Saturday, August 30, 2014


The case of Richard Chichakli, the Syrian-American accountant convicted of sanctions violations, has been scheduled for sentencing on November 14. The defendant, thought by many to have been Viktor Bout's primary money launderer and financial advisor, will be representing himself, with standby counsel available to assist. The Court has set deadline dates for the filing of sentencing memoranda.

Chichakli has a large number of Pro Se post-trial motions pending, including multiple motions for a new trial, all of which must be resolved prior to sentencing. The fact that the District Judge set the scheduling, and did not dispose of pending motions first, could indicate the Court does not regard the motions, some of which are rambling, and bereft of citations to authorities, as having any merit at law.

Viktor Bout, the other defendant, cannot be tried on the charges, because he was not extradited from Thailand for this case, but for the one in which he was convicted and sentenced in New York. His attorneys in Russia, after indicating that they were building a "dream team" of American specialists, failed to timely take his conviction to the US Supreme Court, and have not engaged any US lawyers to attack his conviction and sentence through a collateral proceeding, alleging that Bout cannot afford any more attorneys' fees. His primary Russian lawyer has promised to now make a truthful motion picture about Bout's life, but no concrete plans about such a film have been given to the Russian press, which avidly follows everything about Bout, who has many supporters there.


There have been persistent rumors about Chichakli and/or Bout going public about their reputed extensive activities, in the employ of the Central Intelligence Agency, in their defense, but no such information was ever disclosed. One issue appears to be whether classified information, relating to such operations, reportedly conducted on behalf of the US intelligence community, was seized in Bout's laptop, during his arrest in Bangkok, and if such information would reveal covert activities, of a sensitive nature, which Bout and Chichakli conducted. Hints from Bout's counsel appeared to indicate that powerful information would surface, at the appropriate time, during his case.

Friday, August 29, 2014


Joel Steinger, the principal owner of Mutual Benefits Corp., was sentenced to twenty years in Federal Prison today; he had previously entered a plea of guilty to two felonies in a case that was filed back in 2008. Prosecutors had asked for a 50-year sentence, in light of the 30,000 victims of his classic Ponzi scheme. The Court indicated that his guilty plea, which saved the government the cost of a trial, and his physical disabilities, were factor in the sentence, though his primary role, as the mastermind of the billion dollar Ponzi scheme, was listed in detail, by the judge during the proceeding, according to witnesses.

A Forfeiture Judgment was also entered against him for fifteen million dollars. Under current regulations, he must serve a minimum of 85% of his sentence, more if he commits any violations of BOP rules. He will get credit for the two years he has been in a South Florida hospital; his bond was revoked after he committed health fraud crimes while out on release. That means he must now serve fifteen years for his decade of crime, which many of his victims probably believe is insufficient punishment.



The US Attorney's Office in the Southern District of Florida, in responding to a request made by the attorney for Joel Steinger for home confinement, as a sentence for his guilty plea to running a $1.25bn Ponzi scheme at Mutual Benefits Corp., due to his chronic back problems, has cited extensive Federal case law that holds a criminal defendant who is disabled cannot use his disability to escape justice.

The reply goes on to assert that the 50+ year sentence, which reportedly was computed under the advisory Federal Sentencing Guidelines, should be imposed, lest Steinger, who has prior convictions and regulatory sanctions, be released to offend again. The harm that he inflicted upon his victims, many of whom lost their life savings, is also cited as grounds for a long sentence.

The defendant's sentencing is scheduled for this morning, and we will update our readers as soon as the
ruling is handed down.

Thursday, August 28, 2014


It has been my experience that Congressional staffers are generally highly educated, and extremely bright . I have been wondering all week how those staffers working for a certain Midwestern Congressman ever allowed HR 4986 to be filed. The bill would allow money service businesses to engage in money laundering, with regulatory oversight stripped away. Doesn't anyone look at the practical, real-world consequences of proposed legislation any more ?

The bill, whose intention is to pull Federal regulators away from their campaign against the predatory payday lending industry, which has been known to charge up to 800% interest on small loans extended to needy consumers caught between paydays, who have an urgent need for funds, could result in MSBs   freely engaging in money laundering and terrorist financing. Here's the nightmare:

(1) The bill provides that financial institutions would be prohibited from "restricting or discouraging" the opening of accounts for MSBs that hold a valid license, and are duly registered as a money service business, OR have an attorney's opinion letter, attesting to the fact that the firm is operating within the law. This means that the banks must provide service to MSBs, if they seek to open accounts.

(2) Regulators would be severely restricted from investigating such MSBs.

