Bank Fraud Trial Highlights White Collar Enforcement Risks for Cannabis Industry

Bank Fraud Trial Highlights White Collar Enforcement Risks for Cannabis Industry

By: Sheppard Mullin Richter & Hampton LLP, jdsupra.com

The trial of two men associated with an online cannabis marketplace began last week in the Southern District of New York. Prosecutors seek to prove that Hamid Akhavan and Ruben Weigand, two businessmen who worked with the online platform from 2016 to 2019, conspired to commit bank fraud by disguising credit and debit card transactions for cannabis purchases as transactions for non-cannabis purchases. While selling cannabis remains illegal under federal law, the case demonstrates how cannabis businesses face white collar enforcement risks unrelated to drug-trafficking charges.

There are a number of online cannabis marketplaces that allow customers to purchase cannabis products from a network of dispensaries. One of the key aspects of the marketplace Akhavan and Weigand worked for was that, until 2019, it allowed customers to make purchases with credit cards and debit cards. This was significant because U.S. financial institutions generally avoid transactions related to the cannabis industry because cannabis remains illegal under federal law.

On March 31, 2020, Akhavan and Weigand were indicted with conspiracy to commit bank fraud in violation of 18 U.S.C. § 1349. The indictment alleged that from 2016 to 2019, Akhavan, Weigand, and other unnamed co-conspirators engaged in a “Transaction Laundering Scheme” to deceive banks into processing over $100 million in credit and debit card payments to cannabis retailers by disguising transactions as payments to dummy businesses unrelated to cannabis. The defendants allegedly disguised the money received from customers as payments to phony online merchants and other non-cannabis businesses, including businesses purportedly selling dog products, dive gear, carbonated drinks, green tea, and face cream. To facilitate the scheme, the cannabis marketplace allegedly relied on a third party payment processor to create sham offshore corporations, as well as websites and offshore bank accounts for the dummy businesses. The indictment also alleged that the defendants instructed others to use false credit card and debit card transaction codes in order to create the false appearance that the transactions were unrelated to cannabis. The defendants allegedly used the offshore bank accounts to disguise payments to the cannabis marketplace, concealing the true nature of the payments from U.S. banks. The marketplace itself was not charged.

On February 19, 2021, the former CEO of the online marketplace, James Patterson, pleaded guilty to one count of conspiracy to commit bank fraud and agreed to assist in the prosecution of Akhavan and Weigand. Patterson admitted that he worked with Akhavan and Weigand to hide the true nature of the purchases because he “understood that if banks were aware of the nature of the transactions they would not allow them.”

Regardless of the outcome of the trial, the prosecution shows that financial compliance is another legal pitfall for cannabis businesses to avoid. In a way, the case may also be a symptom of a maturing industry—every established industry has its share of white collar crime, and the Department of Justice’s choice to prosecute financial misconduct instead of traditional drug-dealing charges may reflect the government’s recognition of the industry’s legitimacy. As the industry continues to grow, cannabis businesses must ensure that they maintain policies promoting financial transparency. Cannabis businesses should also be diligent with financial services companies they work with to ensure that they also maintain honest business practices.

 

Article Source: jdsupra.com

Born Again

Born Again

January 22, 2021 is a milestone for me. It marks exactly one year from my official release from prison. Although I was released from FCI McKeen on December 17, 2019, the last day of my fourteen-month sentence is officially today. The Justice Department can keep me on probation for two more years, I am praying that they don’t. I am ready to move on.

Probation has not been a big ordeal, however there are the monthly reports, asking permission to travel (I cannot drive the 70 miles to visit my daughter and granddaughter without permission since it is in another district), you cannot get a credit card or take on any debt, trust me no one will afford you a credit line anyway – former felons are not considered good credit risks. The scarlet letter will always be there.

But I still want it to be done. This day has been marked on my calendar for quite some time. It has been almost four years since this ordeal started. I was arrested March 17, 2017, by far the scariest day of my life.

Although I served just under eleven months in prison, the process from indictment to today has been well over four years. The emotional toll has been extraordinary.

I have begun a move to Naples, Florida from Upstate NY, part of putting the past behind me and getting a fresh start. It is both exciting and scary – starting over six months prior to your sixtieth birthday. No one will hire you with a record, so I am starting out to build another venture, hopefully the last one!

