Section 3
Law Enforcement Cases

This section of the SAR Activity Review provides law enforcement agencies the opportunity to summarize investigative activity in which SARs and other BSA information played an important role in a successful investigation and/or prosecu-tion of criminal financial activity. Each subsequent issue of the SAR Activity Review will include new examples based on information received from law enforcement during the preceding six months.

SAR Filing Uncovers Investment Fraud Scheme

The submission of a SAR filing led to the uncovering of a $28 million invest-ment fraud scheme in which approximately 140 individuals were victimized. The subject convinced the victims/investors that he was a successful businessman who operated many highly profitable business ventures. The subject would make periodic payments to some investors using monies paid to him by other investors. He also provided false and misleading reports to the victims/investors about the performance of their investments. In fact, the subject used the monies paid to him by the investors to support his lavish lifestyle, gambling, and speculative stock trades. The subject pled guilty to mail fraud and engaging in monetary transactions in property derived from specified unlawful activity. He is awaiting sentencing. (Source: U.S. Attorney’s Office, Northern District of California)

SAR Filing Leads to 125-Count Indictment in $2.7 Million Embezzlement Case

A SAR filing by a credit union in Rapid City, South Dakota was instrumental in uncovering a massive scheme by individuals to embezzle approximately $2.7 million from a South Dakota College. The investigation was conducted by IRS-CID, FBI, the Department of the Interior, and the Department of Education and it produced a 125-count indictment of seven individuals charged with money laundering, structuring, conspiracy, obstruction of justice, and tax evasion. The SAR filing indicated that the defendants were structuring currency deposits in amounts under $10,000. The primary defendant in the case received a sentence of 10 years in custody and was ordered to pay restitution in the amount of $2.6 million. The co-defendants received sentences ranging from 24 months to 97 months in custody. (Source: IRS-Criminal Investigation Division)

SAR Filing Unveils Customs Fraud

A U.S. Customs Service investigation in the Washington, D.C. area was initiated after a Virginia-based bank reported suspicious currency activity on a suspected money launderer. The information indicated possible structuring of financial transactions. The suspect had no visible means of support yet more than $4 million was deposited in his account and a comparable amount was withdrawn over a one-year period. A subsequent investigation revealed that the defendants were engaged in Customs fraud through the overvaluation of Generalized System of Preferences (GSP) merchandise. Based upon the suspicious referral provided by the bank, six people were ultimately indicted, arrested, and convicted on money laundering charges. (Source: U.S. Customs Service)

SAR Filing Uncovers Additional Counterfeit Check Fraud

In a Florida case, a SAR filing led to the identification of additional fraud perpetrated by a subject already under investigation by special agents within the U.S. Secret Service’s (USSS) Tampa Field Office. From December 1996 through May 1997, investigators identified an individual who deposited counterfeit commercial checks into various bank accounts opened under aliases and then almost immediately wired the funds from the accounts to Nigeria. Since these checks were drawn against true bank accounts, several days would pass before the counterfeit checks were detected. In some cases, the counterfeit checks actually cleared the bank that the checks were drawn upon. In total, the subject had deposited and collected on $400,000 in counterfeit commercial checks. In June of 1997, a financial institution filed a SAR form stating in part that the subject (using an alias) had opened an account at the bank using a small amount of money. Just a few days later, $85,000 in commercial checks was deposited into the account. A short time later, the subject attempted to wire a large portion of the $85,000 to Nigeria via a bank in New York City. Personnel within the original bank inquired about the sporadic account activity and the wire transfer, and as a result, did not wire the funds and identified the commercial checks as counterfeit. This information was included on the SAR form filed by the finan-cial institution. The USSS investigators then learned that the subject used the name identified by the bank as an alias. As a result of this SAR filing, investiga-tors were able to make the necessary link and attribute additional fraud losses to the defendant. The defendant was arrested, convicted and sentenced to 48 months in prison. (Source: U.S. Secret Service)

Organized Crime Network Attacked with the Help of SARs

The U.S. Customs Service in Chicago conducted an investigation of a Russian and Lithuanian organized crime group that was heavily involved in the smuggling of stolen luxury vehicles out of the U.S. into Europe. Independent analysis of a SAR filing showed suspicious behavior that related to the Russian organized crime network that was under investigation. The SAR filing was later brought to the attention of the Customs case agent who used the filing to identify additional associates and bank accounts. The information contained in the SAR filing contributed to the successful prosecution of the suspects and the seizure and forfeiture of assets. (Source: U.S. Customs Service)

Analysis of SAR Filings and CTRs Leads to Indictments
of Criminal Organization

A U.S. Customs Service investigation in Houston of a criminal organization involved in the repackaging and exportation of stolen commercial baby formula was aided by an analysis of SAR filings and CTRs. The criminal network, which operated in several states, laundered their illicit profits through financial institutions to the Middle East. An analysis of CTRs monitored the movement of these funds. Subsequently, SAR filings were discovered which highlighted the sus-pected transactions. An analysis of the SAR filings and CTRs, coupled with a combination of various investigative techniques, led to multiple indictments on numerous federal offenses, including money laundering, and the identification and seizure of several bank accounts. (Source: U.S. Customs Service)

Operation Mule Train

On July 1, 1998, the Chief Financial Officer, President, and Vice-President of a check cashing company were arrested on money laundering charges stemming from a two-year investigation conducted by the Los Angeles office of the FBI and the Los Angeles Police Department. According to corporate filings, the company was one of the largest check cashing enterprises operating in the western U.S., and purported to be one of the leading U.S. money transfer agents providing services to Mexico and Latin America. It was considered a significant and grow-ing company among the increasing number of independent non-bank financial institutions operating in many inner-city neighborhoods where banks have re-duced their presence.

