Articles Posted in Federal Criminal Defense

OpioidsThe opioid crisis continues to worsen throughout the entire county, but in certain states more than others because the drug has become more accessible.  To makes matters worse, insurance companies are taking advantage of this situation by overcharging for the drug treatment needed by those who suffer from all types of drug addictions. One of the rehab capitals of the United States is Palm Beach County, Florida.  The state of Florida has a billion-dollar drug treatment industry that, according to an NBC investigation, is overwhelmed by clients who continue to overdose and increase in insurance fraud.

According to the National Institute of Drug Abuse, opioids are a class of drugs that include the illegal drug heroin, synthetic opioids such as fentanyl, and pain relievers available legally by prescription, such as oxycodone (OxyContin®), hydrocodone (Vicodin®), codeine, morphine, and many others. The reason why people are abusing the use of the drug is because not only does it relieve pain but it produces euphoria that many become dependent on. Overdoses on opioids have continued to severely increase since 2007, especially because the drug is now being mixed with other drugs to produce other addictive effects.  Family members of the drug abusers rely on drug treatment centers to save their loved ones but the outcome is the complete opposite.

Dave Aronberg, Palm Beach County’s top prosecutor and State Attorney, stated to the NBC News investigator that the entire drug treatment industry has been corrupted by the accessibility of easy money.  Mr. Aronberg also explains that, the actors of this industry have taken advantage of well-intended federal law, and a lack of any good law at the state level, to profit off people at the lowest stages of their lives.

The law he refers to is the Affordable Care Act, which along with the federal Mental Health Parity Act passed in 2008, was meant to ensure people suffering from addiction could get the care they needed. People saw this as an opportunity to make a lot of money and have taken advantage of desperate people, who are usually young or dependent on their families. These scammers have also made it difficult for genuine and ethical centers to prosper because people are losing faith in the credibility of these centers.

According to the investigation done by NBC News, within a few months of a drug abuser reaching the drug treatment centers, they would call their family members stating that they had transferred to another sober home. Bills from the insurance companies kept arriving to their homes with treatment worth thousands of dollars. The bills included from medical treatments, lab tests, chiropractic therapy, and counseling.  When they family members of these victims called the treatment centers to figure out why the bills were so high, the person on the other end of the phone would hang up. The insurance bills detailed charges of $5,000.00 for things like a urine test or $1,800.00 for one counseling session. One of the victims bills reached $1.2 million for only 15 months of treatment, even though they were bounced among nine different facilities.

Governor Rick Scott, officially declared Florida’s opioid crisis a state of emergency in May of 2017. Also, legislators recently passed a bill that would increase penalties for brokering. They believe this will give prosecutors sharper tools to crack down on what a grand jury last December found was rampant brokering and fraud across the insurance industry.

StudentsAccording to the Florida Sun Sentinel in 2005, teacher Blake Sinrod, was accused of molesting four third grade students at Coral Sunset Elementary School.  He fondled the four girls in his classroom during their reading groups, a classroom movie, and he would also instruct them to touch his genitals or he would he would place their hands on his genitals over his clothes. After a 12-year-old lawsuit, the Palm Beach County School District gave the approval for a $3.6 million settlement.

Mr. Blake Sinrod was fired from Coral Sunset Elementary in 2006 and his teaching license was revoked in 2008.  Mr. Sinrod plead guilty in 2006 to molesting two of the four girls but the four families persisted in filing a joint civil suit against the school district.  According to file from 2006, the defense used by Mr. Dale Friedman, the defense attorney, was that the victims were old enough to understand the consequences of of their actions and conducted themselves in careless and negligent minor.  The parents of the four victims could not believe this was the defense tactic used by the school district.

Attorney Dale Friedman, told the Sun Sentinel that the district’s outrageous claim was used in an effort to reduce potential damages the district might have to pay out, a tactic she referred to as “comparative negligence.” Friedman insists, “We have never blamed the girls or given them the appearance of holding the girls responsible for what their teacher did.” But this defense only weakened the defense’s case further because it re-victimized the victims. According to Mr. Jeffrey Herman, an attorney who represents victims of sexual abuse, explained that he had never witnessed the use of such a defense and the fact that the school district was blaming the four girls of what happened to them would remain as permanent record of the case.

However, when the parents of the four third grade students filed a civil law suit in 2006, their lawyer at the time, Charles Bechert, said that the parents believed their children were preyed upon in part because they were immigrants and that perhaps the teacher thought their parents would not know how to report the crimes, or feel comfortable doing so.  This is something that continues to happen to children all over the world but children do not speak out about it because of fear of their families being deported or hurt in any form.

