OFFSHORE TAX HAVENS NAMED BY DISTRICT OF COLUMBIA CRY FOUL

The District of Columbia, for the benefit of those readers not from North America, is the Capitol District of the United States, where Washington is located. It is not a state, and its representative in the US Congress has no vote. So why are Caribbean offshore financial centers screaming bloody murder ?

DC, as it is referred to by most Americans, has a Council; this legislative body, on August 11, 2015, issued its own blacklist of tax havens, as a legislative act. It named & shamed thirty-nine of them, to be precise, and it was for the sole purpose of educating the business community. Unfortunately, sometimes the truth hurts.

Representatives of Bermuda, the Bahamas, and the Antigua-Barbuda have let it be known publicly that they weren't happy with the Council's action, and have stated that times have changed, and that they no longer belong on such a list. One diplomat even complained to the US Congress.

Readers who wish to review the complete text of the Council's designation, including the names of the remaining offshore jurisdictions that the Council has designated as "tax havens" may wish to access the relevant information, which can be found here*. Go to page 118 of the Act.

The District of Columbia

__________________________________________________________________
*D.C. Act 21-148 ( August 11, 2015)

FRAUDSTER GARY LUNDGREN FEARS ASSASSINATION IN THE REPUBLIC OF PANAMA

The Godfather

Gary James Lundgren, the Alaskan native who has left a long line of American and Canadian expats, that he has defrauded, in the dust, is taking extraordinary precautions with his personal safety. According to eyewitnesses who have visited his office, he works behind three separate sets of locked doors, and he will not come out to see anyone, even clients. He has been seen driving different automobiles to work daily, and taking different routes. Who is seeking to do him harm ?

Lundgren is unique among Panama's white collar criminals; he has admitted that he was in partnership with both the convicted Colombian Ponzi schemer David Murcia Guzmán, and Panama's fugitive former president, Ricardo Martinelli. Additionally, he has openly bragged that he was a partner in the insider trading scandal that was Financial Pacific. In short, there's no type of major financial crime that Lundgren has not had his hand in, when it comes to dark deeds in Panama City.

Rumors are circulating that Lundgren's fears are well founded, for he reportedly took money from certain shady Panamanian businessmen, to invest in the Financial Pacific scam. Did he fail to return their profits to them ? We cannot say, but if that is the case, he can run, but he cannot hide from the country's organized crime group. Perhaps it is now time for him to return to the United States, to face the music there. Federal Prison is a better alternative, though he may end up serving time for money laundering, selling unregistered securities to American citizens, and good old-fashioned fraud.

OPERATOR OF PONZI SCHEMER SCOTT ROTHSTEIN'S FEEDER FUND HIT WITH $48m CIVIL JUDGMENT

George Levin (L) and Scott Rothstein (R)

The Securities & Exchange Commission, in a bitterly contested case*, has obtained a final judgment, in US District Court in Florida, against the controversial Fort Lauderdale businessman, George Levin, in the amount of $48,592,570.97, representing disgorgement of profits, prejudgment interest, and a civil penalty. Levin is also permanently enjoined from any future involvement in securities transactions. A jury trial found against him on liability, and this judgment settles the issue of damages.

Levin sold what were held to be unregistered securities, through three entities that most observers would regard to be hedge funds. He sold promissory notes, secured by Rothstein's phantom court settlements. Considering that he could, in theory, been on the wrong side of a $181m judgment, his attorneys probably consider it a victory. Levin has neither sought a rehearing, nor appealed the judgment.

However, he has also failed to pay it within 14 days of entry, as directed by the Court, so you can expect the SEC to institute a collection action. There is no evidence of payment in the court file. His attorneys allege that his net worth is under a half million dollars, so expect to see news of this case again on this blog.
_____________________________________________________________________
*Securities & Exchange Commission vs. George G. Levin et al, Case No.: 12-cv-21917-UU (SD FL).

PANAMA'S SUPREME COURT JUDGES DELAY THE MARCH OF JUSTICE AGAINST RICARDO MARTINELLI

Pending cases against Martinelli

Only three of the twelve active cases filed against Panama's ex-president, Ricardo Martinelli, are actually moving forward. The others remain in legal limbo, thanks to the corrupt members of the Supreme Court of Justice, who are displaying little interest in bringing Martinelli to justice, and the people of Panama are angry about this "business as usual" attitude at the Court.

