Convictions to “Promote” Crime and “Conceal” Illegal Proceeds Vacated Due to Insufficient Evidence of Intent

A recent decision out of the United States District Court for the Eastern District of Virginia adjudicating a seemingly straight-forward alleged fraud and money laundering scheme reminds us that money laundering charges still require the government to establish elements which can be difficult to prove, including, importantly, specific intent.

United States v. Millender involved an investment fraud scheme charged against a husband and wife and their associate. Terry and Brenda Millender were, respectively, the founder and pastor, and the “First Lady” of the Victorious Life Church (“VLC”) in Alexandria, Virginia. The evidence at trial established that Mr. Millender conceived of and founded Micro-Enterprise Management Group (“MEMG”), purportedly for the purpose of helping the poor in developing countries by making small, short-term loans to entrepreneurs who wished to start or expand existing businesses. Mrs. Millender was the co-founder, registered agent, and signatory of MEMG. To fund the enterprise, MEMG solicited “loans” from VLC congregants and other private lenders. MEMG promised its investors high rates of return through profits on the entrepreneur loans and assured them that the loans were securely backed by MEMG assets. Moreover, written materials soliciting investment represented that MEMG had a successful history of making micro-loans in Africa and had established relationships with on-going projects. Later, Mr. Milliner founded a second entity, Kingdom Commodities Unlimited (“KCU”), purportedly for the purpose of brokering Nigerian oil deals, and promising investors substantial returns on what they claimed were short term loans. The defendants solicited over $600,000 from investors from 2008 until 2015.

The Millender opinion reflects the complexity of the different prongs of the money laundering statutes, and their somewhat overlapping and competing requirements. The opinion is particularly noteworthy because of its procedural posture: despite jury verdicts finding guilt, the district court nonetheless found at least as to some counts that there was insufficient evidence as a matter of law of knowledge and specific intent. Continue Reading Money Laundering and Specific Intent Can Be Difficult to Prove

As forecasted in a blog post last summer, the United States Department of Justice (“DOJ”) has again used the money laundering statute to accomplish the otherwise elusive goal of prosecuting foreign officials who allegedly receive bribes. On Monday, DOJ unsealed its Indictment against five Venezuelans employed by or closely connected to Petroleos de Venezuela S.A. (“PDVSA”), the Venezuelan state-owned and state-controlled oil company.

The unsealing of the charges against these five Venezuelan individuals marks the latest development in a multi-year effort by DOJ to investigate and prosecute bribery at PDVSA. As DOJ’s press release notes, ten individuals have already pleaded guilty in the investigation thus far.  Key among these individuals are Roberto Enrique Rincon Fernandez and Abraham Jose Shiera Bastidas, two American businessmen who pleaded guilty in 2016 to violating the Foreign Corrupt Practices Act of 1977 (the “FCPA”) for paying bribes to PDVSA.  In connection with their pleas, the two admitted to paying PDVSA bribes in order to win lucrative energy contracts and to be given payment priority over other PDVSA vendors during a time when PDVSA faced a liquidity crisis.

Last October, more than one year after these guilty pleas, Spanish police announced the arrests of four of the five individuals named in Monday’s Indictment.  The arrests were described as “part of a months-long sting ordered by the U.S. Department of Homeland Security.”  Currently, three of the defendants remain in Spain pending extradition, the fourth was extradited to the United States and made his initial appearance last Friday, and the fifth remains at large.

As noted above, the Indictment is notable for using the money laundering statute to accomplish what the FCPA statute cannot—bringing charges against a foreign official. Last summer, we blogged about the conviction and sentencing of Guinea’s former Minister of Mines and Geology.  There, we noted the FCPA generally prohibits individuals and businesses from paying bribes to foreign officials to assist in obtaining or retaining business.  However, “foreign officials” cannot be charged under the FCPA or with conspiracy to violate it.  Therefore, a foreign official could not be prosecuted for his conduct in soliciting or receiving bribes under the FCPA. Continue Reading DOJ Employs Money Laundering Statute to Prosecute Venezuelan Oilmen for Foreign Bribery

On June 5th, the United States Supreme Court held in Honeycutt v. United States that a criminal defendant is not jointly and severally liable for property his co-conspirator derived from the crime, and that he only can be ordered to forfeit property he actually obtained from the crime.  Although the decision was unanimous (with Justice Gorsuch abstaining), the outcome was far from preordained.

