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Tag: Lanny A. Breuer

  • Payment Processor For Cybercrime Ring Sentenced To 48 Months In Federal Prison; ‘Operation Trident Tribunal’ Is Ongoing

    recommendedreading1Mikael Patrick Sallnert has been sentenced to 48 months in federal prison for his role in processing payments for a cybercrime ring, the U.S. Justice Department announced.

    Sallnert, 37, is a citizen of Sweden. As part of “Operation Trident Tribunal,” Sallnert was arrested in Denmark on Jan. 19, 2012, and extradited to the United States in March 2012. He pleaded guilty on Aug. 17, 2012, to one count of conspiracy to commit wire fraud and one count of accessing a protected computer in furtherance of fraud, the Justice Department said.

    “Payment processors like this defendant are the backbone of the cybercrime underworld,” said U.S. Attorney Jenny A. Durkan of the Western District of Washington.  “As an established businessman, this defendant put a stamp of legitimacy on cyber criminals.  He was involved in defrauding thousands of victims, and his actions contributed to insecurities in e-commerce that stifle the development of legitimate enterprises and increase the costs of e-commerce for everyone.”

    If Durkan’s name rings familiar to PP Blog readers, it’s because her office is involved in an investigation into the activities of a group of “sovereign citizens” operating in the Pacific Northwest. Kenneth Wayne Leaming, a figure in the AdSurfDaily Ponzi scheme story, is being prosecuted by Durkan’s office amid allegations he filed false liens against at least five public officials in the ASD Ponzi scheme case.

    Sallnert, prosecutors said, provided payment-processing services for “scareware” vendors.

    “Mikael Patrick Sallnert played an instrumental role in carrying out a massive cybercrime ring that victimized approximately 960,000 innocent victims,” said Assistant Attorney General Lanny A. Breuer. “By facilitating payment processing, Sallnert allowed the cybercrime ring to collect millions of dollars from victims who were duped into believing their computers were compromised and could be fixed by the bogus software created by Sallnert’s co-conspirators.  Cybercrime poses a real threat to American consumers and businesses, and the Justice Department is committed to pursuing cybercriminals across the globe.”

    Operation Trident Tribunal is an “ongoing, coordinated enforcement action targeting international cybercrime,” prosecutors said.

    “This cyber crime ring spanned multiple countries—increasing the threat it posed and complicating the necessary law enforcement response,” said Laura M. Laughlin, special agent in charge of the FBI’s Seattle Division.  “Thanks to the commitment of many foreign partners and FBI entities across the nation, we were able to dismantle that threat and ensure Mr. Sallnert faced justice.”

    Scams often rely on international payments processors to fleece their victims.

     

  • KABOOM! Money-Services Firm That Turned A Blind Eye To International Scammers Will Forfeit $100 Million After Probe By U.S. Postal Inspection Service

    “MoneyGram knowingly turned a blind eye to scam artists and money launderers who used the company to perpetrate fraudulent schemes targeting the elderly and other vulnerable victims.” — Lanny A. Breuer, Assistant Attorney General, Nov. 9, 2012

    BULLETIN: The price of willful blindness just went up if you’re a money-services business that facilitates international mass-marketing fraud.

    A Dallas-based company that turned a blind eye to scammers using its money-transfer system will forfeit $100 million and has admitted “to criminally aiding and abetting wire fraud and failing to maintain an effective anti-money laundering program,” the U.S. Department of Justice said this morning.

    MoneyGram International Inc. and the Justice Department also have entered into a deferred-prosecution agreement in which the company will adopt “a worldwide anti-fraud and anti-money laundering standard” and implement other changes, the agency said.

    The case against MoneyGram was brought by federal prosecutors in the Middle District of Pennsylvania after a probe by the U.S. Postal Inspection Service.

    MoneyGram’s “broken corporate culture led the company to privilege profits over everything else,” said Lanny A. Breuer, assistant attorney general and head of the Justice Department’s Criminal Division.

    “Thousands of citizens in Pennsylvania and other states suffered heartbreaking financial losses for years because of these international telemarketing schemes which depended on MoneyGram’s facilities to give them an electronic highway to move their illegal profits quickly out of the country,” said U.S. Attorney Peter Smith. “The determined work of U.S. Postal Inspectors and federal prosecutors disrupted and closed that electronic highway, hopefully for good.”

