Tuesday, April 15, 2014


Here's another case that illustrates how even fringe figures, far removed from a Ponzi scheme, end up being charged, when a Ponzi scheme implodes. Patrick Daoud, a prominent Fort Lauderdale jeweler entered a guilty plea to a single count of Obstruction of Justice, in US District Court recently; Daoud lied under oath, when being deposed in a bankruptcy proceeding of the law firm of convicted $1.3bn Ponzi schemer/attorney Scott Rothstein, now serving 50 years for his crimes.

A close friend of Mrs. Rothstein (now also doing time), Stacie Weisman*,  quietly sold a 12.08k yellow diamond, that belonged the Rothsteins, to Daoud, who claims he did not know who the true owner was. When called to testify, at a deposition, about the diamond, Daoud committed perjury, by denying any part in the sale of the diamond. Daoud was sentenced to ten months of Home Confinement (house arrest), and two years of Probation.
* Ms. Weisman was herself sentenced to three month in jail, nine months of Home Confinement, and three years of Supervised Release, for her part in this attempt to sell the diamond covertly, and out from under the Trustee, who was accumulating assets, to repay the victims.


Nevin Shapiro
Lawyers who represent Ponzi schemers are often placed under the microscope, even if they were not involved in their client's criminal activities, and sometimes, something comes from it. A Miami attorney for convicted Ponzi schemer, Nevin Shapiro, Maria Elena Perez, has had charges filed against her by the Florida bar, the agency that regulates attorney conduct.

Perez represented Shapiro in his criminal case; to gain an advantage for her client, namely a major supporter for his sentencing, the NCAA, the National College Athletic Association, she deposed witnesses, in connection with her client's pending bankruptcy proceedings, and made that information available to the NCAA, which was investigating the University of Miami for improper conduct in its athletic department, to which Shapiro had contributed. The NCAA had no subpoena powers, so Perez used the depositions to help the NCAA.

Perez' aim was to have the NCAA testify favorably at Shapiros' sentencing, as she was attempting to get for her client as small a sentence as possible. There was even a plan to have NCAA representatives state that they wanted Shapiro to travel around to colleges and universities, to relate his experiences with making illegal contributions to an athletic program.

Now, the NCAA investigators have been fired, Shapiro received a 20-year sentence for his $930m Ponzi scheme, and Ms. Perez faces the consequences of trying to game the system to aid a major Florida Ponzi schemer in obtaining a short sentence for his crimes. Lawyers for Ponzi schemers would do well to take heed of the lessons learned from this case: everyone involved in a Ponzi case, including even defense counsel, must assume that they are potential targets.  

Sunday, April 13, 2014


Buried in the recent news, concerning the arrests of two Canadians and an American, charged with money laundering through the Cayman Islands, was this gem: one of the methods employed by one of them, a Canadian attorney, based in the Turks & Caicos Islands, was a TC foundation.

While we have been warned for years, about the use of foundations formed in the Republic of Panama as a tax evasion and/or money laundering device, you might want to check to see whether any of your bank clients are moving money through a Turks & Caicos foundation. There is a reason for my concern.

The Cayman Islands are now believed to be the next target of the Internal Revenue Service, in its global quest to unmask wealthy Americans hiding their money offshore, to evade taxes. It is noteworthy that the present case, involving Joshua VanDyk, Eric St-Cyr, and Patrick Poulin, involved the use of undercover IRS agents, to ferret out professionals who are aiding and abetting tax cheats. For those of you not well versed in the Caribbean,  the US Dollar is the official currency; the island chain's decided to not join the Bahamas in its move to independence, and it remains a British Overseas Territory.

I do know that many TC foundations are legitimate, and do positive things in their country, but I am wondering whether a small minority are being used to shield a money laundering enterprise. We have already pointed out to our readers the presence of a number of dodgy Canadian attorneys plying their trade in the Turks & Caicos Islands, where the amount of legitimate legal work could not possibly support their overhead; perhaps you might want to take a fresh look at any bank client contact with TC, unless the client actually has a brick-and-mortar business there.

Friday, April 11, 2014


The attorney for convicted hedge fund Ponzi schemer, Francisco Illarramendi, has filed a motion for temporary release, asserting that his client cannot properly review the more than 15,000 pages of government-produced documents, to ascertain the exact amount of victim loss. It is claimed that he cannot assist his counsel, while in custody in a state correctional institution.

