct Machine Tools, in some instances procuring the goods for import to the United States for Factory Direct Machine Tool customers.

Violating IEEPA carries a maximum penalty of 20 years in prison and a $1 million fine; money laundering carries a maximum penalty of 20 years in prison and a $500,000 fine; and conspiracy to defraud the United States carries a maximum penalty of five years in prison and a $250,000 fine. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory U.S. Sentencing Guidelines. The government is being represented by Assistant U.S. Attorneys Patrick Pope and Brian Hayes.

The public is reminded that a complaint is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.”

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

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Federal Crimes – Be Proactive

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Federal Crimes – Detention Hearing

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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.


U.S. Seizes $150 Million in Alleged Hezbollah-Linked Cash

August 21, 2012

The Wall Street Journal on August 20, 2012 released the following:

“By Samuel Rubenfeld

U.S. officials said Monday they seized $150 million connected to a scheme in which entities linked to Hezbollah allegedly used the U.S. financial system to launder money through West Africa and back to the group’s base of Lebanon.

The seizure stems from a civil lawsuit filed last year by federal prosecutors in Manhattan against defunct Lebanese Canadian Bank, or LCB, and two Lebanese exchange houses seeking more than $480 million in funds allegedly derived from drug trafficking and other criminal activity passing through the U.S. financial system.

The seizure was reported by The Wall Street Journal, and there’s more here.

Hezbollah is a U.S.-designated foreign terrorist organization. The group’s leadership has denied engaging in money laundering to finance its activity.

Prosecutors said Monday they seized $150 million from a New York correspondent account of Lebanon’s Banque Libano Francaise SAL, or BLF. Société Générale de Banque au Liban, which bought LCB in September 2011 for $580 million, paid for part of the transaction through BLF. The seized funds are substitutes for the money in the LCB account in escrow at BLF, prosecutors said.

The warrants to seize the funds were issued August 15, but made public Monday. Neither BLF nor Société Générale de Banque au Liban were accused of wrongdoing, prosecutors said.

“Money is the lifeblood of terrorist and narcotics organizations, and while banks which launder money for terrorists and narco-traffickers may be located abroad, today’s announcement demonstrates that those banks and their assets are not beyond our reach,” said Manhattan U.S. Attorney Preet Bharara in a statement.

A lawyer for LCB declined to comment to the Journal.

The U.S. Treasury Department designated LCB as a “primary money-laundering concern” under the Patriot Act in February 2011, accusing it at the time of facilitating money laundering by a network of drug traffickers spanning South America, Europe, the Middle East and West Africa.

Société Générale de Banque au Liban acquired LCB’s assets and liabilities following the Treasury’s finding.

According to the civil complaint filed last year, the alleged scheme involved cash sent from Lebanon to the U.S. between January 2007 and early 2011 to buy used cars that were later sold in West Africa for cash.

The money from from the car sales was then allegedly transferred back to Lebanon with proceeds from narcotics trafficking and other crimes, prosecutors said in the complaint.

Correction: The seized funds came from the New York correspondent account of Lebanon’s Banque Libano Francaise SAL, not from a U.S. account at Société Générale de Banque au Liban.”

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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.


Bo Zhang Pleads Guilty in U.S. District Court in Manhattan to Stealing Software Code From the Federal Reserve Bank of New York

May 29, 2012

Reuters on May 29, 2012 released the following:

“Chinese man pleads guilty to NY Fed cyber theft

By Basil Katz

May 29 (Reuters) – A Chinese computer programmer on Tuesday pleaded guilty to stealing software code from the Federal Reserve Bank of New York.

Bo Zhang, 33, was accused of illegally copying the software code to an external hard drive, according to a criminal complaint filed in U.S. District Court in Manhattan. The charge was made public on Jan. 18.

Authorities said the software, owned by the U.S. Treasury Department, cost about $9.5 million to develop.

“I knowingly stole and converted to my use an item owned by the United States government valued at more than $1,000,” Zhang told U.S. Magistrate Judge Michael Dolinger on Tuesday.

“Specifically, while working at the Federal Reserve Bank of New York, I appropriated proprietary software owned by the United States Department of Treasury for my own personal use,” said Zhang, who is a U.S. permanent resident.

Zhang on Tuesday also pleaded guilty to one charge of immigration fraud. He is currently free on $200,000 bail and is due to be sentenced on Oct. 1.