    A top postal inspector said that scammers who took advantage of MoneyGram’s laxity targeted “the most vulnerable in our society.”

    “Businesses are supposed to provide their customers with fair and honest services,” said Karen V. Higgins, inspector in charge of the Philadelphia Division.

    From the Justice Department statement (italics added):

    According to court documents, starting in 2004 and continuing until 2009, MoneyGram violated U.S. law by processing thousands of transactions for MoneyGram agents known to be involved in an international scheme to defraud members of the U.S. public.  MoneyGram profited from the scheme by collecting fees and other revenues on the fraudulent transactions. 

    The scams – which generally targeted the elderly and other vulnerable groups – included posing as victims’ relatives in urgent need of money and falsely promising victims large cash prizes, various high-ticket items for sale over the Internet at deeply discounted prices or employment opportunities as “secret shoppers.”  In each case, the perpetrators required the victims to send them funds through MoneyGram’s money transfer system. 

    Despite thousands of complaints by customers who were victims of fraud, MoneyGram failed to terminate agents that it knew were involved in scams.  As early as 2003, MoneyGram’s fraud department would identify specific MoneyGram agents believed to be involved in fraud schemes and recommended termination of those agents to senior management.  These termination recommendations were rarely accepted because they were not approved by executives in the sales department and, as a result, fraudulent activity grew from 1,575 reported instances of fraud by customers in the United States and Canada in 2004 to 19,614 reported instances in 2008.  Cumulatively, from 2004 through 2009, MoneyGram customers reported instances of fraud totaling at least $100 million.

    “In addition to forfeiting $100 million, which will be used to compensate victims, MoneyGram must for the next five years retain a corporate monitor who will report regularly to the Justice Department,” Breuer said.

  • UPDATE: David Lewalski, Head Of Botfly LLC Ponzi Caper In Florida, Sentenced To 20 Years; In Rationalizing $30M Fraud Scheme, Lewalski Painted Investigators As Bogeymen, Complaining About ‘Orwellian Totalitarian Tactics’ As He Called Victims’ Advocate A ‘Nazi’ And ‘Bi***’

    David R. Lewalski, the Florida man who ran a $30 million commodities Ponzi and fraud scheme known as Botfly LLC and persuaded at least one investor to pony up cash to pay for his defense, has been sentenced to 20 years in federal prison.

    Elements of the Lewalski caper were reminiscent of elements of the alleged AdSurfDaily Ponzi scheme, which also operated from Florida. Vile language was directed at investigators in both cases, and Lewalski urged victims not to cooperate with authorities. One person gave Lewalski $50,000 to pay for a lawyer — after Lewalski jetted to Europe on a private Gulfstream IV a day after Florida investigators implicated him in a Ponzi scheme, according to court filings.

    ASD President Andy Bowdoin also is asking his members to pony up for his defense to Ponzi charges. A number of ASD members have urged fellow members not to cooperate with authorities.

    After his European junket, Lewalski eventually came back to the United States and ensconced himself in a swanky hotel suite overlooking Central Park in New York while pretending to be elsewhere, according to court filings.

    The U.S. Postal Inspection Service alleged that Lewalski complained to investors he defrauded about “recent ‘Orwellian’ totalitarian tactics” employed by U.S. investigators in Ponzi scheme cases, instead of accepting accountability for his fraud.

    Assistant U.S. Attorney General Lanny A. Breuer joined U.S. Attorney Robert E. O’Neill of the Middle District of Florida in making the announcement about Lewalski’s prison sentence.

    In September, Breuer joined with U.S. Attorney Ronald C. Machen Jr. of the District of Columbia in announcing that $55 million had been returned to ASD victims. The U.S. Secret Service seized the money in August 2008.

    Bowdoin called investigators “Satan.” Other ASD members called them “Nazis” and “goons.”

    In the Botfly case, Lewalski described a victims’ advocate a “c[$%!]” and a “Nazi,” according to court filings. In one rant, Lewalski allegedly said, “So f[$%!] her what a bitch.”

    Court documents also allude to a woman who allegedly was called an “FDLE chick” and described by Lewalski as “nuts” and a “bitch.”

    FDLE is the acronym of the Florida Department of Law Enforcement, which assisted in the state and federal probes of Lewalski.