The United States Attorney in Connecticut,  in a written opposition, has objected, on the following grounds:

(1) The defendant cannot be trusted, he lied to the Court and the Government after he pled guilty.
(2) The defendant committed serious violations of the conditions of his bail.
(3) He has had more than two years, since his conviction, to ascertain the amount of loss. He himself earlier had estimated it as a $300m loss. The stated grounds for his temporary release, to calculate the amount of loss, are not necessary to assist his counsel with the documents.
(4) His Pre-Sentence investigation Report (PSIR) reportedly calculated his guidelines sentence as Life in Prison. Since there is no more parole, he would die in custody.That makes him a serious flight risk.

Illarramendi has gone through four different attorneys during this case, and the Court has stated that it will not allow any more continuances. There is a sealed pleading, referred to in the Government's filing, referring to certain unspecified misconduct of the defendant, committed while he was out on bond. He obviously has attempted to game the Court system, and Government is obviously tired of it, as is the Court.

This is a 2011 case, and it is high time for the sentence to be pronounced. The defendant has run out of excuses to delay justice any further. Is a life sentence fair in a white-collar case ? Ask his victims.


If you were one of those individuals who were wondering when the trial judge in the Richard Chichakli case was going to rule on his post-trial motions, and finally get around to sentencing the defendant, his new court-appointed counsel, Mitchell Dinnerstein, has thrown a legal monkey wrench into the works.

To quote from his filing:

"After my careful review of the trial transcript, and doing conversations with Mr. Chichakli, about certain motions that he wanted pursued, I came to the conclusion that a question may arise as to the defendant Chichakli's mental competency to assist in his own defense, as required by 18USC §4241."

Granted, Chichakli has, since a verdict was rendered against him, in a case where he chose to represent himself Pro Se, with standby counsel, filed a number of letters to the Court, some of which may constitute supplemental information, for his pending post-trial motions, but others are unusual. Chichakli, who has had no legal training, may have just been trying to create appellate issues, but the letters, and the grounds cited, may have caused his new counsel some concern.

Observers who are aware that Chichakli, and his partner, Viktor Bout, were involved in a number of confidential matters, in which they rendered assistance to agencies of the United States Government,  and which could possibly be embarrassing, may fear that this competency examination is simply a means to discount the accuracy of any such information, should Chichakli choose to disclose it.  

The Court has ordered a psychiatric examination to determine whether Chichakli satisfies the prerequisites for mental competency. A report by the appointed forensic psychiatrist is due on May 3, 2014.

Thursday, April 10, 2014


Local sources in Panama advise that the Government of Italy has filed criminal charges, for corruption, against Panamanian President Ricardo Martinelli. It is apparently waiting for his term in office to end before making it official, and asking for his extradition. Martinelli has Italian citizenship.

 One source states that the charging documents have been delivered to the Ministry of Foreign Affairs, whose officials served them upon the president, who reportedly was defiant and arrogant, and denied that he would ever be tried in Italy. Given that the leading presidential candidate standing for election as Panama's next president has stated that he has chosen Martinelli's wife for Vice President,  you may expect a political crisis in Panama after June 30.   

Wednesday, April 9, 2014


A columnist in a Cayman Islands publication has taken the radical position that the war on money laundering, like America's previous efforts to ban alcohol sales  between 1920 and 1933, is an abject failure, and it has resulted in increased costs to all, and a loss of personal and financial privacy, and has allowed governments to restrict liberty, and to abuse its own citizens, all the name of money laundering suppression.

The article, The Destructive Effort to Combat Money Laundering, Tax Evasion, and Terrorist Financing, which appeared in the Cayman Financial Review, makes three important points:

(1) AML laws generally only hurt legitimate business; criminal enterprises find a way to operate around, or despite, such laws and regulations, and the law enforcement agencies that seek to enforce them through arrests and indictments.

(2) FATCA has resulted in a wholesale closure of the foreign accounts, of American nationals, everywhere, as foreign banks do not want the headache, and potential civil, and even criminal, liability.

(3) Non-bank remittance services, from the developed to the developing world, have taken a huge hit due to AML/CFT laws.

His solution, and I quote verbatim:

"To many of those who have signed up for the war against money laundering are either
  obsessed with increasing their own power, or have a delusional, utopian vision, where
the rights of the individual, and liberty are not as important as the "collective," the war
on money laundering has failed for the last quarter of a century, because it had not pre-
vented terrorists, drug dealers and assorted criminals from transferring money around the
world.... What it has done is greatly increase the cost of transferring money by innocent
people and businesses, greatly reduced access to banking services for millions, destroyed
personal and financial privacy for much of the world's population, and enhanced the ability
of government officials around the world to abuse their citizens. "

While some of this may be true, if we abolish AML/CFT, then we would need to deal with increased risk of terrorist attacks on the US, and the EU, and I am not willing to let radicals blow up our world. Money laundering laws may not be perfect, far from it, but I will not accept the alternative, which is chaos.