The three executives, along with six other employees and associates, were arrested after a federal grand jury returned a 67-count indictment against 11 defendants, charging multiple conspiracies, money laundering, evading cur-rency reporting requirements, aiding and abetting, and criminal forfeiture. The initial target of the investigation was a company store in Reseda, Califor-nia. Investigators, working in an undercover capacity, approached the manager, who agreed to launder “drug” money in exchange for a cash fee. Specifically, the manager converted large amounts of cash into money orders issued by the com-pany. As larger sums were laundered, the manager sought the assistance of his associates working at other store locations. When a new manager took over operations at the Reseda store in April 1997, he brought in the company’s corpo-rate officers, including the CEO, the President, and the Senior Vice-President. Pocketing the cash fee, the corporate officers authorized the issuance of money orders and the wire transfers of large sums of “drug” money to a secret bank account in Miami, Florida while the cash was used to maintain operations at the company stores.

To avoid detection by law enforcement, no SAR forms or CTRs were filed by the company for any of these transactions; however, SAR forms and CTRs were filed by the banks into which the cash deposits were made, and these filings significantly enhanced the value of other information received. In total, the defendants laundered over $3.2 million dollars of “drug” money. The investiga-tion is believed to be one of the largest money laundering “sting” operations targeting a check cashing business in U.S. history. (Source: DOJ)

Six People Arrested for Allegedly Bilking Millions of Dollars
of Goods from Food Bank

On October 7, 1999, a man and woman, their lawyer and three private investi-gators in their employ were arrested for alleged involvement in an elaborate conspiracy. The conspiracy included bilking millions of dollars worth of goods from a food bank, burning buildings for insurance, stalking, and trying to corrupt the judicial system. Another lawyer is being sought. The 266-count criminal complaint stemmed from a 29-month investigation conducted by the San Bernar-dino County District Attorney’s Office. The couple was charged with a total of 107 counts including conspiracy to commit grand theft, insurance fraud, money laundering, obstruction of justice, arson, and assault with a deadly weapon.

The couple was accused of selling nearly 3 million pounds of food and other merchandise they obtained for free from the Second Harvest Food Bank in River-side, CA, beginning in 1991. The food was obtained using the tax-exempt status of a nonprofit group without the group’s knowledge. In addition, the couple allegedly used private investigators to stalk and harass the husband’s ex-wife, her boyfriend and others; filed false lawsuits to force judges off court cases in which he was involved; set fire to their Rancho Cucamonga home and collected $600,000 in insurance; and conspired to set fire to a warehouse.

The California Department of Justice, Bureau of Narcotics Enforcement, assisted investigators from the San Bernardino County District Attorney’s Office by conducting a review of the Currency and Banking Retrieval System (CBRS) database for BSA reports relating to the subjects. The review was accomplished through FinCEN’s Gateway System. Three Suspicious Activity Reports, nine CTRs, and two Currency Transaction Reports by Casino (CTRCs) were filed. The lead investigator said the BSA documents provided to him assisted in justify-ing probable cause to obtain several signed search warrants. He further stated that it gave him a much better sense of the way cash was used by the husband, his primary subject. The documents also helped him to locate a bank that the hus-band was using to withdraw large amounts of cash. A total of 45 search warrants were served in this case.

All remain jailed, with bail ranging from $500,000 to $7.5 million each. (Source: Lead Investigator, San Bernardino County District Attorney’s Office)

Biggest Worker’s Compensation Scam in Southern California
Totaling more than $3 Million Dollars

On June 25, 1999, a doctor from southern California, was ordered to pay $250,000 in fines and was sentenced to five years’ probation after his conviction in Los Angeles County Superior Court on three money laundering charges. The doctor is awaiting trial on securities and insurance fraud charges. Both cases were brought by the Los Angeles District Attorney’s Office in connection with the doctor’s role as the alleged mastermind of what authorities call one of the biggest worker’s compensation scams in southern California during the late 1980s and early 1990s.

