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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 1.5. citizen involved in
the banking industry.
The individual who wanted the money
launde red owned and controlled several federally insured banks in
Rentucky 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.
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,
nd 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" refers in general to the practice of
gaining control of a bank and then draining its assets through
Because it is an on-going investigation, I
an not able to discuss the details of the case.
However, I can
say that the tax benefits alone are estimated to exceed one
This scheme, in my opinion, represents the most
baterial 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 illegal activities. 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 tour
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 In Tax Fraud Scheme
en finner NEW YORK, April he wastny executive
Hotey were that cont Wita meg a scheme to hide sotme $150 hon in income is earned by 170 companies and individuala
Among the companies were a man jor 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
Schnejer Zalman Gurary, 74, and Noctem Sternberg. 42, face up to 20 years in prison and fines of $750,000, said U.S. Attorney Rut dolph Giuliani
Giafiani maid the mea set up a group a 37 companies, known as the Zalg companies, received from 1979 to 1985 more than $150 mullion from at least 170 companies and individuals, took a 5 to 15 percent Yee 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 rap idly formed and dissolved in an attempt to cover up their illegal op erations, Giuliani mida
Paul Summit, an assistant U.S. attorney prosecuting the case, aplained that a Zalga company would
wata from i.
sleg read money ning company atter out the fee The purchasing company ob tained two illegal benefit from the transaction," Summit said. "First, the principals of the 'purchasing company received cash secretly, which enabled them to evade per. sonal income tax; and, second, the 'purchasing company claimed a. false business deduction (based on the false invoice) on its 'corporate tax return."
The publicly held company alleg. edly engaged in more than $15 million worth of transactions.
Garment center businessman Ir. win Feines 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 pur• chasing company. His company at legedly 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 1 he was to receive was taken out, he could see it was only a thin layer of the cash in the satchel
W.P. 413186 (E3)
Ex-Banker Sentenced In Drug Scheme
By Nancy Lewis Washington House 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. Ho gan 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 co caine distribution ring that smug. gled 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 "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.
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 serv. ing 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 con sidered 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.
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.