     

  • URGENT >> BULLETIN >> MOVING: ALLEGED ‘PUPPETMASTERS’ EXPOSED: Feds Charge 5 Attorneys, 2 Mob Figures And CPA In Extortion Scheme That Led To ‘Illegal Takeover’ Of FirstPlus Financial Group Inc.; Scheme Featured ‘Fraudulent SEC Filings,’ U.S. Attorney Says

    URGENT >> BULLETIN >> MOVING: Thirteen people have been arrested, including five attorneys, a CPA, two alleged mob associates and others in a spectacular case that alleges the mafia and its underlings illegally took over FirstPlus Financial Group Inc., a publicly held company in Texas.

    “[T]he defendants gave new meaning to ‘corporate takeover’ by looting a publicly traded company to benefit their criminal enterprise,” said U.S. Attorney Paul J. Fishman of the District of New Jersey.

    Charged were attorneys William Maxwell, Cory Leshner, David Adler, Gary McCarthy and Donald Manno. Their ages and addresses were not immediately clear. Howard Drossner, whom federal prosecutors described as a CPA, also was charged.

    Nicodemo S. Scarfo, an alleged member of La Cosa Nostra and the Lucchese organized crime family, also was charged, as was Salvatore Pelullo, an alleged LCN and Lucchese family associate.

    “Through rampant self dealing, fraudulent SEC filings and more traditional mob methods, the defendants allegedly stole $12 million from shareholders,” Fishman said. “Particularly in these economic times, investors should be free to invest in public companies without fear that violent criminal organizations are their puppetmasters.  And the public deserves to rely with confidence on corporate officials and professionals whose positions require them to act in the best interest of shareholders, not members of organized crime.”

    “The indictment alleges that Mr. Scarfo and Mr. Pelullo used economic extortion and threats of violence to seize and maintain control of a publicly traded company, successfully removing its entire existing board of directors and management,” said Assistant Attorney General Lanny A. Breuer.  “Once in control, they allegedly used their criminal enterprise to extract millions of dollars from the company to fund their lavish lifestyles.”

    Breuer is head of the Justice Department’s Criminal Division.

    Read the Feds’ news release for other names and details.

  • URGENT >> BULLETIN >> MOVING: AdSurfDaily Ponzi Scheme Example Of ‘Insidious’ Financial Crime, Head Of Justice Department’s Criminal Division Says; Top Officials, U.S. Secret Service Issue Statement In Support Of Victims; Obama Task Force Monitoring ASD Case

    Assistant Attorney General Lanny Breuer, head of the Justice Department's Criminal Division.

    URGENT >> BULLETIN >> MOVING: The AdSurfDaily Ponzi scheme is an example of an “insidious” financial crime, the head of the U.S. Department of Justice’s Criminal Division said moments ago in a special statement on how forfeiture laws were used to protect ASD victims.

    Meanwhile, a top official of the U.S. Secret Service described Florida-based ASD as a “criminal enterprise.”

    ASD members who filed approved claims through the government’s remissions program will receive back tens of millions of dollars owing to the quick actions of the U.S. Secret Service and federal prosecutors in the District of Columbia in 2008, officials in Washington said.

    Victims who filed remissions claims and demonstrated losses will be compensated at 100 percent, a rare total, a source with knowledge of the process told the PP Blog last week.

    “[F]orfeiture is a powerful tool for ensuring that victims of financial fraud are made whole,” Assistant Attorney General Lanny A. Breuer said today. “Returning funds to victims is a key goal in our mission to combat financial crimes. We will continue to use every tool at our disposal to bring justice to the citizens defrauded by these insidious schemes.”

    Breuer was backed by U.S. Attorney Ronald C. Machen Jr. in the District of Columbia.

    U.S. Attorney Ronald C. Machen Jr.

    “We are putting $55 million back into the pockets of innocent victims of this online Ponzi scheme,” said Machen.  “As we did in this case, we will continue to work with our law enforcement partners to recover every penny we can find for victims of financial fraud.”

    A top Secret Service official said today that ASD was a “criminal enterprise” and that the remissions program represented a positive outcome for victims of an elaborate fraud scheme.