I couldn’t imagine a more beautiful place to start. Every day is sunny, warm and holds promise.

Fed Crackdown on COVID-19 White-Collar Crime: Is It Working?

Fed Crackdown on COVID-19 White-Collar Crime: Is It Working?

By TCR Staff, Thecrimereport.org

A Minnesota man has been charged in connection with an $800,000 fraud scheme involving the Paycheck Protection Program (PPP), in the latest example of stepped-up federal vigilance over white-collar crime during the pandemic.

According to the indictment announced last week, Kyle William Brenizer, 32, submitted “false and misleading” applications for financial relief under the federal CARES Act, enacted in March to provide monetary assistance to businesses facing financial struggles as a result of COVID-19.

Three days earlier, a Taiwanese national living in New York City named Sheng-Wen Cheng was charged in connection with an alleged scheme to fraudulently obtain over $7 million in loans from the PPP and the Economic Injury Disaster Loan (EIDL) program.

Both cases may represent the tip of the iceberg in what experts warn is a growth in COVID-related fraud that undermines legitimate businesses who are struggling to stay afloat, despite claims by federal authorities that “rigorous” measures” are in place to combat it.

Schemes ranging from price-gouging and hoarding of personal protective equipment (PPE) to false claims for business relief are likely to increase as the financial impact of the crisis widens, Bridget Rohde, former Acting United States Attorney for the Eastern District of New York, told a panel last June at the University of Maryland.

“You’re going to see accounting fraud, you’re going to see insider trading, you’re going to see all sorts of misrepresentations,” said Rohde.

Federal authorities say they are stepping up efforts to meet the threat.

“This isn’t the first case of…fraud we’ve seen, and it won’t be the last,” FBI Assistant Director William F. Sweeney Jr, said in a statement announcing the charges against Cheng.

“But rest assured those who try to buck the system will be met with federal criminal charges wherever and whenever possible.”

In late July, the Small Business Administration’s Office of the Inspector General announced it had identified $250 million in taxpayer-subsidized coronavirus loan funds given to “potentially ineligible recipients,” and warned of increasing fraud involving the federal stimulus program, the Washington Post reported.

Potential fraud identified in the watchdog report included some $1.9 million in pending SBA transactions made to accounts outside the United States, and about 3,000 “suspicious” transactions worth $73 million.

“We are alarmed by these reports, but they are consistent with our investigations, which indicate pervasive fraudulent activity,” the Inspector General’s report said.

The SBA has been criticized for not developing internal preventive measures against abuse, a claim SBA Administrator Jovita Carranza refuted, saying the agency had put in place a “comprehensive, rigorous, end-to-end infrastructure to reduce the risk of fraud in the EIDL COVID program.”

According to the indictment against Brenizer, he tried twice to obtain relief in the name of the same firm. The first application was denied, and he allegedly re-submitted it under another name.

He allegedly used the some of the money to purchase a $29,000 Harley-Davidson motorcycle, as well as “other retail and entertainment expenditures for his personal benefit,” the indictment claims.

The Cheng case also allegedly involved using the names of other individuals to falsely obtain relief from the Small Business Administration and five financial institutions, claiming that he operated companies with over 200 employees and was responsible for a $1.5 million monthly payroll.

In fact, authorities said, his companies had no more than 14 employees.

Additional reading:

 Citibank Warns of Rising Payments Fraud During COVID

 Attorney General William Barr warns in a March memo that financial misconduct during the pandemic “cannot be tolerated.”

 This summary was prepared by TCR intern Laura Bowen.

Article Source: Thecrimereport.org

Return to Sender: A History of the Mysterious Postal Police Who Arrested Steve Bannon

Return to Sender: A History of the Mysterious Postal Police Who Arrested Steve Bannon

By Norman Vanamee, townandcountrymag.com

On Thursday, former White House advisor Steve Bannon and two other men were arrested and charged with defrauding individuals who had contributed to Build the Wall, an online fundraising effort that has raised over $25 million to help build the Mexico border wall promised by President Trump.

According to an indictment unveiled by Audrey Strauss, Acting United States Attorney for the Southern District of New York, the men claimed that 100% of proceeds would go toward construction but instead used hundreds of thousands of dollars to secretly pay for expenses and salaries.

