Bradford L. Geyer is reading enforcement agency tea leaves and he is seeing signs of enhanced enforcement involving grant fraud and procurement fraud at grantfraud.com. His latest note regarding an extensive credit card fraud scheme can be found here.
Category Archives: Criminal Division-AFMLS
Four People Arrested and Charged in Cross-Country Insider Trading Scheme
The owner and operator of a stock trading operation and three of his associates were arrested today on charges arising from their alleged participation in a multi-year insider trading scheme that netted more than $3.2 million in illicit profits, announced today by U.S. Attorney Paul J. Fishman for the District of New Jersey.
Steven Fishoff, 58, of Westlake Village, California, Ronald Chernin, 66, of Oak Park, California, Steven Costantin aka Steven Constantin, 54, of Farmingdale, New Jersey, and Paul Petrello, 53, of Boca Raton, Florida, are each charged by complaint with one count of conspiracy to commit securities fraud. Fishoff is charged with four substantive counts of securities fraud, Chernin and Petrello are each charged with two counts of securities fraud and Costantin is charged with one count of securities fraud.
The defendants were arrested by FBI agents this morning at their respective residences. Costantin is scheduled to appear this afternoon before U.S. Magistrate Judge Joseph A. Dickson in Newark, New Jersey, federal court. Fishoff is scheduled to appear before U.S. Magistrate Judge Kenly Kiya Kato in Riverside, California, federal court, Chernin is scheduled to appear before U.S. Magistrate Judge Carla Woehrle in Los Angeles, Californina, federal court, and Petrello is expected to appear before U.S. Magistrate Judge Dave Lee Brannon in West Palm Beach, Florida, federal court.
“The defendants and their associates were entrusted with confidential, nonpublic information about companies and time and time again, they allegedly violated that trust by illegally trading the companies’ stock for substantial profits,” said U.S. Attorney Fishman. “They allegedly rigged the game so they would always win, and their profits came at the expense of legitimate investors, who were not privy to this inside information.”
“Insider trading is an investigative priority of the FBI,” said Special Agent in Charge Richard M. Frankel for the FBI in Newark, New Jersey. “The FBI is committed to stopping insider trading and will hold those who perpetrate these schemes accountable because their illegal activities undermine the integrity of the U.S. financial markets and weaken investor confidence.”
“We allege an insider trading scheme based on a short-selling business model designed to systematically profit on confidential information obtained under false pretenses,” said Senior Associate Director Sanjay Wadhwa for Enforcement in the SEC’s Regional Office in New York. “But the defendants’ short selling proved to be short-sighted as they overlooked the fact that their trading patterns would be detected and they would be caught by law enforcement.”
According to the complaint unsealed today, Fishoff, Chernin, Costantin, Petrello and others, acting individually and through their associated trading entities, engaged in an insider trading scheme in which they netted more than $3.2 million in illicit profits over three years by executing illegal trades through trading entities that they controlled.
Fishoff is the president and sole owner of Featherwood Capital Inc. (Featherwood), a trading entity that he operates out of his home. Featherwood maintained numerous stock trading accounts in its own name and in various additional names under which Featherwood did business (DBAs), including Gold Coast Total Return Inc. (Gold Coast), Seaside Capital Inc. (Seaside) and Data Complete Inc. (Data Complete).
Chernin, an attorney who was disbarred in California for misappropriation of client assets, is a friend and longtime business associate of Fishoff. Corporate documents list Chernin as the president of Gold Coast and Fishoff as an officer. Chernin is president of the trading entity Cedar Lane Enterprises Inc. (Cedar Lane) and an officer of Data Complete.
Costantin, a former pipefitter by trade, is Fishoff’s brother-in-law and a friend and business associate of Chernin. Corporate documents list Costanstin as president of Seaside. In brokerage account documents, Fishoff identifies himself as Seaside’s owner. Costanstin is also the vice president and secretary of Cedar Lane.
Petrello is the president and owner of two trading entities, Brielle Properties Inc. and Oceanview Property Management LLC and a friend and longtime business associate of Fishoff.
On numerous occasions, the conspirators obtained material, nonpublic information related to publicly traded companies and traded on that information before it became public. Between June 2010 and July 2013, Fishoff, Chernin, Costantin and a business associate referred to in the complaint as “Trader A” expressed interest in participating in at least 14 stock offerings by publicly traded companies. Before providing these individuals with confidential information concerning the companies or the terms of the proposed sales, the investment bankers first required that Fishoff, Chernin, Costantin, Trader A and their associated trading entities, agree to be “brought over the wall,” or “wall-crossed,” standard industry terms which meant that they were required to keep the information disclosed to them confidential and could not buy or sell the stock based on the information.