    “With all of our efforts to punish and deter this criminal enterprise, the rights of innocent parties are protected and will subsequently be returned,” said Assistant Director A.T. Smith of the Secret Service’s Office of Investigations. “This substantial remittance not only emphasizes the cooperation between the Secret Service, U.S. Attorney’s Office, and the Department of Justice, but promotes positive community impact by returning these funds to innocent victims.”

    The U.S. Secret Service “safeguards the nation’s financial infrastructure and payment systems to preserve the integrity of the economy,” said Smith.

    Today’s statement by the officials confirmed that President Obama’s Financial Fraud Enforcement Task Force, which was created in November 2009 to root out fraud, has been monitoring ASD developments and assisting in the case.

    Information for ASD victims is accessible by dialing this number:

    1-800-644-1535

    Victims who use the mail and have questions should contact:

    Basizette Stribling
    Victim Witness Assistant
    Re: AdSurf Daily
    United States Attorney’s Office for the District of Columbia
    555 Fourth Street NW
    Washington, D.C. 20530

    ASD President Andy Bowdoin was arrested by the Secret Service in December 2010. He was charged with wire fraud, securities fraud and selling unregistered securities. Bowdoin, 76, is free on bail and awaiting trial.

  • BULLETIN: Feds Make Criminal Bust In Alleged Forex Fraud; Nicholas Cox Of Integra Capital Management LLC Arrested In North Carolina; Allegations In Companion Civil Case Destroy Myth That Companies That Issue 1099s Could Not Possibly Be Operating Scams

    A North Carolina man sued by the CFTC last year in an alleged $3 million Forex and commodities Ponzi scheme now has been arrested by federal agents on criminal charges.

    The allegations in the case destroy a myth advanced by financial hucksters and shills that a company that issues 1099 tax forms could not possibly be operating a scam.

    Nicholas Cox, 34, was indicted by a federal grand jury on Tuesday. He is charged with seven counts of mail fraud, one count of conspiracy to commit mail fraud and one count of conspiracy to commit money laundering, federal prosecutors said.

    The announcement of the arrest was made in Washington by Assistant Attorney General Lanny A. Breuer and U.S. Attorney Anne M. Tompkins of the Western District of North Carolina.

    Breuer is the head of the Justice Department’s Criminal Division, and the case was brought by elements of the interagency Financial Fraud Enforcement Task Force created by President Obama in 2009, officials said.

    Cox, who was arrested in Denton, N.C., was one of the principals of Integra Capital Management LLC. An alleged Integra co-conspirator, Rodney Whitney, also was charged criminally, and already has pleaded guilty to conspiracy to commit mail fraud, wire fraud and money-laundering, prosecutors said.

    Whitney also is a defendant in the CFTC action.

    Integra’s scheme operated between September 2006 and January 2009, luring investors with tales about handsome “dividends,” prosecutors charged.

    Cox and Whitney “provided false and fraudulent information, including prospectuses, contracts, tax forms, account statements and other documents, to current and prospective investors to obtain and misappropriate more than $3.29 million in investor funds,” prosecutors said.

    They also lied about their experience and credentials, prosecutors said.

    In September 2010, the CFTC said Whitney “distributed false account statements and false 1099 tax forms to Integra Capital’s customers, showing that their investments were profitable.

    “Instead,’ the CFTC charged, “the defendants’ trading accounts consistently lost money.”

    It is common for Forex fraudsters to claim that a company that issues 1099s could not possibly be operating a fraud. Similar claims are made in the universes of HYIP and autosurf fraudsters.

    If the allegations in the Integra case are true, it means that, not only did a corrupt company issue 1099s, it also issued fraudulent 1099s that reflected gains that did not exist, thus potentially causing participants to pay taxes on phantom profits.

    “At least” four of Integra’s customers received bogus 1099s, the CFTC said last year.

    One of the 1099s showed a bogus gain of more than $226,000, the CFTC said. Another showed a bogus gain of $81,500. Still others showed bogus gains of more than $48,000 and more than $5,000.

  • SPECIAL REPORT: Investor In Alleged Florida Forex Caper Arrested For Bankruptcy Fraud; Botfly LLC Ponzi Case Reminiscent Of ASD Case; Female Investigator Called Vile Names; Accused Schemer David Lewalski Shifted Blame To Government, Feds Say

    UPDATED 1:14 P.M. EDT (U.S.A.) A Florida man who allegedly received $1.5 million from an international Forex fraudster now jailed in the United States has been arrested on charges of bankruptcy fraud, federal prosecutors said.