If found guilty, Bannon will join a venerable cohort of criminals who were nabbed by a federal law enforcement agency most people don’t even know exists.

The U.S. Postal Office Inspection Service (USPIS) is 2,442-member enforcement division made up of white-collar-crime experts, research scientists, explosives, chemical, and biological weapons experts, as well as armed officers who protect post offices and postal employees and arrest people who violate postal laws (there are a lot). It has offices across the country, a forensics lab in Dulles, Maryland, and 22 satellite labs.

It also has an impressive history of laying down the law

 

It’s the Oldest Federal Law Enforcement Agency

The first post office inspector, William Goddard, was appointed in 1775 by Benjamin Franklin who was then the Postmaster General. Goddard’s job was to investigate and arrest anyone who stole or interfered with the mail. (Back then, it was usually the innkeeper or the carrier.) Congress made mail theft a capital crime in 1792. By 1801, the country had three full-time inspectors, one of whom was lexicographer Noah Webster.

Its Agents Helped Launch Other Major Federal Enforcement Agencies

During the Civil War President Lincoln appointed Allan Pinkerton (of detective agency fame) to lead the Union Intelligence Service, which went on to become the United States Secret Service. In 1919, a postal inspector named Elmer Irey was appointed head of the Internal Revenue Service’s new Intelligence Unit. Irey and five other former inspectors led the department during the investigation and conviction of Al Capone on tax charges.

Helped Extend Federal Authority

As the United States acquired territories, the Post Office would establish new offices and districts and its investigators would police the trains, boats, and carriages used to transport mail. By 1853, there were 18 inspectors.

Things That Got Mailed

Most notably, $15 billion in U.S. treasury gold bars were mailed from New York City to Fort Knox, first class, by train between 1937 to 1941 and the Hope Diamond was sent to the Smithsonian Museum, accompanied by armed postal officers, in 1955.

Not Worried About the Dog

Postal Inspectors were among the first federal agents to be issued Thompson submachine guns (Tommy guns) to combat a rise in train robberies. Today’s postal officers have access to a wide assortment of modern enforcement tools.

Bagged!

Over the years, Congress has enacted laws that have become valuable tools for federal prosecutors, among them the mail fraud statute under which Bannon has been charged. There are also laws concerning child pornography and distributing narcotics that have been used to bring down major criminal enterprises.

High-profile USPIS arrests include pyramid schemer Charles Ponzi, financiers Ivan Boesky and Michael Milken, and televangelist Jim Bakker.

Ready For a Close-Up

USPIS and its predecessors have been the subject of two feature films (Appointment with Danger in 1951 and Showtime’s 1998 The Inspectors) and CBS television series, also titled The Inspectors, which won two Emmy Awards. (Brooklyn Nine-Nine’s season two episode, “USPIS” was less flattering and is not included in the agency’s About Us timeline). In 2014, the Smithsonian launched a permanent exhibition about the service called, “Behind the Badge.”

Article Source: townandcountrymag.com

White Collar Crimes To Avoid As A Business Owner

White Collar Crimes To Avoid As A Business Owner

By Smith Big, MyVenturePad.com

According to the FBI, white-collar crime is any form of fraud, theft, or money laundering performed by government officials and business professionals. White-collar crime is a non-violent crime committed by employees who have access to business and financial records. Here is a look at some of the white-collar crimes you should avoid and how to prevent these crimes as a business owner.

1. Tax Evasion

One of the most serious white-collar crimes you should avoid as a business owner is tax evasion. This crime involves failing to pay taxes. Many entrepreneurs avoid paying taxes to save for their operational costs. Some will either try to pay fewer taxes or find ways of hiding from the taxman altogether. Federal and state tax laws require businesses to pay taxes regardless of their business operations.

Tax evasion involves filing returns incorrectly or failing to declare your property and income. Anyone found liable for tax evasion is subjected to high fines. In severe cases, a person accused of tax evasion may be imprisoned.

2. Fraud

Fraud is a white-collar crime that involves using deception for financial gain. You can become a victim of fraud voluntarily or involuntarily. For example, misinterpretation of facts when marketing stock to potential investors amounts to security fraud.

