Money Laundering Update

Vladimir Kuznetsov was formally indicted and arraigned on charges that he helped hide hundreds of thousands of dollars in payouts from companies seeking UN contracts.^[1]

According to the indictment, Mr. Kuznetsov established an offshore company in 2000 to hide proceeds he received from a UN procurement officer, who was not named.^[2] The officer apparently had taken payments from foreign companies seeking goods and services contracts.^[3] He was charged with a single count of conspiracy to commit money laundering.

Some people suspect that the unnamed procurement officer is Alexander Yakovlev,^[4] who we discussed here, and who is suspected to be cooperating with Federal prosecutors.^[5]

Conspiracy to commit money laundering is covered by 18 U.S.C. § 1956(h), which states that anyone who conspires to commit any money laundering offense will be punished as prescribed for a commission of the offense. The Supreme Court recently determined that an overt act requirement is not part of section 1956(h), which we previously discussed here.

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[1] Pat Milton, U.S. Court Indicts U.N. Chair Kuznetsov, Guardian Online, Spet. 2, 2005, available here. There is no explanation why the spelling of his name changed from this morning.
[2] Id.
[3] Id.
[4] Irwin Arieff, Russian UN Diplomat Charged With Money-Laundering, Reuters.co.uk, Sept. 2, 2005, available here.
[5] Id.

Money Laundering

Vadim Kouznetsov, the head of the UN General Assembly panel that oversees the UN budget, has been arrested by the FBI on charges of money laundering.^[1] While Mr. Kouznetsov is the second UN official in a month to be arrested on charges of money laundering, this arrest seems to be only remotely related to the Oil-for-Food program scandal that led to the arrest of Alexander Yakovlev.^[2] Mr. Kouznetsov’s diplomatic immunity was waived by Kofi Annan on Thursday afternoon.^[3]

Mr. Kouznetsov is expected to be arraigned this afternoon, at which point more details about what charges he may be facing will be available.^[4]

However, for a little more information on money laundering, please see our post about Judge Gross, here.

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[1] Pat Milton, Law Enforcement Official: Russian U.N. Official Arrested, Associated Press, Sept. 2, 2005, available here.
[2] Id. For more information on Mr. Yakovlev, please see our posts about his arrest and subsequent guilty plea here, here, and here.
[3] Pat Milton, Russian U.N. Official Arrested on Money Laundering Charges, Associated Press, Sept. 2, 2005, not yet available online.
[4] Id.

Counterfeit Pharmaceuticals

A Federal grand jury in Missouri has indicted 11 people on charges related to a two-pronged conspiracy to sell $42 million worth of counterfeit, stolen, and illegally imported pharmaceuticals.^[1]

The first prong of the conspiracy consisted of what is known as “diversion”: genuine Lipitor and Celebrex tablets which were intended to be sold in South America were purchased and illegally imported into the United States.^[2] Then, chemicals and equipment—including punches, dies, and counterfeit drug labels—were purchased and sent to Costa Rica to manufacture Lipitor, which was then illegally imported into the United States.^[3] The legitimate Lipitor was commingled with the counterfeit Lipitor and sold throughout the US.^[4] The co-conspirators did this by making false representations to Customs officials, and creating false “pedigrees” for the drugs, which are written statements identifying the persons and entities from whom the drug was purchased.^[5]

According to the indictment, the defendants are charged with violating a number of transnational crimes: 18 U.S.C. §§ 371 & 2315, and 21 U.S.C. §§ 331(i)(3) & (d).

Conspiracy
18 U.S.C. § 371, the conspiracy statute, is the overarching statute at issue in this case. We have previously discussed conspiracy here.

Sale or Receipt of Stolen Goods
Under 18 U.S.C. § 2315, it is a crime for a person to receive, possess, or sell any goods which have crossed a United States border after being stolen, if that person knows the goods are stolen.
The punishment for violating section 2315 is a fine, imprisonment up to ten years, or both.

Introduction into Interstate Commerce of Certain Articles
Under 21 U.S.C. § 331(d), it is illegal to introduce into interstate commerce any article in violation of 21 U.S.C. § 355, which requires pharmaceuticals to meet certain packaging requirements.

Counterfeit Drugs
Under 21 U.S.C. § 331(i)(3), it is illegal for a person to do any act which causes a drug to be counterfeit, or to sell a counterfeit drug.

Punishment for Violating 21 U.S.C. § 331
Under 21 U.S.C. § 333, the violation of section 331 can be punished by a fine of up to $10,000, imprisonment up to three years, or both.^[6]

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[1] David Twiddy, Companies and Some Californians Indicted for Selling Fake Drugs, Associated Press, Aug. 31, 2005, available here. See also, US Attorney’s Office, Press Release: Pharmaceutical Distributors Indicted for $42 Million Lipitor Smuggling, Counterfeiting, Aug. 31, 2005, available here [hereinafter Press Release].
[2] Press Release at 2.
[3] Id. at 2-3.
[4] Id. at 3.
[5] Id.
[6] 21 U.S.C. § 333(a).

McNabb in the News

Senior Principal Douglas McNabb was quoted in this month’s Inside Counsel magazine, in connection to Ian Norris, a retired CEO of The Morgan Crucible Co.