The California Department of Justice, Bureau of Narcotics Enforcement, assisted the Los Angeles District Attorney’s Office by conducting a review of the Currency and Banking Retrieval System (CBRS) database for BSA reports relat-ing to the doctor. The review was accomplished through FinCEN’s Gateway System. Four Suspicious Activity Reports, 33 CTRs, eight Currency Transaction Report by Casino (CTRCs), 16 Foreign Bank Account Reports (FBARs), and one Currency or Monetary Instrument Report (CMIR) were filed. The Deputy District Attorney (DDA) handling the prosecution said the documents revealed that no 20.CTRs had been filed for 1989-1992. A certified document stating that no CTRs were filed during this time was introduced into evidence. This was very impor-tant to forestall the defense claim that CTRs in fact were filed. The DDA further said the one-month trial has ended with a conviction on three counts of violating the State of California’s money laundering law, with the intent to commit Califor-nia tax fraud.

The DDA indicated, in preparing documents for sentencing, that because the case involved the laundering of $3 million, it is the state’s largest money launder-ing case to date. (Source: Deputy District Attorney, Los Angeles District Attorney’s Office)

Stock Fraud Cheats Elderly Out of $100 Million

Indictments announced on July 8, 1999, in Manhattan, New York allege that a stock broker from Naples, Florida and other defendants bilked investors by lying to them, performing unauthorized trades, ignoring sell orders, engaging in forg-ery, and committing outright theft. Some investors, mostly elderly, were per-suaded to get as much cash as possible from their credit cards, or withdraw money from retirement accounts, to invest with the stock broker. Virtually all of that money was lost.

The brokerage firm, which was started in 1994, was created to steal money from investors. At its peak, it had more than 300 brokers and 50,000 customer accounts at offices in Iselin, New Jersey and Naples, Florida. The defendants, all from New York, New Jersey, Connecticut, and Florida, were charged variously with enterprise corruption, grand larceny, scheme to defraud, falsification of business records, money laundering, and related crimes.

The District Attorney’s Office of New York County, Manhattan Office, con-ducted a review of the Currency and Banking Retrieval System (CBRS) database for BSA reports relating to the stock broker and members of his brokerage firm they identified in their investigation. The review was accomplished through the use of FinCEN’s Gateway System. The reports included two Suspicious Activity Reports, 97 CTRs, and nine Currency Transaction Reports by Casino (CTRCs). Investigators reported that BSA data obtained provided information about the individuals and the entities and their inter-relationship. It helped identify and/or confirm identities of those under investigation and provided some specific infor-mation regarding bank transactions and account information. Investigators noted that BSA data identified over 12 bank accounts for the subjects that were not previously known. Of those account holders, about five were eventually charged in felony indictments. The BSA data also identified important financial transac-21.tions in Atlantic City, New Jersey. Overall, Gateway saved the investigators time and effort, and helped focus investigative resources more efficiently.

The Manhattan District Attorney’s Office has begun a civil court proceeding to recover $99,269,688 as the proceeds of the defendants’ criminal acts. (Source: Investigators, District Attorney’s Office of New York County, Manhattan Office)

Man Pleads Guilty to Laundering $5.9 Million in Drug Proceeds

An individual from Catlettsbury, Kentucky pleaded guilty in U.S. District Court on May 19, 1999, to laundering $5.9 million in drug proceeds from the sale of marijuana in West Virginia and Kentucky. The indictment alleged that the individual, his brothers, his stepbrother, and three other suspects, conspired to sell marijuana and transfer the profits between bank accounts in West Virginia, Kentucky, Ohio, and Florida in an effort to make the money appear legitimate.

The Cabell County Federal Drug Task Force, which consists of FBI, IRS Criminal Investigation Division (CID) agents, West Virginia State Police, Cabell County Sheriff’s Office, and Huntington City Police Department officers, con-ducted an investigation which targeted the individual. The task force requested the West Virginia Intelligence Exchange to conduct a review of the Currency and Banking Retrieval System (CBRS) database for BSA reports relating to members of this drug trafficking organization. This review was accomplished through FinCEN’s Gateway System. The reports included one Suspicious Activity Report and 17 CTRs. The analyst said information obtained from BSA data helped them to identify assets, and to locate bank accounts used by this drug trafficking organization.

As part of a plea agreement, the individual admitted to laundering money from 1992 to 1996, and to selling marijuana during that period. He also agreed to cooperate in forfeiting money and other property, including three luxury cars, six homes, and a warehouse. (Source: Analyst, West Virginia State Police)

Reports Filed under the BSA Critical to Largest Medicaid Fraud
Case in the Nation

The Newark U.S. Attorney’s Office and the IRS utilized reports filed under the BSA to help build the largest Medicaid fraud case in the nation to date. This multi-agency investigation, also involving the FBI and the FDA, uncovered a New Jersey pharmacist who defrauded the Medicaid program by fraudulently obtaining Medicaid numbers and prescription slips and then falsely billing federal and state medical assistance programs for prescription items that were never 22.dispensed. Reports filed under the BSA helped investigators piece together their case. Once the primary target of the investigation became a cooperative defen-dant, investigators were also able to bring to culmination three other associated cases. Using the forfeiture procedures available in money laundering cases, the government has recovered a total of $5.5 million in fraud proceeds that the subjects laundered through various bank and investment accounts. (Source: U.S. Attorney’s Office, New Jersey and IRS)