There is a reason for this sorry situation. Some of the judges are suspects in the Financial Pacific insider trading scandal, including Chief Judge José Ayú Prado, and Hérnan De Leon. Others have dark pasts, where they took bribes and fixed cases. Still others are Martinelli allies. Frankly, the entire Supreme Court of Justice should be removed from the bench, and replaced with attorneys who are known to be honest, follow the rule of law, and trusted by the people of Panama. Let's see if the new reform government is up to the task.

RICHARD CHICHAKLI FILES ADDITIONAL BRIEF IN HIS APPEAL

He may have filed his appellate brief, with extensive appendices, but Richard Chichakli apparently was not finished with presenting his issues before the Second Circuit*. He requested, and received, permission to file what he has captioned a "Supplemental Brief," notwithstanding that the US Attorney's office has not yet filed its brief of appellee.

The 53-page brief, filed Pro Se, made the following arguments, some of which appeared earlier in his initial brief. Where necessary to frame an issue he has presented, I have resorted to commonly-used legal terms, as he often used non-legal language:

(1) The Government suborned, and knowingly used, perjured testimony.
(2) The Government violated the extradition treaty with Australia, but charging him with a different crime than that which he was extradited for.
(3) The indictment was, at the time of trial, materially altered, and at variance with the indictment received from the Grand Jury.
(4) The final judgment should be vacated, due to ineffective assistance of court-appointed stand-by counsel.
(5) The court erred in charging the jury; highly prejudicial external material was introduced to the jury.
(6) Irrelevant, highly prejudicial, evidence was improperly admitted, and the Court expressed bias toward the defendant.
(7) The judgment should be vacated, and a new trial ordered, pursuant to Rule 60, for Fraud Upon the Court.
(8) The Government withheld Discovery, in violation of Rule 16, and the Jencks Act**.
(9) The Pro Se defendant was denied a fair trial, as he was prevented from preparing for trial, by placing him in solitary confinement, and removing all possible tool necessary for him to prepare a defense.
(10) The guidelines calculation was improperly enhanced eighteen levels, and a Downward Departure, pursuant to Section 3553(a) was improperly denied.
(11) The Court erroneously authorized Forfeiture.
(12) The judgment should be vacated, and a new trial ordered, due to jury misconduct.

When the Government's brief is filed, we shall update this story.
_________________________________________________________________________
* Chichakli vs. United States, Case No.: 14-4255 (2nd Cir.).
** previous statements, or testimony, of government witnesses, or materials that they relied upon during testimony.

.

PANAMA'S SECURITIES REGULATOR SENTENCED TO FIVE YEARS FOR KILLING INSIDER TRADING INVESTIGATION

Ignacio Fábrega, the former Director of the Superintendency of Securities (SMV), Panama's securities regulatory agency, was handed a sentence for five years in prison this week, for his role in the Financial Pacific/Petaquilla Mining insider trading scandal. Fábrega admitted delivering confidential information, detailing his agency's investigation into the FP scandal, to then-President Ricardo Martinelli, and his associates, and subsequently dismissing all pending investigations into misconduct at FP.

The defendant , who pled guilty to the charge of official corruption, had recently been a fugitive from justice for several months, after he fled house arrest. Martinelli and former Tourism Minister Solomon Shamah, a suspected narcotics trafficker, have been implicated by his statements to anti-corruption prosecutors.  Many ministers in Martinelli's cabinet made millions of dollars, by illegally trading in inside information on Petaquilla, defrauding hundreds of Canadian & American investors who did not have the benefit of non-public information about developments concerning the company's gold mine. Members of Panama's shadowy criminal elite also illegally made massive profits in the insider trading scandal.

Fábrega, while in office, was known to ignore any securities law violations, when they implicated any of Martinelli's inner circle of associates, and concealed the fact that the former president was a $3m investor in FP, and obeyed any directions he received from him, notwithstanding his obligations as head of his country's securities regulator.

SMART LAWYER FOR VICTIMS OF PONZI SCHEMER OBTAINS JUSTICE AT SENTENCING

A sharp attorney representing the victims of a $10m Ponzi schemer found a way to get justice for his clients, at the sentencing of the criminal who promised them a 50% return in six months for their investment, in US District Court in California*. The defendant, an Iranian-American who preyed upon people who borrowed money against their homes, to raise funds for him, got a nasty surprise at his sentencing.