Fishoff, Chernin, Costantin and Trader A agreed to these disclosure and trading restrictions and then flagrantly breached the agreements. In instances where Fishoff was not personally wall-crossed in an offering, Chernin and Costantin tipped Fishoff telephonically or by email about the offering prior to the public announcement. Even where Fishoff ostensibly was a party to the confidentiality agreement, through his affiliation with the wall-crossed trading entity, Fishoff himself breached the agreement by trading on the confidential information and by providing the information to Petrello so that Petrello could engage in parallel trading. There were also instances where Chernin and Costantin violated the terms of the confidentiality agreements by trading themselves before the offering. The conspirators traded through the accounts of the trading entities or through related accounts that they controlled. The conspirators shared the proceeds of the insider trading scheme, with Fishoff wiring money to Chernin and Costantin for their services and Fishoff receiving compensation from Petrello for the offering-related tips that Fishoff provided to him.
The conspiracy count with which each defendant is charged carries a maximum potential penalty of five years in prison and a $250,000 fine, or twice the aggregate loss to victims or gain to the defendants. Each of the substantive securities fraud charges carry a maximum penalty of 20 years in prison and a $5 million fine.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Frankel, for the investigation leading to today’s arrests and complaint. He also thanked the U.S. Securities and Exchange Commission’s New York Regional Office under the direction of Andrew Calamari. He also thanked special agents of the FBI, Los Angeles (Ventura Resident Agency and Riverside Resident Agency) and FBI, Miami (West Palm Beach Resident Agency) for their assistance.
The government is represented by Assistant U.S. Attorneys Shirley U. Emehelu of the Economic Crimes Unit of the U.S. Attorney’s Office in Newark, New Jersey and Acting Chief Barbara Ward for the of the Office’s Asset Forfeiture and Money Laundering Unit.
The charges and allegations contained in the complaint are merely accusations and the defendants are presumed innocent unless and until proven guilty.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.stopfraud.gov
New York Check Cashing Company and Owner Plead Guilty for Roles in $19 Million Scheme
Belair Payroll Services Inc. (Belair), a multi-branch check cashing company in Flushing, N.Y., and its owner, Craig Panzera, 47, pleaded guilty today for failing to follow reporting and anti-money laundering requirements for more than $19 million in transactions, in violation of the Bank Secrecy Act (BSA). Panzera also pleaded guilty to conspiring to defraud the United States by willfully failing to pay income and payroll taxes.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Loretta Lynch of the Eastern District of New York, Acting Director John Sandweg of U.S. Immigration and Customs Enforcement (ICE), and Chief Richard Weber of the Internal Revenue Service Criminal Investigation (IRS-CI) made the announcement.
As part of the guilty plea, Belair will forfeit $3,267,252.10, and Panzera will pay restitution in the amount of $946,841.17 to the IRS. Sentencing for Belair and Panzera will be determined at a later date.
According to court records, from in or about June 2009 through June 2011, certain individuals presented to Belair’s manager and other employees checks to be cashed at Belair. The checks were written on accounts of shell corporations that appeared to be health care related, but in fact, the corporations did no legitimate business. The shell corporations and their corresponding bank accounts on which the checks were written were established in the names of foreign nationals, many of whom were no longer in the United States.
Belair accepted these checks and provided cash in excess of $10,000 to the individuals. Panzera and others at Belair never obtained any identification documents or information from those individuals. Belair filed currency transaction reports (CTRs) that falsely stated the checks were cashed by the foreign nationals who set up the shell corporations, and in certain CTRs, Belair failed to indicate the full amount of cash provided to the individuals. The individuals cashed more than $19 million through Belair during the course of the scheme. Panzera and Belair willfully failed to maintain an effective anti-money laundering program by cashing these checks.
The charges in the indictment against Panzera’s and Belair’s co-defendants remain pending and are merely accusations. Those defendants are presumed innocent unless and until proven guilty.