The code, called the Government-wide Accounting and Reporting Program, was developed to help track the billions of dollars the U.S. government transfers daily. The program provides federal agencies with a statement of their account balance, the court documents said.

Zhang was hired as a contract employee in May 2011 by an unnamed technology consulting company used by the New York Fed to work on its computers, court documents said.

According to an April cooperation agreement with Zhang, Manhattan federal prosecutors recommended he be sentenced to one to 1-1/2 years in prison, much less than the potential 10-year maximum term the theft charge carries.

The case is USA v. Bo Zhang, U.S. District Court for the Southern District of New York, No. 12-0390.”

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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 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.


US prosecutors seeking life sentence for former Soviet arms dealer Viktor Bout

April 5, 2012

The Washington Post on April 5, 2012 released the following:

“By Associated Press

NEW YORK — A Russian man who became known as the “Merchant of Death” for his exploits in arms sales markets worldwide is set to learn Thursday how long he’ll be in U.S. prison after his defense lawyers asked a judge to set him free and prosecutors asked that he never get out.

Viktor Bout, 45, faces a mandatory minimum of 25 years in prison and possibly life during sentencing for his conviction on terrorism charges. His lawyers have asked U.S. District Judge Shira Scheindlin to throw out his conviction, saying he’s a political prisoner who stepped into a vindictive U.S. government sting operation.

Federal prosecutors say Bout should spend life in prison because he agreed “without hesitation and with frightening speed” to ship “a breathtaking arsenal of weapons,” including hundreds of surface-to-air missiles, machine guns and sniper rifles along with 10 million rounds of ammunition to men he believed represented a foreign terrorist organization willing to kill Americans in Colombia.

They say his weapons fueled armed conflicts in some of the world’s most treacherous hot spots, including Rwanda, Angola and the Congo and that he was looking for new arms deals in places like Libya and Tanzania when he was arrested.

Lawyers for Bout, who was the inspiration for an arms dealer character played by Nicolas Cage in the 2005 film “Lord of War,” say their client became a political prisoner after Drug Enforcement Administration agents coaxed him from his Russian home to Thailand, where he was arrested in March 2008. They say the charges stemmed from a made-up scenario to deliver weapons to rebels in South America to shoot down American helicopter pilots.

“The relentless pursuit of Viktor Bout and the abominable design to create a criminal case against him that brings him before this court for sentencing is the product of malice and object of private politics stemming from the then White House,” defense attorney Albert Dayan wrote in a letter to Scheindlin, a judge who recently ordered Bout moved from solitary confinement into the general prison population.

Dayan said the prosecution resulted from “outrageous, inexcusable government conduct” to get his client even after Bout rebuffed the first approach by U.S. operatives by saying the Russian government had ordered him to withdraw from any illegal arms deals.

Dayan said his client faked his way through negotiations for a $15 million to $20 million arms deal so he could sell two shoddy cargo planes for $5 million to U.S. government operatives. He said the operatives followed a well scripted dialogue of anti-Americanism that would whip American jurors into “a blind rage … and ultimately to conviction.”

Dayan said Bout’s conviction culminated a plan put in motion by the U.S. to avenge the embarrassing revelation that U.S. military contractors had arranged in late 2003 with Bout-owned or Bout-controlled companies to deliver tents, food and other supplies for U.S. firms working for the U.S. military in Iraq.

The deliveries occurred despite United Nations sanctions imposed against Bout since 2001 because of his reputation as a notorious illegal arms dealer, Dayan said.

The lawyer noted that the U.S. Treasury Department imposed its own ban on dealings with Bout in July 2004, citing in part the “unproven allegation” that Bout made $50 million in profits from arms transfers to the Taliban when Osama bin Laden and al-Qaida were based in Afghanistan.

Federal prosecutors said the government initiated its investigation in 2007 because Bout “constituted a threat to the United States and to the international community based on his reported history of arming some of the world’s most violent and destabilizing dictators and regimes.”

“Although Bout has often described himself as nothing more than a businessman, he was a businessman of the most dangerous order,” prosecutors said in their memo. “Transnational criminals like Bout who are ready, willing and able to arm terrorists transform their customers from intolerant ideologues into lethal criminals who pose the gravest risk to civilized societies.””