The lawyer cleverly filed, just five days before the sentencing hearing, a 100-page memorandum of law, on behalf of the victims, detailing all the sins and transgressions of the defendant, including some facts apparently not known to the Court, such as his purchase of a $400,000 Lamborghini for the defendant's brother, his attempts upon the lives of two victims,  the fact that he represented a danger to the public, and the fact that he drew out $490,000, in cash, to support a lavish lifestyle.

At sentencing, defense counsel requested a continuance to respond, but the Court refused, saying that the defendant knew that the victims were going to appear, and give testimony, and that he should have been prepared. The hearing proceeded on schedule. The US Attorney's Office had asked for eight years; the US Probation Office, in its Pre-Sentence Investigation Report, calculated a ten year sentence. The defense asked for four years, in its filings. Cases involving similar amounts of loss were shown to generally result in 10-year sentences.

The Court then pronounced its sentence; eighteen years, a total surprise to the defendant and his attorney, who took an appeal to the Ninth Circuit, and oral argument was recently held. Will the appeals court remand the case for re-sentencing ?  We shall be monitoring the file, and report back when the decision is published. Even if the sentence is overturned, and the case sent back down for a new sentencing hearing, the Ponzi schemer felt the wrath of the victims the day of sentencing, I am certain of it. I hope he has had many sleepless nights in custody, for ruining the lives of his victims.

In the meanwhile, the innovative lawyer for the victims may have just hit upon a valuable, but seldom used, tool to see that justice is served, to give victims at least some amount of satisfaction, when a Ponzi schemer steals their money, and spends it on himself.
_______________________________________________________________________
* United States vs. Kaveh Vahedi,  Case No.: 12-cr-00380-DDP (CD CA). 

VIKTOR BOUT'S RUSSIAN LAWYERS ASSERT THAT UN ACTION CONSTITUTES NEW EVIDENCE IN HIS CASE

Russian lawyers representing convicted arms trafficker, Viktor Bout, have declared that action taken, on September 2, 2015, by the Security Counsel of the United Nations, in ending sanctions related to the arms embargo on Liberia, concerning Charles Taylor, and his associates, qualifies as newly-discovered evidence in Bout's criminal case in the US, justifying a new trial.

A United Nations Security Council Resolution (S/RES/2237) terminated certain sanctions, which Bout's Russian attorneys advise were repeatedly brought up during his trial, seeking to convince the Court that he was a "dangerous criminal."Bout's motion for a new trial is currently pending before the trial court where he  was convicted, and sentenced to 25 years' imprisonment. Bout has often stated that his case is purely political and that he was entrapped by US law enforcement agents.

Russia has attempted to have Bout transferred, to serve out the remainder of his sentence in Russian custody, but those efforts have been unsuccessful to date. Some observers believe that Bout would simply be quietly released upon arrival in Russia, as his case has been cited there as a prime example that the United States is illegally targeting, and imprisoning, Russian nationals, for political reasons.

US TREASURY IDENTIFIES AND SANCTIONS FARC MONEY LAUNDERING NETWORK IN ZURICH

If you thought the Revolutionary Armed Forces of Colombia, the FARC, were coming to any sort of final settlement with the Government of Colombia after three years of negotiations, think again. The US Treasury (OFAC) has now identified a FARC money laundering ring operating out of Zurich. Apparently, it provides money remittance and related financial services to FARC agent worldwide, giving them access to the global financial structure.

There are some bank compliance officers who have come to profile all Colombian nationals operating abroad, as potential drug traffickers and money launderers, but you need not go to that extreme. Just insure that your toolkit includes both the best commercial off-the-shelf databases of high-risk individuals, and that your multilingual staff carefully examine any commercial entity incorporated in, or doing business from, Colombia or Panama, when dealing with Colombian nationals. That way, you will have no nasty surprises down the road, with investigations of Colombian money laundering activity at your bank. 

WILL PANAMA'S NEW REFORM GOVERNMENT SHUT DOWN HEZBOLLAH'S VENEZUELA-TO-PANAMA-TO BEIRUT TERRORIST FINANCING PIPELINE ?