The cases are being investigated by agents from ICE Homeland Security Investigations and IRS-CI. These cases are being prosecuted by Trial Attorneys Claiborne W. Porter and Kevin G. Mosley of the Criminal Division’s Asset Forfeiture and Money Laundering Section’s (AFMLS) Money Laundering and Bank Integrity Unit, Trial Attorney Darrin McCullough of AFMLS’s Forfeiture Unit, and Assistant U.S. Attorney Patricia Notopoulos of the Eastern District of New York.
The Money Laundering and Bank Integrity Unit investigates and prosecutes complex, multi-district and international criminal cases involving financial institutions and individuals who violate the money laundering statutes, the Bank Secrecy Act and other related statutes. The Unit’s prosecutions generally focus on three types of violators: financial institutions, including their officers, managers and employees, whose actions threaten the integrity of the individual institution or the wider financial system; professional money launderers and gatekeepers who provide their services to serious criminal organizations; and individuals and entities engaged in using the latest and most sophisticated money laundering techniques and tools.
Phillip Zane’s Game Theory: Ten Years On
Phillip Zane be the only attorney whose colleagues and clients might expect to see an open book on games and strategy on his desk.
Ten years ago this spring, Zane published The Price Fixer’s Dilemma: Applying Game Theory to the Decision of Whether to Plead Guilty to Antitrust Crimes, 48 Antitrust Bull. 1 (2003), which changed the way law-and-economics scholars and sophisticated prosecutors and defense counsel analyze whether, and when, to settle high-stakes antitrust cases.
Zane’s article strongly suggested that in a number of common situations, pleading guilty (or even seeking the protections of the corporate leniency program) is not always justified. Zane’s article used a repeated, or iterative, version of the prisoner’s dilemma to demonstrate that pleading guilty was not always the best strategy for antitrust defendants facing criminal prosecution and civil liability in multiple proceedings or jurisdictions.
At the time, a few of the brainier Antitrust Division prosecutors breathed a sigh of relief when the defense bar did not seem to notice and they failed to incorporate Zane’s research into their negotiating strategies.
In 2007, Zane published “An Introduction to Game Theory for Antitrust Lawyers,” which he used in a unit of an antitrust class he taught at George Mason University School of Law. That paper was another milestone on the way to making game theory concepts accessible and useful to the antitrust defense bar.
Zane’s work, which now used game theory to criticize the settlement of the second Microsoft case and the Government’s approach to conscious parallelism, as well as the leniency program, was met with official grumblings within the Antitrust Division.
GeyerGorey LLP was founded on the principle that the chances for achieving the best possible outcome are maximized by having access to multiple, top-notch, cross-disciplinary legal minds that are synced together by an organizational and compensation structure that encourages sharing of ideas and information in client relationships.
As international enforcement agencies sprouted and developed criminal capabilities and as more hybrid matters included prosecutors from US enforcement agency components with sometimes overlapping jurisdictions, such as the Antitrust, Criminal, Civil and Tax Divisions of the Department of Justice, and the alphabet soup of regulatory agencies, particularly the Securities and Exchange Commission, it became apparent that Zane’s game-theoretic approach has application in almost every significant decision we could be called upon to make. Since Zane has joined us we have been working to factor in the increased risks associated with what we call hybrid conduct (conduct that violates more than a single statute). Our tools of analysis for identifying risks for violations of competition laws, anti-corruption laws, anti-money-laundering laws, and other prohibitions, include sophisticated game-theoretic techniques, as well as, of course, the noses of former seasoned prosecutors, taking into account, each particular client’s tolerance for risk.
To take one example, an internal investigation might show both possible price fixing and bribery of foreign government officials. How, given the potential for multiple prosecutions, should decisions to defend or cooperate be assessed? And how might such decisions trigger interest by the Tax Division, the SEC, the Commodities Futures Trading Commission, the Federal Energy Regulatory Commission or other regulators. When should a corporation launch an internal investigation? When should it make a mandatory disclosure? What should it disclose and to which agency, in what order? When should it seek leniency and when should it instead stand silent? These tools are valuable in the civil context as well: When should it abandon a proposed merger or instead oppose an enforcement agency’s challenge to a proposed deal?
These are truly the most difficult questions a lawyer advising large corporations is required to address. We are well positioned to help answer these questions.
Rockville, Md., Property Purchased with Nigerian Corruption Proceeds Forfeited Through Justice Department’s Kleptocracy Initiative
A forfeiture judgment was executed today against real property with an estimated value of more than $700,000 in Rockville, Md., that had been purchased with corruption proceeds traceable to Diepreye Solomon Peter Alamieyeseigha, a former Governor of Bayelsa State, Nigeria, announced Acting Assistant Attorney General Mythili Raman of the Criminal Division and U.S. Immigration and Customs Enforcement (ICE) Director John Morton.