Until 2015, courts applying the forfeiture statute, 21 U.S.C. § 853, had uniformly held that co-conspirators are jointly and severally liable for amounts received pursuant to the conspiracy.  That rule was adopted by nine circuits.  However, in 2015, the D.C. Circuit split with its sister circuits in United States v. Cano Flores, rejecting joint and several liability for co-conspirators.    The district court in Honeycutt sided with the D.C. Circuit, but the Sixth Circuit reversed, following the overwhelming majority view of the other Courts of Appeal.

The result in Honeycutt, and the underlying analysis and related policy arguments, may have implications in other government enforcement contexts, including in securities cases. Further, the result appears to obligate the government to perform some degree of a tracing analysis to tie individual defendants to specific tainted funds – an analysis which might be difficult in complex fact patterns involving multiple defendants and the use of multiple entities or financial accounts. Continue Reading A Criminal Defendant Cannot Forfeit Property He Never Received

IED Bomb still lifeOn March 24, 2017, the U.S. Department of Justice unsealed an indictment charging Kassim Tajideen, an alleged prominent financial supporter of the Hizballah terror organization, with evading U.S. sanctions and conspiring to commit money laundering.  Tajideen, of Beirut, Lebanon, was arrested in Morocco earlier this month and has made his initial appearance in federal court in Washington, D.C.

According to the government, Tajideen, through his multi-billion dollar network of businesses based in Lebanon and Africa, contributed tens of millions of dollars to Hizballah. For this reason, in May 2009, the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) designated Tajidden as a Specially Designated Global Terrorist (“SDGT”).  This designation makes it illegal for U.S. companies to do business with Tajideen or any entity that he controls.  More broadly, it is illegal for U.S. companies to transact business with any entities or individuals on OFAC’s blacklists.

The indictment charges Tajideen with one count of conspiracy to evade U.S. sanctions, specifically the International Emergency Economic Powers Act (“IEEPA”) and the Global Terrorism Sanctions Regulations, by transacting business with three U.S. businesses, referred to only as Business A, Business B and Business C, and by concealing from OFAC that he was benefitting from these transactions. Tajideen is also charged with seven counts of unlawful transactions with a SDGT, and one count of conspiracy to commit money laundering.

According to the indictment, Tajideen heads a large-scale commodity distribution business based primarily in Lebanon, the United Arab Emirates and Angola, but which operates throughout the world, including in the U.S. The business utilized what the government says was “a web of vertically integrated companies, partnerships and trade names.” The indictment further alleges that Tajideen and others engaged in a scheme to do business with U.S. companies while concealing Tajideen’s involvement.  As part of that scheme, between approximately July 2013 and the present, Tajideen, his employee, codefendant Imad Hassoun, and other unnamed co-conspirators illegally caused at least 47 wire transfers totaling over $27 million to be sent to entities in the U.S. for the purchase of frozen poultry and other items.  These payments caused the U.S. entities to illegally ship goods from the U.S. without obtaining the proper licenses from the U.S. Department of the Treasury. The count of conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h), charges that Tajideen and others conspired to both promote and conceal the conspirators’ illegal business transactions with U.S. persons through numerous wire transfers from bank accounts held by Tajideen’s companies in the United Arab Emirates to bank accounts held within the U.S. in order to pay for transactions involving Businesses A, B and C.

It has been reported that the investigation is continuing. Specifically, the government wants to determine whether Businesses A, B or C knowingly did business with Tajideen after he was designated a SDGT. Tajideen is alleged to have restructured his business empire after the designation and to have created new trade names in order to evade the sanctions and continue doing business with U.S. companies.  But Tajideen’s alleged deception may not save Businesses A, B and C from the government’s crosshairs.  Companies are responsible for conducting due diligence to determine whether entities and individuals with whom they do business – including middlemen, corporate shells and newly formed firms – are linked to individuals or entities on OFAC’s blacklists.  So while this indictment shows that the U.S. is taking aggressive action against Hizballah, it also underscores the need for U.S. companies to have robust export control compliance programs so that they can ensure they are not doing business with terrorists.

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The federal courts continued in 2016 to produce a stream of cases pertaining to money laundering. We focus on three below because they involve analysis of basic issues that frequently arise in money laundering litigation.

Justitia, a monument in Frankfurt, Germany

The first case tests the money laundering statute’s reach in prosecution of an alleged international fraud perpetrated primarily outside of the United States—an increasingly common fact pattern as cross-border cases proliferate and the U.S. Department of Justice (DOJ) prosecutes more conduct occurring largely overseas. The other two cases involve defense victories that focus on critical issues of mental state: the question of specific intent under the BSA, and the question, under the money laundering statutes, of knowledge by a third party that a transaction involved proceeds of another person’s crime. The issue of third-party knowledge is often crucial in prosecutions of professionals. Continue Reading 2016 Year End Review: Money Laundering Opinions of Note