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

Federal Crimes – Federal Indictment

Federal Crimes – Appeal

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

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

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


Feds investigating possible fraud at GE’s former subprime unit

January 20, 2012
GE
“General Electric CEO Jeff Immelt, right, waits for the start of the company’s annual shareholders meeting. Tony Dejak/AP file”

iWatch News on January 20, 2012 released the following:

“By Michael Hudson and E. Scott Reckard

Federal authorities are investigating possible fraud at General Electric Co.’s former subprime mortgage arm amid increased public pressure to hold Wall Street accountable for its role in the financial crisis.

The FBI and the U.S. Justice Department are looking into potentially criminal business practices at Burbank, Calif.-based WMC Mortgage Corp. during the home-loan boom, according to four people with knowledge of the investigation. They declined to be identified because of the sensitivity of the investigation.

The government is asking whether WMC used falsified paperwork, overstated borrowers’ income and other tactics to push through questionable loans, two of the people said. They said the probe appears to be focusing on whether senior managers condoned improper practices that enabled fraudulent loans to be sold to investors.

“It’s mostly about: Did they knowingly sell mortgages into the secondary market that they knew were fraudulent?” said one person with direct knowledge of the investigation.

A spokesman for the FBI declined to comment, and the Justice Department did not return telephone calls.

Russell Wilkerson, a spokesman for GE, said the company “as a matter of practice” cooperates with law enforcement on inquiries but does not comment on specific investigations. However, he said any allegation that WMC sold large numbers of fraudulent loans to investors was false.

GE acquired WMC near the height of the mortgage boom in 2004, giving it a major presence in the growing subprime lending market. But by 2007 the California lender was hemorrhaging money and slicing into the conglomerate’s earnings.

The unit was shut down as the housing market buckled. Since then, investors have launched a string of civil lawsuits, and federal authorities began a criminal inquiry.

The FBI’s San Francisco office indicated that it has been looking into WMC’s business practices for nearly two years, according to one of the people who has knowledge of the investigation. The bureau has examined individual WMC loan files and has begun contacting former employees about how the lender handled the sale of mortgages to investors, this person said.

WMC recorded the second-highest number of foreclosures on higher-risk mortgages in America’s 10 hardest-hit real estate zones, according to the U.S. Treasury Department. The company was second only to now-defunct subprime lender New Century Financial Corp. of Irvine, Calif.

For instance, the Treasury report said WMC’s foreclosure rate topped 40 percent in hard-hit California areas such as Merced, Modesto and Stockton.

The FBI and Justice Department had little success in prosecuting mortgage executives after launching investigations in 2008. But there has been increasing pressure, from groups including labor unions and Occupy Wall Street, to find culprits for the devastating housing crash that triggered the financial crisis.

Subprime lenders have long been in the cross hairs.

They issued hundreds of billions of dollars in mortgages to people with shaky credit, then bundled the loans for sale to investors as highly rated securities. When the borrowers couldn’t pay their mortgages, the investments collapsed — leaving investors and lenders saddled with toxic debt.

Lawsuits in state and federal courts have charged that WMC and GE misled investors and other parties in the sale of mortgages and mortgage-backed securities.

An investor lawsuit in federal court, for example, said that a $550-million pool of mortgages originated by WMC and another subprime lender, EquiFirst Corp., included numerous examples of fraud. The lawsuit said a review found inflated borrower incomes and other “material breaches” in 75 percent of the loan files sampled.

GE said it would “vigorously defend” itself, adding that the complaint is “based upon a flawed statistical sampling of a small number of loans.”

“WMC had in place processes to detect and report fraudulent activity,” Wilkerson, the GE spokesman, said. “When any allegations of misconduct at WMC were raised to GE, they were investigated and given an appropriate response by WMC, including the termination of employees.”

WMC was a wholesale lender that issued loans through a network of independent mortgage brokers, making it a less-familiar name than giant retailers such as Ameriquest Mortgage Co. and Countrywide Financial Corp. Still, in 3½ years under GE’s ownership, WMC issued roughly $110 billion in risky home loans.

Federal prosecutors in Los Angeles have said they investigated three prominent high-risk home lenders in Southern California that melted down — Countrywide, New Century and IndyMac Bancorp — without finding clear evidence that top executives intended to defraud anyone. No criminal charges were filed.

Some settlements have been reached. Countrywide co-founder Angelo R. Mozilo paid $67.5 million — much of it covered by insurance — to resolve an SEC case.