“Foreign officials who think they can use the United States as a stash-house are sorely mistaken,” said Acting Assistant Attorney General Raman. “Through the Kleptocracy Initiative, we stand with the victims of foreign official corruption as we seek to forfeit the proceeds of corrupt leaders’ illegal activities.”
“This investigation was initiated by ICE’s Homeland Security Investigations (HSI) Asset Identification & Removal Group (AIRG) in Baltimore, in an effort to recover the criminal proceeds from Diepreye Solomon Peter Alamieyeseigha’s assets, whose shell companies were convicted of money laundering offenses in Nigeria,” said ICE Director Morton. “HSI’s AIRG will continue working with the Department of Justice to seek to recover illicit proceeds gained through foreign corruption and to protect the U.S. financial system from being utilized by criminals.”
Alamieyeseigha, aka DSP, was the elected governor of oil-producing Bayelsa State in Nigeria from 1999 until his impeachment in 2005. As alleged in the U.S. forfeiture complaint, DSP’s official salary for this entire period was approximately $81,000, and his declared income from all sources during the period was approximately $248,000. Nevertheless, while governor, DSP accumulated millions of dollars’ worth of property located around the world through corruption and other illegal activities. The complaint alleges that DSP acquired the Rockville property during his first term as governor of Bayelsa State with funds obtained through corruption, abuse of office, money laundering and other violations of Nigerian and U.S. law. Title to the property was transferred to Solomon & Peters, Ltd., a shell corporation controlled by DSP and on whose behalf the former governor entered a guilty plea to money laundering in Nigeria in 2007.
On May 24, 2013, U.S. District Court Judge Roger W. Titus of the District of Maryland granted a motion for a default judgment filed by the Criminal Division’s Asset Forfeiture and Money Laundering Section and issued a final decree of forfeiture. The order extinguishes all prior title and authorizes forfeiture to the United States of the private residence located in Rockville, Maryland, estimated to be worth more than $700,000 and allows the United States to liquidate the property in accordance with federal law. In a related action in the District of Massachusetts, the Department of Justice and ICE Homeland Security Investigations successfully forfeited approximately $400,000 from an investment account traceable to DSP.
Both actions were brought under the Justice Department’s Kleptocracy Asset Recovery Initiative announced by the Attorney General in 2010. Through this initiative, the Department of Justice, along with federal law enforcement agencies, seeks to identify and forfeit the proceeds of foreign official corruption, and where possible and appropriate return those corruption proceeds for the benefit of the people of the nations harmed by the corruption.
The case was investigated by the HSI’s Asset Identification & Removal Group (AIRG) in Baltimore. The case was prosecuted by Assistant Deputy Chief Daniel H. Claman and Trial Attorney Tracy Mann of the Criminal Division’s Asset Forfeiture and Money Laundering Section, with assistance from the U.S. Attorney’s Office of the District of Maryland.
Individuals with information about possible proceeds of foreign corruption in the United States, or funds laundered through institutions in the United States, should contact Homeland Security
Former Director of Accounting and Outside Auditor of American Mortgage Specialists Inc. Plead Guilty to Roles in Fraud Against BNC National Bank
(ed. note: Would not want to be in the cross-hairs of this cross-agency group of fraud enforcers.)
Former Director of Accounting and Outside Auditor of American Mortgage Specialists Inc. Plead Guilty to Roles in Fraud Against BNC National Bank
The former director of accounting and the former outside auditor of Arizona-based residential mortgage loan originator American Mortgage Specialists Inc. (AMS) pleaded guilty in Arizona to conspiracy to defraud BNC National Bank and obstruction of justice, respectively, Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Timothy Q. Purdon of the District of North Dakota; Christy Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP); and Steve A. Linick, Inspector General of the Federal Housing Finance Agency Office of Inspector General (FHFA-OIG) announced today.
Lauretta Horton, 45, and David Kaufman, 69, both residents of Arizona, pleaded guilty yesterday before U.S. District Judge Daniel L. Hovland of the District of North Dakota, who took the pleas in Arizona federal court. Horton and Kaufman were charged in separate criminal informations unsealed on Oct. 2, 2012, for their roles in the fraud scheme against BNC.