Anyone with even a rudimentary knowledge of money laundering techniques knows that this proposed law opens a hole in anti-money laundering large enough to drive a truck, laden with a trillion dollars in criminal proceeds, through it. I understand that the Congressman believes that payday lenders are currently being unfairly targeted by Federal investigators and regulators, but open the gateway for MSB money laundering is not exactly the way to do it. Please review the bill yourself, and call your elected representative, to advise him that this bill could undo decades of AML/CFT legislation. It is an absurd response to the efforts of regulators and law enforcement to rein in a usurious, predatory industry. Frankly, payday loans should be abolished, Mr. Congressman, unless the lenders clean up their practices.

Wednesday, August 27, 2014


The "search engine" you see above you is not available, unless you are a government law enforcement agency; known as ICReach, it accesses a collection of over 850 billion records,  all collected and maintained by the National Security Administration (NSA). The Google-like program allows US law enforcement to reach domestic records without a subpoena or court order, according to a number of sources that report on personal data and privacy.

It has a direct impact upon all of us in compliance, because confidential legal communications with your bank's outside counsel, the identity of a whistle blower who is giving you incriminating information on a client, user names and passwords that you are sending to correspondents, and any number of proprietary, confidential and restricted information, and client details, that you handle each day, in the performance of your job, can be accessed by numerous law enforcement agencies, without any judicial oversight. It makes the use of a trusted courier relevant, for important documents.  

If your reply is that they cannot use that information, because it was illegally obtained, think again. Many law enforcement agencies are adept at what its known as parallel construction, the attribution of intelligence to a known, legitimate source, such as a confidential informant. The illegally-obtained information is then said to have come from the legal source. Some commentators refer to this practice as information laundering, which is an appropriate designation.

Should you alter your present practices ? We cannot say, but we can no longer confidently communicate domestically, without the threat of interception. Though designed for counter-terrorism investigations, such resources are ripe for abuse. Big Brother is indeed watching.


Today's OFAC Civil Penalties notice* provides an important lesson for banks that rely upon their software to do it all. Sometimes that jack-of-all-trades software you are using is not as all-inclusive as you think. Have you ever checked it ?

Branch Banking & Trust Co., known to the public as BB&T, was processing a wire transfer for $25,000, for a Sudanese national that the bank determined was not a Specially Designated National, but the bank's AML/CFT software failed to record it when the officer input "Sudanese" into the program; the software could not accept that notation.

Why is this important ? It appears that the software in use by the bank could not flag any country sanctions information; OFAC pointedly listed Cuba, Myanmar/Burma, Iran and Sudan as examples that the program was not set up to record, report, or note, for any purpose. The software was deemed by OFAC to be inadequate with regard to the sanctions screening process.  Why wasn't this caught by compliance ?

The fine was minimal: $19,125, but the reputation damage sustained by being named & shamed on the OFAC CivPen list is serious; We all read those postings, and when we learn that a major bank has never checked its software to ensure that it kicked out potential sanctions violations, that bank's status in the industry suffers, and law enforcement agencies may check to see that there aren't any other problems over there.


Francisco Illarramendi
John Carney, the BakerHostetler partner who is the court-appointed Receiver in the Michael Kenwood Corp. hedge fund Ponzi scheme case, managed by its indicted operator, Francisco Illarramendi, has stipulated with the attorneys for defendant Moris Beacha, against whom carney had a $171m civil suit pending, to dismiss the civil action, against Beracha, and all related corporate defendants, with prejudice. This is a strangerturn of events, for which there is no publicly-available explanation.

The defendants, who were to have filed an Answer to the amended complaint by August 11, never responded, and we are unable to learn what their defenses were. We do not know whether there was a monetary settlement in the civil action, as searches of both the pleadings in the court file, as well as the original SEC suit, wherein Attorney Carney was appointed Receiver, are silent on any financial settlement.

Morris Beracha
Mr. Beracha, it is alleged by the receiver, kept Illarramendi's hedge fund afloat, by the infusion OF funds, when they were desperately needed to keep the Ponzi scheme solvent. The circumstances under which the dismissal was entered remain unknown at this time. There may be a confidential settlement in place, in which case, we will remain in the dark. It is also possible that Mr. Carney was unable to obtain sufficient evidence to link Beracha to the Ponzi scheme, and chose not to continue the suit.
John Carney, Esq.

 Also still a puzzle is the scope of the role played by the enigmatic Spanish investor, Javier José Ardura Gomez. If you are not familiar with this aspect of the Illarramendi scandal, you can access the complete text of our earlier article here*.