Another way that fraud manifests itself is if an employee uses your business name to deceive people. This form of fraud could ruin your company’s reputation and cost you important clients and potential investors. In most cases, it takes some time before the real perpetrators of fraud are tracked down and punished.

3. Embezzlement 

Embezzlement arises when an employee uses an organization’s fund for their personal use. In many embezzlement scenarios, the employee withholds insignificant amounts of money from different sources to avoid being caught. Embezzlement is often executed by people who are responsible for investment accounts.

In some cases, the perpetrators of embezzlement falsify accounts to hide their tracks. Embezzlement could easily bankrupt your business, especially if discovered when it is too late. Failing to vet employees involved with handling payment and investment accounts can be a huge liability to your business.  

4. Money Laundering

Another serious white-collar crime you should avoid is money laundering. This crime often leads to imprisonment. A case of money laundering can also discredit your business and cost you clients and investors.

Money laundering is when a person manipulates money obtained illegally from activities like gambling, drug sales, and theft sales. The perpetrator of this crime makes it look like money was acquired from legal transactions. The criminal usually passes money through different transactions, so the document trail appears legit.

5. Bribery

Another common white-collar crime is bribery. As a business owner, you should not resort to corruption to have an edge over your competitors. Bribery is a double-edged sword; it can be used for your benefit or to your detriment.

For example, bribing a government official to allow you to market a substandard product may work in your favor. However, bribery will be a disadvantage to you if, for example, an employee receives a bribe to reveal company secrets. It is crucial to discourage the culture of bribery in your organization.

Strategies For Avoiding White Collar Crime

1. Zero Tolerance Policy

One of the most important defenses against white-collar crime is implementing a zero-tolerance policy. It is crucial to impress upon your employees the need to avoid white-collar crimes. Furthermore, you need to explain to them the consequences of engaging in white-collar criminal activity.

It is vital to engage an employment lawyer from the HKM law firm for advice on the policies that will best work to prevent white-collar crime. An employment attorney will advise you on employment contracts, breach of contracts, data breaches, and other issues that can help you avoid white-collar crime. Your lawyer will also instruct you on how to enforce a policy that lays out the consequences of being involved in these crimes. 

2. Anonymous Reporting

It isn’t easy to trust an employee if you know anything about them. The best way to determine the credibility of your employees is by performing a background check on them. Vetting your employees will help you discover any questionable incidences in their life history.

You need to create a way for employees to report anonymously if they detect any criminal or ethical conduct. Another alternative is to engage a third-party reporting agency. You will then instruct your employees to call the agency to express their concerns. The agency will forward the notification to the appropriate authorities in the company for further investigation.

3. Routine Audits

Another smart way of avoiding white-collar crimes is through performing routine audits. Implement regular audits in your organization to prevent a single group or person from having excess control over your finances. Try to use both internal and third-party auditors for accurate reports.

The best way to detect white-collar crimes in time is by conducting random audits. These audits should be done randomly at different times throughout the year. Routine audits are a smart way of discouraging employees from engaging in criminal activity.

Can I Lose My Assets While Under Investigation for a White-Collar Crime?

Can I Lose My Assets While Under Investigation for a White-Collar Crime?

When someone is being investigated for a white-collar crime, there is almost always substantial evidence that exists against them. It’s this mound of evidence that provokes a deeper investigation in the first place. Because white collar crimes are financially motivated, criminal investigators are going to look closely at the finances and assets of the accused, often going forward with the perception of guilt. It’s not uncommon for assets to be seized, or forfeited, in a white-collar investigation, but what does this really mean?

What Is Asset Forfeiture

In a nutshell, asset forfeiture is the freezing of assets by officials, so that they cannot be accessed or used in any capacity by the accused. Asset forfeiture usually occurs during the investigation process, especially when a financially motivated crime is involved, as the assets may have been acquired through illegal means. 

The Federal Bureau of Investigations (FBI), as well as other law enforcement agencies, can leverage asset forfeiture as a means of limiting the ability of the person under investigation to commit further unlawful acts, hide their criminal activity, or potentially flee the area. Asset forfeiture can essentially cripple a person who is under investigation for a white-collar crime, at least financially speaking – regardless of whether it can be proven their assets were obtained illegally. 