    The three-count indictment against Jon Jerald Hammill, 39, of St. Petersburg, was unsealed yesterday. It marked the fourth major Ponzi-related event in Florida in recent days. The state is the site of some of the most complex fraud investigations in the nation, and the case against David R. Lewalski — from whom Hammill and his company allegedly received money — is no exception.

    Hammill, whose arrest was announced in Washington yesterday by Assistant Attorney General Lanny A. Breuer, was accused of failing “to disclose that he had received more than $100,000″ from Lewalski’s company prior to the filing of his bankruptcy petition” in February 2009. He is further accused of not disclosing his ownership of a shell company into which payments from Lewalski’s Ponzi scheme were routed and not disclosing his business relationship with Lewalski.

    Although Hammill’s Chapter 7 bankruptcy initially was granted in July 2009, U.S. Bankruptcy Trustee Donald F. Walton later reopened the case and sought to revoke Hammill’s discharge for fraud. In court filings, Walton said Hammill invoked his 5th Amendment right against self-incrimination when questioned about his dealings with Lewalkski’s company, which was known as Botfly LLC.

    Breuer is the head of the Criminal Division of the U.S. Department of Justice. The federal probe into the alleged $29 million Botfly Forex caper is being led by U.S. Attorney Robert O’Neill of the Middle District of Florida, with the U.S. Postal Inspection Service in Washington as the lead agency. O’Neill and his predecessor — former U.S. Attorney A. Brian Albritton — have squared off against against a series of spectacular fraud schemes operating in the region.

    Among the cases are the Beau Diamond Ponzi scheme, the David Merrick Ponzi scheme known as TIRN, the $220 million Forex Ponzi scheme of Jamaican David A. Smith and the alleged EMG/Finanzas Forex fraud. Investigators say they have traced proceeds from the EMG/Finanzas fraud to the international narcotics trade. A task force working in the region also did investigative legwork in the alleged AdSurfDaily Ponzi scheme.

    Some of the cases have elements that only can be described as bizarre and deeply disturbing. In the Lewalski case, for instance, it is alleged that Lewalski discussed a plan by which he’d divert blame to the government for his legal predicament in a bid to get his victims to pay for his defense.

    By making the government the bogeyman, Lewalski hoped victims would come to believe that he — as opposed to investigators — offered the best shot of getting back their money, according to court filings.

    At least one person gave Lewalski $50,000 to pay for a lawyer — and this occurred after Lewalski had chartered a private Gulfstream IV jet at a cost of $172,744 to fly from the United States to Belgium one day after he was charged civilly in Florida, according to court filings.

    One women — an attorney for the court-appointed receiver in Florida’s civil case — was made the subject of misogynistic rants by Lewalski, according to court filings. The rants were cited by federal prosecutors who argued successfully that Lewalski should not be released on bond.

    Prosecutors also argued that Lewalski had spent astronomical sums of investors’ money on luxuries in the United States and Europe and advised investors to take the 5th Amendment when questioned. In court filings, prosecutors argued that Lewalski also sought to tamper with witnesses.

    Lewalkski, prosecutors said, told “family members and other potential witnesses to stay quiet and not cooperate with law enforcement.”

    The receiver’s attorney was called a “c[$%!]” and a “Nazi,” according to court filings. In one rant, Lewalski allegedly said, “So f[$%!] her what a bitch.” Court documents also allude to a woman who allegedly was called an “FDLE chick” and described by Lewalski as “nuts” and a “bitch.”

    It was not immediately clear if Lewalski was talking about the receiver’s attorney or a different woman employed by the Florida Department of Law Enforcement  when making the alleged “FDLE chick” remark. In the context of the remark, however, Lewalski is alleged to have discussed a “nuclear option.”

    Separately, the U.S. Postal Inspection Service alleged that Lewalski complained to investors he defrauded about “recent ‘Orwellian’ totalitarian tactics” employed by U.S. investigators in Ponzi scheme cases, instead of accepting accountability for his fraud.

    But even as Lewalski was grumbling that his U.S. assets had been frozen, he allegedly did not tell his investors what had happened to their money and why they had not been paid as promised prior to the seizure. Instead, according to the investigating postal inspector, he talked about money he was able to access in Europe after he left the United States hastily, saying he had as many as six offshore accounts.

