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former Regional Counsel for the Southeast Region for the Comptroller of the Currency.
There is at least one known instance where USTPS promoters provided money laundering services to a U.S. citizen involved in the banking industry. The individual who wanted the money
laundered owned and controlled several federally insured banks in Kentucky and Tennessee. The bank owner arranged for over $2
million in loans to be made by his banks to corporations
controlled by himself and conspirators in the scheme. There was no intention to ever repay the loans. To ensure that the money would not be traced to him, the bank owner made arrangements with USTPS promoters to have the money moved to offshore accounts, converted to silver coin and returned to him in the United States.
In another scheme, unrelated to USTPS, but similar in basic concept, a very large domestic bank was defrauded of a substantial sum of money during operation of one of the sham transactions.
As a final example, during a current investigation being conducted jointly with the FBI, a scheme was uncovered that combines what appear to be abusive tax shelters with a form of bank raiding. "Bank raiding" refers in general to the practice of gaining control of a bank and then draining its assets through phoney transactions.
Because it is an on-going investigation, I
am not able to discuss the details of the case.
However, I can
say that the tax benefits alone are estimated to exceed one
billion dollars. This scheme, in my opinion, represents the most material and pervasive threat by promoters of abusive tax shelters to date against United States financial institutions. Accordingly, we are coordinating our efforts closely with appropriate Federal financial regulatory agencies all of which are jeopardized to various degrees by this scheme.
In the last decade traditional financial institutions have become vital, albeit often unwitting, participants in all sorts of
The international banking network offers the
efficiency, security, and most of all privacy, cherished by criminals who specialize in money laundering, tax evasion, and
other financial crimes.
These criminals have learned how to make the maximum use of
international banking services.
Funds are wire transferred out of
the United States and then sent on
a Caribbean Island hopping
from one haven bank to another in order to cover the trail.
final foreign destination is often a traditional European financial center from which the funds can be repatriated with an
added appearance of legitimacy.
Money laundering is not just a problem for law enforcement. The illicit money circulating through the financial bloodstream of our country is a poison that attacks the health of the financial community itself. The good reputation of financial institutions
who are found to have laundered illicit funds can be deeply
scarred in the eyes of the public even if none of the officers or
employees are culpable. Moreover, we are seeing cases in which banks are actually the prey of the white collar criminal. A
solution to the money laundering problem will take the joint
effort of government and the financial community.
we must commit
ourselves to make sacrifices and pursue with vigor those who would
disrupt the free flow of commerce to facilitate their corrupting
2 Executives Charged An Tax Fraud Scheme
United Press international
NEW YORK, April 2—A 74-yearold garment ndustry executiv his son-in-law today were federal court with running invoice” scheme to hide some $150 million in income tax earned by 170 companies and individuals.
Among the companies were a major retail chain and a publicly held company, which were not named.
The men were also charged with currency violations for distributing sums of currency in excess of $10,000 without filing Currency Transaction Reports as required by law.
Schnejer Zalman Gurary, 74, and Nochum Sternberg, 42, face up to 20 years in prison and fines of $750,000, said U.S. Attorney Rudolph Giuliani.
Giuliani said the men set up a group of 37 companies, known as the Zalga companies, received from 1979 to 1985 more than $150 million from at least 170 companies and individuals, took a 5 to 15 percent "fee" from them and then, using "false invoices," returned most of the money in cash and bonds.
They allegedly deposited at least $30 million in Swiss bank accounts.
The Zalga companies were rapidly formed and dissolved in an attempt to cover up their illegal operations, Giuliani said.
Paul Summit, an assistant U.S. attorney prosecuting the case, explained that a Zalga company would
sing company" after the fee.
purchasing company obtained two illegal benefits from the transaction," Summit said. "First, the principals of the 'purchasing company' received cash secretly, which enabled them to evade personal income tax; and, second, the false business deduction (based on 'purchasing company' claimed a. the false invoice) on its 'corporate tax return."
The publicly held company allegedly engaged in more than $15 million worth of transactions.