Asset forfeiture is a tool that law enforcement agencies are quick to use. One could argue that there are legitimate reasons to employ asset forfeiture in a white-collar crime case. For instance, if there is strong evidence that certain assets were obtained through illegal means, or if it is believed that allowing the accused to access their assets could potentially lead to more illegal activity. 

There is another side to the issue, however. The fact is that when a person is under investigation, they are just that – under investigation. This doesn’t imply guilt, so freezing a person’s bank account or other assets when guilt hasn’t been established can be unfair. This is especially true if the person under investigation was the primary income source for a family, or if an innocent spouse also loses assets that are equally theirs. 

Why Assets Are Seized

Asset forfeiture is not used in every type of crime, so it becomes important to ask why assets are seized in certain cases.  When a crime appears to be financially motivated, the potential for forfeiture escalates. This includes crimes where the vulnerable were preyed upon for financial gain, crimes involving illegal drug activities, acts committed by criminal organizations, and anyone who is under investigation for terrorist acts. 

According to the FBI website (1), there are a number of reasons why they’ll initiate asset forfeiture in a white-collar crime investigation. 

  • Assets forfeiture is sometimes used as a form of punishment against criminals
  • Asset forfeiture can disrupt the activity of criminal organizations
  • Freezing assets can help prevent ongoing criminal activity
  • Assets may be forfeited so they can be returned to the victims of financial crimes
  • To help protect communities from criminal activity

Will Your Assets Be Seized?

If you’re under investigation for a white-collar crime, you are probably anxious about whether or not your assets will be seized. There is no straightforward yes or no answer to this question, but you should be aware that it is a possibility, especially if there appears to be sufficient evidence against you. 

Law enforcement can freeze your assets, including your bank accounts until the investigation is over and you’re found to be innocent of the charges. This can cause a serious disruption of day-to-day life, especially in cases where the accused has family or they rely on certain assets – such as vehicles – for transportation to and from work. 

This Could Happen To You

This Could Happen To You

Like many people I never thought I would be arrested, the idea that I could be arrested and put in prison was something I could never imagine. After all, I wasn’t doing anything wrong. Sure, I took some extra deductions on my taxes, but nothing criminal, or so I thought.

The fact is, it is very easy for the government to convict you of a crime, in some cases they don’t even need proof of a crime, a “conspiracy” is essentially the government’s catch all for crimes that they have no proof for. I was convicted on two counts; one count of conspiracy to commit wire fraud, and one count of filing a false tax return in 2012. Candidly, I did cheat on my taxes, I took a large deduction I should not have taken. I never thought it was something that I could be imprisoned for. I knew that if the IRS caught it, I would get a fine and have to pay the taxes plus interest, but never did I think I could be arrested. That tax deduction, however, gave the government the leverage they needed to get me to take a plea for the conspiracy charge.

My former business partners and I were indicted based on an accusation made by a competitor. This person was a disgruntled sales representative who left our company to start his own venture. When his new venture failed, he decided to get vengeance. He hired a former IT worker from our company who provided him stolen reports from which he tried to create a case that we were stealing from our investors. Ultimately it was difficult to make a case that we stole from our investors when they made a return of 260%, they were actually paid $13.2 million on a $5.5 million investment, not a bad deal! That would not make a great case for a jury, telling them that a bunch of millionaire investors only made $13 million on their $5 million investment.

The government needed us to take a plea, but to that they needed leverage. Our plan was to fight the government in court, we felt that we had a very strong chance to succeed, that was until my attorney told me about an email between one of my business partners and our CFO. In that email my business partner was asking the company CFO to help him cheat on his taxes. That email was the smoking gun the feds needed. That was the day my attorney suggested I take a plea, whether we were innocent or guilty on the other charges no longer mattered, the jury would hear that we cheated on our taxes and therefore we probably did the other things the government alleged.

Now I was faced with 51-63 months in prison if we lost at trial, or if I took a plea, home confinement and probation. Prison was still not a consideration…

I am sharing my story because I never thought of myself as a criminal, I still don’t. But my story should serve as a warning that this could happen to anyone in business. Alan Dershowitz authored a book called Three Felonies a Day, where he clearly shows us how my story is typical and is happening to others around this country every day.