Other executives are contesting the suits. Former IndyMac Chairman Michael W. Perry has even created a blog, nottoobigtofail.org, on which he argues he has been scapegoated with false accusations.

The Justice Department has been successful in only two major criminal investigations into the mortgage crisis. Both ended in guilty pleas to egregious fraud. One, at Taylor, Bean & Whitaker Mortgage Corp. in Florida, included the creation of fictitious loans. The other, at U.S. Mortgage Co. in New Jersey, involved selling the same loans twice — once to credit unions and then to home finance giant Fannie Mae.

Some former WMC employees say sales staffers at the lender used fraudulent practices to push through loans borrowers couldn’t afford.

Eight former employees told iWatch News that WMC managers ignored them when they flagged loans supported by misrepresentations such as fake bank statements and pay stubs.

“They didn’t want to hear what you found,” Gail Roman, who worked as a loan auditor at a WMC office in New York, said. “Even if you had enough documentation to show that there was fraud or questionable activity.”

Some ex-employees claim GE officials did too little to root out fraud at WMC, despite warnings from whistleblowers who worked inside the lender. GE disputes those allegations.

White-collar crime experts say the WMC criminal probe is unusual at this late date — more than four years after subprime lenders began to collapse.

“In that area I haven’t heard boo these days,” said Orange County defense attorney David Wiechert, a former federal prosecutor.

This story was the result of a reporting partnership between iWatch News and the Los Angeles Times. Michael Hudson is a staff writer with iWatch News and E. Scott Reckard is staff writer with the Times.”

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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.


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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Richard Rufo Charged in a Federal Criminal Complaint Alleging Disability Fraud

August 12, 2011

The U.S. Attorney’s Office District of New Jersey on August 11, 2011 released the following:

“MINT POLICE OFFICER ARRESTED, CHARGED IN NEW JERSEY FOR ALLEGED DISABILITY FRAUD

CAMDEN, N.J. – A police officer employed by the U.S. Treasury at the Philadelphia Mint was arrested this morning at his Mt. Laurel, N.J., residence for allegedly defrauding the government by collecting disability benefits to which he was not entitled, U.S. Attorney Fishman announced.

Richard Rufo, 49, was taken into custody by special agents of the U.S. Treasury Department’s and Department of Labor’s Offices of Inspector General, and is expected to make an initial appearance this afternoon before U.S. Magistrate Judge Ann Marie Donio in Camden federal court.

Rufo is charged by Complaint with one count of fraud against the United States, filed in connection with his alleged receipt of approximately $173,000 in federal workers’ compensation benefits while making hundreds of thousands in unreported income running a memorabilia business on the side.

According to the Complaint unsealed today:

In September 2008, Rufo reported that he injured his back closing a gate at the mint, and was unable to perform his duties as a result. He also declined an offer to take a sedentary job at the mint, claiming it would be too strenuous. From September 2008 through August 2011, Rufo received compensation benefits of more than $173,000.

On three separate occasions since the reported injury, Rufo completed forms to obtain federal workers’ compensation benefits on which he fraudulently claimed that he had not worked for any employer in the past 15 months, been self-employed, nor received any income or actual earnings outside of the disability payments.

In reality, Rufo operated United Safety Supply Co. (“USS”) – which sells law enforcement badges, pins, patches, coins, t-shirts, and hats – out of his residence. In telephone calls monitored during the investigation, Rufo stated that he has been so busy that trucks had routinely been at his house twice a day for deliveries and boasted that USS had a long list of federal clients.

Rufo was also observed by law enforcement selling memorabilia from a booth at the annual Police Week in Washington, D.C., in May 2010, and setting up tables and selling at the same event in May 2011.

Between September 2008 and November 2010, Rufo made more than $1.1 million in gross receipts and netted approximately $318,000 through his company.

The count with which Rufo is charged carries a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense.

U.S. Attorney Fishman credited special agents of the Department of Treasury Office of Inspector General, under the direction of Special Agent in Charge John L. Phillips; and the U.S. Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, under the direction of Special Agent in Charge Robert L. Panella, with the investigation leading to the arrest.

The government is represented by V. Grady O’Malley, Senior Litigation Counsel, of the U.S. Attorney’s Office Organized Crime\Gangs Unit in Newark.

The charges and allegations contained in the Complaint are merely accusations, and the defendant is considered 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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