One of Venezuela's senior government officials, who fled to the United States, essentially defecting from the Bolivarian Republic, some time ago confirmed that, eight years ago, his country's current president, Nicolas Maduro, held a covert meeting, in Damascus, with the Secretary-General of Hezbollah, Hassan Nasrallah. For some reason, this information was not disclosed in most major media, perhaps because, if the American public was made aware of it, they might not look upon Venezuela, then a major supplier of oil, as favorably as the US State Department wanted them to, and oil prices could rise, without Venezuela as a source of oil for America's automobiles and trucks.

The purpose of that secret meeting was to firm up the cooperative agreements between the Chavez regime and Hezbollah, specifically, how Venezuela would assist Hezbollah in its profitable drug trafficking operations, crucial to its terrorist financing objectives, and how the proceeds of crime would be funneled, via an air bridge into Panama, and on into the country's amoral banking structure. As you can see, Sr. Maduro is not only no friend of the United States, he works with its enemies.

Since then, Hezbollah has enjoyed the lucrative profits that the drug trade offers, and more importantly, has moved those profits through Panama, with impunity, as Western intelligence agencies are obviously content to merely monitor Hezbollah in Latin America, rather than attack and destroy it. The net result is that money flows to Beirut, through Panama City, uninterrupted.

The situation in Panama has changed to some degree, with the new reformist government of President Varela. The question is: will it finally get around to cleaning up Panama's out-of-control money laundering banks, some of which are controlled by ownership of Middle Eastern ethnic heritage, and who will, frankly, do anything for a dollar. Will Panama throw Hezbollah out of its banks ? Perhaps it can start by closing up its offices and front companies, and continue the job by shutting down the Venezuelan bulk cash smuggling air bridge into Panama's Albrook Marcos A Gelabart International Airport, and by finally closing the three banks notorious for accepting US Dollars from Venezuelan "businessman." 

MEXICO FILES AMICUS BRIEF IN US SUIT OVER VALIDITY OF MATRICULA CONSULAR FOR IDENTIFICATION

The Government of Mexico has filed an Amicus Curae brief in the pending Federal civil suit* that seeks to compel the State of Texas to accept the Mexican Consular ID, known as the Matrícula Consular, as an acceptable form of identification for the parents of infants born in Texas, to illegal immigrants who have no form of official US identification. The brief, filed by as local attorney on behalf of the United Mexican States, Mexico's proper legal name, disputes Texas concerns about the reliability of the Matricula as a valid form of identification. US Birth certificates are not now being issued to newborns, based solely upon Mexican Matriculas, or Mexican passports; reports that illegals from Honduras and Guatemala are having thew same problem.

We have previously advised compliance officers to reject these Consular Identity Cards, because they were found to be used by criminals engaged in narcotics trafficking, that a false identity could be easily obtained, due to corruption in Mexican government offices, and that there was no central database to allow one to verify their authenticity. Last year, through, there were major security upgrades to the Matricula, to counter these concerns, though the ability to obtain one through corrupt sources appears to still be an option. Mexico's rampant corruption means that en enterprising money launderer, or bulk cash smuggler, will be able to obtain multiple Matriculas, that will be legitimately and properly issued.

The Mexican Government's argument:

(1) if the US-born child does not receive a birth certificate, he or she may not be able to subsequently sufficiently prove identity, in order to obtain Mexican citizenship at a later date.

(2) This impasse could seriously affect the Mexican-Texas relationship.

(3) Newborns who are born in the United States have a right to an identity document, notwithstanding that Texas does not choose to accept Mexican identification of their parents.

From a compliance standpoint, in a risk-based program, and given the billions of dollars in drug profits that are repatriated through remittances, money orders, and wire transfers, your decision regarding choosing whether to accept even the most current form of Matricula, as primary identification, should be made only after due consideration of the risks involved, history of illicit transactions at your bank, nature of your client base, and whether the return justifies the potential risk. I personally do not like them, but that is a decision for you to make.
_____________________________________________________________
*Maria Isabel Perles Serna v. Texas Department of State Health Services, Case No.: 15-cv-00446-RP (WD TX).