    Among Lewalski’s other claims was that he had been “investigated and cleared by the Securities and Exchange Commission,” according to court filings. Members of ASD also have claimed that ASD, which was accused of orchestrating a $110 million international fraud from Florida, was given the green light by the SEC.

    No evidence has surfaced in either the ASD case or the Botfly case that the SEC approved of the companies’ operations. Meanwhile, ASD members also have directed rants at prosecutors and investigators, describing them as “goons,” “Nazis,” merchants of “Satan” and criminals. One ASD member proposed that a federal prosecutor be placed in a medieval torture rack, with ASD members at large drawing straws to determine who got the honor of turning the torture wheel.

    Another ASD member proposed that a “milita” storm Washington in defense of ASD. Still another said that the company’s critics consisted of “Rats, Bed Bugs, Maggots, Cockroaches And Everything Else.”

    Lewalski, 47, operated Botfly from his mother’s home in Bayonet Point, Fla., according to court records.

    After being charged civilly by the state of Florida in April 2010, Lewalski immediately left the United States, spending the next seven months in Europe, according to court filings.

    He is believed to have returned to the United States in October 2010, but investigators said he pretended still to be in Europe. Lewalski was arrested in New York on November 4, 2010. Prosecutors said he was staying in a luxury suite atop the Mandarin Oriental Hotel for which he had paid $143,000 in advance with investors’ money.

    The Mandarin bills itself “the most breathtaking luxury hotel in New York,” and Lewalski’s suite overlooked Central Park, according to court records.

    Visit the site of the court-appointed receiver in the Lewalski Forex Ponzi case.

  • FEDS: Illegal Money-Transmitting Businesse Operating In ‘Shadows’ Funneled $172 Million Offshore For ‘Shell’ Companies; Murky Enterprises Blocked From Using Oregon Banks ‘Like The Corner ATM’

    Tigard, a small city in Oregon, was home to Victor Kaganov. Kaganov has pleaded guilty to operating an unlicensed money-transmitting business that funneled $172 million to at least 50 countries. Prosecutors said he established "shell companies" for Russian clients. PHOTO: Wikipedia

    An Oregon man living in a small town set up “numerous” shell companies for Russian clients and funneled more than $172 million to at least 50 countries, prosecutors said.

    Victor Kaganov, 69, of Tigard, has pleaded guilty to charges of operating an unlicensed money-transmitting business. Tigard is small city whose population is about 47,000.

    Kaganov was born in Russia. He moved to the United States in 1998 and became a naturalized citizen, prosecutors said.

    At least one of the shell companies purported to have a tie to Cyprus, according to records. At least three of the companies used the word “Fishing” in their corporate names. Some used the word “Financial.”

    The announcement of the guilty plea was made in Washington by Assistant Attorney General Lanny A. Breuer, the head of the Criminal Division of the U.S. Department of Justice.

    Using stark language, Breuer said U.S. investigators followed the money to expose the crime and were committed to exposing similar crimes. The FBI has repeatedly warned Congress about a “shadow” banking system and shell companies set up to disguise crimes.

    “Now more than ever, we are determined to bring to justice those who attempt to hide funds in U.S. financial institutions,” Breuer said.

    The probe was led by the office of U.S. Attorney Dwight C. Holton of the District of Oregon. Holton, like Breuer, also used stark language when describing the Oregon caper.

    “When shell corporations are illegally manipulated in the shadows to hide the flow of tens of millions dollars overseas, it threatens the integrity of our financial system,” Holton said. “Sunshine kills the stink of corruption — our laws aim to bring the sunshine in, and we will enforce these laws vigorously.”

    Holton and Breuer were backed by Oregon’s top FBI agent, who also used stark language.

    “We will not allow Oregon to be used like the corner ATM for people in foreign countries,” said Arthur Balizan, special agent in charge. “Crimes like these eat away at the stability and prosperity of the American financial system.”

    Agents determined that Kaganov made at least 4,200 illegal wire transfers.

    “In order to move money in and out of the United States, Kaganov created various shell corporations under Oregon law, and then opened bank accounts into which he deposited money he received from his Russian clients,” prosecutors said. “Kaganov admitted he would then wire the money out of the accounts based on wire instructions he received from his clients.”