“ While the nation was reeling from a financial downturn, Lauetta Horton conspired with AMS executives to deceive BNC Bank about AMS’s true financial stability, and AMS auditor David Kaufman lied to federal investigators to impede their investigation,” said Assistant Attorney General Breuer. “Horton and Kaufman’s guilty pleas reflect our continued vigilance in investigating and punishing criminal conduct relating to the financial crisis.”
“Banks in North Dakota were not immune from illegal conduct related to the mortgage crisis that impacted banks all across the country,” said U.S. Attorney Purdon. “These guilty pleas are the result of close collaboration with our federal investigative partners and the Justice Department’s Criminal Division and should send the message that the Department of Justice is committed to prosecuting cases such as these wherever they might arise.”
“As the controller and director of accounting of mortgage originator AMS, Horton sent to TARP-recipient BNC National Bank false financial statements she had prepared so that BNC would continue to fund AMS,” said Special Inspector General Romero. “In a cover-up and an attempt to impede the federal grand jury investigation, AMS’s external auditor Kaufman lied to SIGTARP agents about his telling an AMS executive that he had changed the financial statements so that BNC would not discover the truth. Kaufman is the third person convicted of lying to SIGTARP agents, which shows that SIGTARP will aggressively pursue those who fail to tell the truth and impede our investigations.”
“This is a significant case because it holds accountable an individual who participated in a scheme to defraud a member bank of the Federal Home Loan Bank System, and another individual who lied to federal investigators,” said Inspector General Linick. “This case is a reminder that there are consequences for giving investigators false information and manipulating numbers.”
AMS was in the business of originating residential real estate mortgage loans to borrowers and then selling the loans to institutional investors. In 2006, AMS entered into a loan participation agreement with BNC whereby BNC provided funding for the loans issued by AMS. According to court documents, Horton, the director of accounting at AMS, conspired from February 2009 to April 2010 to defraud BNC by making false representations regarding the financial well-being of AMS in order for AMS to continue to obtain funding from BNC. Specifically, Horton admitted to inflating asset items and altering financial information in the AMS balance sheet provided to BNC to falsely reflect that AMS had substantial liquid assets when, in fact, it did not.
According to court documents, Kaufman, a certified public accountant and the outside auditor of AMS’ annual financial statements, lied to federal agents during the criminal investigation and obstructed the grand jury investigation. Specifically, Kaufman admitted denying to agents that he had a conversation with an AMS executive in which Kaufman explained to the AMS executive that Kaufman had combined two expenses on AMS’s financial statements in order to conceal the true nature and extent of AMS’s financial condition from BNC.
Although BNC’s holding company had received approximately $20 million under the TARP and had injected approximately $17 million of the TARP funds into BNC, BNC incurred losses exceeding the millions received from TARP. BNC then did not make its required TARP dividends to the Department of Treasury for nearly two years.
At sentencing, scheduled for May 6, 2013, Kaufman and Horton face a maximum penalty of 10 years and five years in prison, respectively.
The investigation was conducted by agents assigned to the Offices of the Inspector General of SIGTARP and of FHFA. The case is being prosecuted by Trial Attorney Robert A. Zink and Senior Litigation Counsel Jack B. Patrick of the Criminal Division’s Fraud Section and by Assistant U.S. Attorney Clare Hochhalter of the District of North Dakota, with the assistance of Trial Attorney Jeannette Gunderson of the Criminal Division’s Asset Forfeiture and Money Laundering Section.
This case is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov .
Former FBI Agent and Alleged Co-Conspirators Indicted for Scheme to Obstruct Federal Fraud Investigation
FOR IMMEDIATE RELEASE
Thursday, October 18, 2012
Former FBI Agent and Alleged Co-Conspirators Indicted for Scheme to Obstruct Federal Fraud Investigation
WASHINGTON – A federal grand jury in Salt Lake City today returned an 11-count indictment charging a former FBI special agent and two alleged accomplices with a scheme to use the agent’s official position to derail a federal investigation into the conduct of one of the alleged conspirators. The charges were announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney for the District of Utah David B. Barlow and Department of Justice Inspector General Michael E. Horowitz.
The indictment charges former FBI special agent Robert G. Lustyik Jr., 50, of Sleepy Hollow, N.Y.; Michael L. Taylor, 51, of Harvard, Mass., the principal of Boston-based American International Security Corporation (AISC); and Johannes W. Thaler, 49, of New Fairfield, Conn., each with one count of conspiracy, eight counts of honest services wire fraud, one count of obstructing justice and one count of obstructing an agency proceeding.