ALWAYS ASK NEW CLIENTS IF THEY ARE DUAL NATIONALS

A US District Judge in Northern Ohio recently sentenced a woman, who pled guilty to structuring, to home confinement, rather than incarceration, to be followed by three years of supervised release. She was a very minor player in a pharmacy illegally selling painkillers without a prescription; her husband and his partner are the principal defendants. Unfortunately, they are not in the US, having reportedly fled to the Palestinian Territory of Gaza.

The lesson to be learned is that we are talking about dual nationals; the female defendant surrendered two passports, US and the Palestinian Authority. When we talk about risk factors, the ability of an individual to travel overseas on a passport other than the one which they possess by virtue of being a citizen of your country, affects your assessment of this individual's ability to engage in financial crime.

At account opening, when you ascertain that the prospective bank client was born in another country, and that country is a high-risk jurisdiction, it is not out of line to ask whether they have any other government-issued identification, containing their photograph. A foreign passport may be the only thing that satisfies that requirement. Alternatively, if your compliance department authorizes it, you should ask where the client is a citizen or national. This is not an invasion of their privacy , but a risk-based compliance program component. You might even discover a variation in the spelling of their name, important for OFAC searches.

This is a risk management issue; in the case above, one wonders whether the bank where the defendants had their business accounts, for the pharmacy, would the fact that they were dual Palestinian nationals affect the compliance assessment of risk, and regular account monitoring ? It certainly might. Dual nationals can often flee the jurisdiction without triggering any alerts set for them as local nationals, for the various spellings of their sur-names, especially if in a non-Western Latin alphabet, can frustrate any attempt to detain them.  

FRANCE REVOKES RICARDO MARTINELLI'S LEGION OF HONOR AWARD

Reliable sources in France have advised that Ricardo Martinelli, the fugitive former President of the Republic of Panama, has had his Legion of Honor award quietly revoked by the Government of France. A search of the rolls of Legion recipients has reportedly failed to find Martinelli's name inscribed there.

The President of France gave the Legion of Honor, France's highest award, to Ricardo Martinelli in 2013, though the specific reason has never been known. The award can be revoked for improper, illegal or amoral conduct, judging by the company of those prior holders who have had theirs rescinded. Ricardo Martinelli, whose present location is not known, faces multiple criminal cases in Panama, relating to corruption, illegal surveillance of Panamanians, insider trading of registered securities, and several other high crimes.

Before he left office, Martinelli purchased an estate in Paraguay, which has no extradition treaty with the Republic. Given that his former securities head has recently named him as a full partner in the Financial Pacific insider trading scandal, it is not likely that he will voluntarily return to Panama.

The award ceremony in 2013.

PANAMA'S FORMER SUPERINTENDENT OF SECURITIES SAYS MARTINELLI WAS A PARTNER IN FINANCIAL PACIFIC

Ignacio Fábrega, Panama's ex-Superintendent of Securities, in custody on criminal charges, and facing a sentence of eight years, has charged that former President Ricardo Martinelli was actually a partner in Financial Pacific, the entity responsible for the Petaquilla Mining insider trading scandal. The former securities agency head also disclosed that Martinelli contributed $3m to its capitalization, and actually contacted Banco Universal, with orders to open accounts for the brokerage house.

When the scandal broke, Fábrega asserts that both Martinelli and the former Minister of Tourism, Solomon Shamah, contacted him with instructions to kill any pending investigation into misconduct, or criminal activity, and to delay the release of any report until after Panamanian elections.

FOOD FOR THOUGHT: WESTERN HEMISPHERE PEPS WITH DIRTY MONEY IN SWITZERLAND

If you have not seen the computation, made by a private entity, from whistleblower data,  of exactly how much "flight capital" was on deposit in HSBC Private Bank (Suisse) SA, from each of the countries in Latin America and the Caribbean, perhaps this chart may serve as a wake-up call. The billions of dollars, linked to clients with passports from those specific countries, tell us that corruption in the region remains rampant, and that bankers in North America, and the European Union, should adjust their Country Risk accordingly, based upon the level of dirty money at just one Swiss bank.

From a risk standpoint, any compliance officer that knowingly accepts a new, affluent client from this region, that he learns is a PEP, is not doing his job. Latin American PEPs are not the golden goose that your New Accounts people hope for, they represent a nightmare, just waiting to happen. If you are the gatekeeper, and you are serious about your responsibilities, just say no.