“If Norris is extradited, he’ll be handcuffed, shackled, denied bail, detained in a high-security facility for up to a year awaiting trial, have limited access to a lawyer and the documents he needs for his defense, and be facing a sentence of 20 to 25 years in a federal facility without hope of parole,” says Douglas McNabb, senior principal of the Washington, D.C.-based global criminal defense firm McNabb Associates.^[1]

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[1] Julius Melnitzer, U.S. Tries to Extradite British CEO Under Terrorist Act, Inside Counsel, Aug. 2005.

Human Trafficking

The United Nations recently announced that approximately two million people are falling victim to the modern slave trade across the world.^[1] The UN’s High Commissioner of Human Rights, Louise Arbour, said that the victims, mostly women and children, were “ending up as sex slaves, beggars, and forced labourers because of human trafficking.”^[2]

The majority of people trafficked in south-east Asia end up in the sex trade.^[3] Some of the victims are tricked into thinking they will have high-paying jobs, never suspecting that they will be forced into prostitution; others know they are going into prostitution but think they can leave after a certain amount of time when they actually cannot.^[4]

Human trafficking is a very serious transnational crime, and the United States has taken measures to combat the practice. In 2000, Congress enacted the Trafficking Victims Protection Act of 2000,^[5] to “combat trafficking in persons, a contemporary manifestation of slavery whose victims are predominantly women and children, to ensure just and effective punishment of traffickers, and to protect their victims.”^[6] The same Act also amended Title 18, Chapter 77 of the US Code, by adding sections 1589-1594 to the chapter. In 2003, Congress amended Chapter 77, changing the former “Peonage and Slavery” to the current “Peonage, Slavery, and Trafficking in Persons.”

Trafficking in persons for the purpose of engaging in sexual activity is largely punished by 18 U.S.C. § 1591. Under this section, it is a crime for a person to knowingly

• recruit, entice, harbor, transport, provide, or obtain by any means a person, knowing that force, fraud, or coercion will be used to cause that person to engage in a commercial sex act;^[7]
• recruit, entice, harbor, transport, provide, or obtain by any means a person who has not reached 18 years of age, and that person will be caused to engage in a commercial sex act;^[8] or
• benefit, financially or by receiving anything of value, from participation in such a venture.^[9]

The punishment for violating section 1591 is a fine, imprisonment for up to life, or both.^[10]

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[1] Justin Huggler, Two Million Fall Victim to Slave Trade Each Year, Says UN, Independent Online, Aug. 31, 2005, available here.
[2] Id.
[3] Id.
[4] Id.
[5] Pub. L. No. 106-386, 114 Stat. 1464 (2000) (codified at 22 U.S.C. §§ 7101-7110).
[6] 22 U.S.C. § 7101(a).
[7] 18 U.S.C. § 1591(a)(1).
[8] Id. § 1591(a). Note that force, fraud, or coercion, are seemingly not required if the victim is under 18.
[9] . Id. § 1591(a)(2).
[10] Id. § 1591(b).

Trafficking in Protected Wildlife

Six people in Florida where indicted on 21 counts of illegally dealing in protected species of migratory birds.^[1] The indictment was obtained after one of the men was arrested at Miami’s airport with two rare Cuban birds hidden in his underwear.^[2] The defendants are accused of violating the Migratory Bird Treaty Act,^[3] which is a serious transnational crime.

Migratory Bird Treaty Act
16 U.S.C. § 703 states that it is illegal to possess or sell any migratory bird that is listed in any of the treaties that have been signed that concern the protection of migratory birds.^[4]

The punishment for knowingly selling, attempting to sell, or possessing with intent to sell, such a bird is a fine of not more than $2,000, imprisonment for up to two years, or both.^[5]

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[1] Six in Fla. Charged in Illegal Bird Sales, Associated Press, Aug. 30, 2005, available here.
[2] Id.
[3] Id.
[4] 16 U.S.C. § 703(a).
[5] Id. § 707(b).

Withheld Evidence

Important exculpatory evidence in the trial of Ahmed Omar Abu Ali, who is charged with joining al Qaeda and plotting to assassinate President Bush, is in the possession of the judge presiding over the case, but he cannot give it to the defendant’s lawyers because they lack the requisite security clearance.^[1]

Federal prosecutors, who are required to turn over evidence in their possession which is potentially beneficial to the defense, gave the information to the judge.^[2] During a pretrial hearing today, the judge told the defense team “from what I’ve seen it is important information and it bears on your defense.”^[3]

He is apparently deciding whether to appoint a lawyer who has the requisite security clearance to assist the defendant, but one of Mr. Ali’s current lawyers questions the practicality of such a move since the new lawyer would still be unable to share the information with the others.^[4]

Abu Ali has argued that he made a confession related to the case only after being tortured, and that he was detained by Saudi Arabia for nearly two years at the instruction of the United States.^[5] Arguments concerning those claims will be heard at a pretrial conference on September 19.^[6]

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[1] Matthew Barakat, Classified Evidence Kept from Abu Ali’s Defense, Associated Press, Aug. 29, 2005, available here.
[2] Id.
[3] Id.
[4] Id.
[5] Id.
[6] Id; see also Deborah Charles, U.S. Qaeda Suspect Claiming Torture Must Show Proof, Reuters, Aug. 29, 2005, available here.