“According to the indictment, while active in the FBI, former Special Agent Lustyik used his position in an attempt to stave off the criminal investigation of a business partner with whom he was pursuing lucrative security and energy contracts,” said Assistant Attorney General Breuer. “He allegedly acted through a childhood friend to secure promises of cash, purported medical expenses and business proceeds in exchange for abusing his position as an FBI agent. The alleged conduct is outrageous, and we will do everything we can to ensure that justice is done in this case.”
DOJ Inspector General Horowitz stated: “Law enforcement officers are sworn to uphold the law. Agents who would sell their badges and impede the administration of justice will be vigorously pursued.”
According to the indictment, Robert Lustyik was an FBI special agent until September 2012, assigned to counterintelligence work in White Plains, N.Y. The indictment also states that from at least June 2011, the three alleged conspirators had a business relationship involving the pursuit of contracts for security services, electric power and energy development, among other things, in the Middle East, Africa and elsewhere.
The indictment alleges that in September 2011, Taylor learned of a federal criminal investigation, begun in Utah in 2010, into whether Taylor, his business and others committed fraud in the award and performance of a contract with the U.S. Department of Defense.
Soon thereafter, Taylor allegedly began to give and offer things of value to Lustyik in exchange for Lustyik’s agreement to use his official position to impair and impede the Utah investigation. The indictment also alleges that Thaler, a childhood friend of Lustyik’s, served as a conduit between Taylor and Lustyik, passing information and things of value.
Specifically, the indictment charges that Taylor offered Lustyik a $200,000 cash payment; money purportedly for the medical expenses of Lustyik’s minor child; and a share in the proceeds of several anticipated contracts worth millions of dollars.
According to the indictment, Lustyik used his official FBI position to impede the Utah investigation by, among other things, designating Taylor as an FBI confidential source, texting and calling the Utah investigators and prosecutors to dissuade them from charging Taylor and attempting to interview potential witnesses and targets in the Utah investigation. As alleged in the indictment, Lustyik wrote to Taylor that he was going to interview one of Taylor’s co-defendants and “blow the doors off this thing.” Referring to the Utah investigation, Lustyik also allegedly assured Taylor that he would not stop in his “attempt to sway this your way.”
According to the indictment, Lustyik, Taylor and Thaler attempted to conceal the full extent of Lustyik’s relationship with Taylor from the Utah prosecutors and agents, including by making and planning to make material misrepresentations and omissions to federal law enforcement involved in the investigation of Taylor.
For example, the indictment alleges that on Sept. 8, 2012, after Taylor was searched at the border and his computer seized, Lustyik sent a text message to Thaler, stating: “You might have to save me and testify that only you r doing business.” Nine days later, according to the indictment, Thaler told federal law enforcement agents – in a voluntary, recorded interview – that Lustyik was not involved in Taylor’s and Thaler’s business.
The pair also allegedly used an email “dead drop” to avoid leaving a record of their interactions and used the names of football teams and nicknames as part of their coded communications.
Taylor and Lustyik were both previously arrested on prior criminal complaints in this case. Taylor has been detained pending trial and Lustyik received a $2 million bond. Thaler is expected to surrender to authorities tomorrow.
If convicted, the defendants each face a maximum potential penalty of five years in prison on the conspiracy charge, 20 years in prison on each of the wire fraud charges, 10 years in prison on the obstruction of justice charge and five years in prison on the obstruction of an agency proceeding charge. Each charge also carries a maximum $250,000 fine, or twice the gross gain or loss from the offense. The indictment also seeks forfeiture of any proceeds traceable to the conspiracy, wire fraud and obstruction of justice offenses.
The case is being investigated by the Department of Justice Office of the Inspector General and prosecuted by Trial Attorneys Kevin Driscoll and Maria Lerner of the Criminal Division’s Public Integrity Section; Acting Deputy Chief Pamela Hicks, Acting Assistant Deputy Chief Jeannette Gunderson and Trial Attorney Ann Marie Blaylock of the Criminal Division’s Asset Forfeiture and Money Laundering Section; and Assistant U.S. Attorney Carlos Esqueda.
The charges and allegations contained in the indictment are merely accusations and the defendants are presumed innocent unless and until proven guilty.