    Kaganov’s operation complied with neither Oregon law nor U.S. law, prosecutors said.

  • Justice Department Using Undercover Agents To Battle White-Collar Criminals; Top Official Says Investigative Tactics Normally Used To Prosecute Organized Crime Figures Useful In Battling Fraud Epidemic

    EDITOR’S NOTE: The remarks below are excerpted from a speech last week in New York by Assistant U.S. Attorney General Lanny A. Breuer. As the PP Blog has previously reported, the Justice Department and agencies such as the FBI and U.S. Secret Service have been using undercover operatives to infiltrate criminal operations and networks used by the criminals.

    One of the FBI investigations Breuer referenced was the Trevor Cook Ponzi scheme in Minneapolis. The scheme consumed tens of millions of dollars, defrauding victims of at least $158 million. Many mysteries remain in the case.

    Meanwhile, undercover operatives also recently were used to expose penny-stock schemes operating in Florida.

    It also is known that the Secret Service used undercover operatives in the AdSurfDaily case, the INetGlobal case, the Regenesis 2×2 case, the Legisi case and a case involving alleged international fraudster Vladislav Horohorin, accused of using criminal forums to peddle stolen credit-card information.

    Here, now, some excerpts from Breuer’s speech . . .

    Part of Trevor Cook's stash.

    “Now, as I’m sure you know, financial criminals can be extraordinarily innovative, and they are often expert at covering their tracks. So we are always looking for creative ways to gather the evidence we need to bring financial criminals to justice. To that end, we have begun increasingly to rely, in white collar cases, on undercover investigative techniques that have perhaps been more commonly associated with the investigation of organized and violent crime.

    “As part of this effort, we have significantly strengthened the Criminal Division’s Office of Enforcement Operations (known as OEO), which is the office in the Justice Department that reviews and approves all applications for federal wiretaps from across the country. We have a dynamic new OEO Director, Paul O’Brien, and we’ve substantially increased the number of attorneys at OEO who review these wiretap applications, adding to their ranks experienced prosecutors and recent graduates who have completed federal clerkships. As a result, the number of wiretaps we authorize – in all types of cases – has gone up.

    “Let me give you just two examples of white collar cases in which we have used undercover techniques, both of which also highlight areas in which we have stepped up our white collar enforcement efforts more generally.

    “The first example is the case of Trevor Cook, which was prosecuted by the U.S. Attorney’s Office in Minneapolis. Mr. Cook is just one of dozens of individuals whom we’ve prosecuted in recent months for participating in investment fraud schemes. Over the course of several years, Mr. Cook schemed to defraud at least 1,000 people out of approximately $190 million by pretending to sell them investments in a foreign currency trading program.

    “In reality, he was pocketing the money or using it to pay off other investors. As was recently reported in the New York Times, we gathered evidence against Mr. Cook by using an undercover informant to record his transactions and conversations. [Cook] pleaded guilty earlier this year and was recently sentenced to 25 years in prison.

    “Trevor Cook is one of literally hundreds of financial criminals who have preyed upon vulnerable, individual investors and bilked them out of their savings using investment fraud schemes. And as with Mr. Cook, we have been prosecuting these people aggressively, all over the country – from New Jersey and Connecticut to Texas and California, and everywhere in between.

    “The second example comes from our enhanced efforts in the area of FCPA enforcement. Earlier this year, as I’m sure many of you know, we indicted 22 defendants in the military and law enforcement products industry for their participation in widespread schemes to bribe foreign government officials. These indictments resulted from the Department’s most extensive use ever of undercover law enforcement techniques in an FCPA investigation, and they represent the single largest prosecution of individuals in the history of our FCPA enforcement efforts. In September, one of the defendants in the case, Richard Bistrong, pleaded guilty . . .

    “Over the last 18 months, we’ve devoted significant additional resources to the Criminal Division’s Fraud Section. We’ve recruited talent not only from white shoe law firms, but also from a deep pool of prosecutors around the country who bring with them extensive experience in prosecuting everyone from violent mobsters to dangerous terrorists. We are now bringing that extraordinary talent and experience to bear on prosecuting financial fraudsters.”

    See related story on alleged Pathway To Prosperity Ponzi scheme.

    See related story on alleged Legisi Ponzi scheme.

    See related story on Matt Gagnon and Mazu.com.