Garment center businessman Irwin Feiner pleaded guilty Oct. 24 to charges of conspiracy, tax evasion and wire fraud.
The complaint against Gurary and Sternberg says Feiner and his company engaged in more than 700 false invoice transactions as a purchasing company. His company allegedly paid more than $25.6 million and received back more than $24.3 million in cash and bonds.
Gurary and Sternberg generally brought the cash in a satchel, it was alleged. Feiner had said that, when the satchel was open and the cash-in the thousands of dollars— he was to receive was taken out, he could see it was only a thin layer of the cash in the satchel.
Ex-Banker Sentenced In Drug Scheme
By Nancy Lewis
Washington Post Staff Writer
A former Riggs National Bank vice president was sentenced yesterday to six months in prison, fined $10,000 and ordered to perform 1,000 hours of community service by a federal district judge here who said the penalties should "send a message" to bank officials who launder drug profits.
"This needs to be stopped," said U.S. District Judge Thomas F. Hogan as he sentenced William G. Hessler, 48, who pleaded guilty last month to not reporting to the Internal Revenue Service a $450,000 cash deposit that prosecutors said represented the proceeds of a cocaine distribution ring that smuggled the drug from Columbia and sold it in the United States.
Hogan, who told Hessler that he would have imposed the maximum sentence of five years in prison and a $500,000 fine if he thought that the former manager of, Riggs Watergate branch knowingly had laundered the money, called the banking industry the "crucial" link in allowing drug dealers to channel their profits into legitimate business.
"Didn't it cause you any concern" when former Washington lobbyist Fred B. Black Jr. showed up at the bank with nearly $500,000 in cash crammed in a shopping bag, Hogan asked Hessler.
"No, sir," Hessler replied. Hogan then said that he was "surprised by some of the things that went on at the bank."
U.S. Attorney Joseph E. diGenova said prosecutors were "very pleased, very satisfied" with the sentence imposed on Hessler, of 11832 Dinwiddie Dr., Rockville, who resigned from the bank in June 1983, three weeks before he was indicted in connection with the drug ring, which prosecutors said was led by his brother-in-law, Lawrence G. Strickland Jr.
"The signal sent, obviously, is that bank officials, who can be the first line of defense in the community against money laundering by international drug dealers, can be held accountable," diGenova said.
Hessler is the 14th person convicted in the case, which is the first brought here as a result of an investigation by the Organized Crime Drug Enforcement Task Force formed by the Reagan administration in 1982. At his trial in June, Hessler was acquitted of six charges of misusing bank funds, mail fraud and failure to report taxable income, but the jury could not reach a verdict on 17 other counts.
In the same trial, Black, 71, was convicted of three counts of income tax evasion and, in a separate trial, was convicted with three other defendants, of conspiracy to import and distribute cocaine. He is serving a seven-year prison term.
Assistant U.S. Attorney Roger Adelman told Hogan that Hessler is different from the others in the case because he "occupied in his career a position of trust." Despite Hessler's guilty plea, Adelman said, Hessler "perpetuates the myth" that he has done nothing wrong.
According to testimony during the trial, at the time that Hessler extended unauthorized bank loans to Black, he borrowed $40,000 from Black to help buy the house in which Hessler lives. Prosecutors alleged the money was a bribe; Hessler said it was a loan.
A financial statement filed in court indicated that Hessler does not expect to repay the $35,000 loan balance because the money was used to pay legal expenses "caused by Black and Strickland.”
Edgar Wilhite, Hessler's lawyer, said his client was "strung along" by Black, whom Hessler said he considered "almost as a father to me," and that no one at Riggs knew much about the cash transaction laws. Hessler told Hogan: "I still deny the charge concerning this case."
As a result of the case, Hessler said, "Now I'm a self-employed, blue-collar laborer My direct
family is close to financial ruin." Hogan imposed a three-year jail term, suspending all but six months, and ordered Hessler to work 500 hours in sports programs for poor and handicapped children and to spend 500 hours raising money for the American Cancer Society.