According to 7 News what infuriated the parents of the victims and their attorneys is that the school district failed to investigate or take proper action against Blake Sinrod in the sexual molestation incidents in 2003.  The Sun Sentinel reports that the school district also uses as its defense that Mr. Sinrod’s actions were unknown and beyond the foresight of a reasonably prudent person.  But this insufficient for both the parents of the victims and their attorneys because they do not understand how the School District did not think that this man was a danger to the students and why he was not revoked of his teaching license from that very moment.

MarijuanaAccording to ABC News a senior citizen and her son, in Pasco County Florida, explain that the nursing home where she lives is denying her potential pain relief, by refusing to allow her to have the medical marijuana she has a legal prescription to take. This seems to be an issue that is affecting Florida residents who live in long term care facilities throughout the state. Ms. Simpson, who is  attached to a wheelchair and suffers from Parkinson’s Disease, has tried everything she could have possibly tried to assist her with the medical conditions she suffers from, but medical marijuana  had given her faith in a new alternative that would allow to live a little more comfortably.

Medical marijuana legislation in the State of Florida was finally established by the governor on June 16, 2017 after years of Florida residents explaining to the government all its health benefits. In Amendment 2 of the Constitution of the State of Florida, patients with a debilitating medical condition will not be found subjects to criminal or civil liability for consuming medical marijuana.  Debilitating medical conditions mean cancer, epilepsy, glaucoma, positive status for human immunodeficiency virus (HIV), acquired immune deficiency syndrome (AIDS), post-traumatic stress disorder (PTSD), amyotrophic lateral sclerosis (ALS), Crohn’s disease, Parkinson’s disease, multiple sclerosis, or other debilitating medical conditions of the same kind or class as or comparable to those enumerated, and for which a physician believes that the medical use of marijuana would likely outweigh the potential health risks for a patient.

Ms. Simpson’s son explains that after medical marijuana became legal in Florida, a doctor prescribed it for his mother and she applied for a compassionate use permit. When she was finally approved, and the medicine was delivered, they gave it to him and told him he had to take it home with him because it would not be permitted inside the nursing home. But according to a healthcare expert from the University of Florida, even though Ms. Simpson had a legitimate medical therapy reason for the use of medical marijuana and a prescription for it, it doesn’t mean they have to allow her to take it if they can provide her with other options for her pain.  This is one of the biggest dilemmas with the statue because it is not completely clear on the regulations of long term health care facilities and the acceptance of medical marijuana therapy.

States like California, Colorado, and other states have found other alternatives to balancing the use of medical marijuana in long term health care facilities.   Instead of having their patients, who suffer from chronic diseases, consume the marijuana inside the medical facilities, they offer to take the patients to close by dispensaries where they can practice this therapy without breaking the law. Unfortunately, medical marijuana is a scheduled narcotic and is considered a private business, therefore nursing homes can set their own rules regarding its use in their facilities, even if it causes their residents to live uncomfortably.  Issues such as this one will push the government to amend Section 381.986, F.S., or to create a brand new legislation that clarifies the rules and regulations of the use of medical marijuana with better ways of providing it to its consumer.

PillFentanyl, a very addictive and dangerous narcotic, continues to rise in popularity among the United States.  On October 05, 2017, two people were arrested and charged with a 24-page federal indictment, along with seven others, of distributing the imitation opioid fentanyl through the United States, especially through states such as Florida where drug abuse has always been an issue.  According to the Sun Sentinel, Anthony Santos Gomes and Lisa Gomes, told the judge they were trying to hire attorneys to represent them but most likely both will be transferred to North Dakota to face the charges against them in that state.

According to the officials of the Drug Enforcement Administration, Internal Revenue Service, and the Department of Homeland Security the Gomes are being charged with five different counts in the indictment.  The indictment explains that Anthony Santos Gomes and Lisa Gomes were running a conspiracy to possess with intent to distribute…controlled substances and controlled substance analogues resulting in seriously bodily injury and death. The indictment also explains that they did all this knowingly and intentionally with the purpose of distributing the drug.

The National Institute of Drug Abuse, describes fentanyl as a powerful synthetic opioid that is very similar to morphine, but 50 to 100 times more potent. If prescribed, it is given to patients with severe pain or to manage severe pain after surgery.  The way drug abusers use this new dangerous imitation of fentanyl is swallowing it in solid form, snorting it in powder form, or by burning it and then injecting it or having it absorbed by the mucous membrane. Similar to heroin and morphine, fentanyl works by binding to the body’s opioid receptors, which are found in areas of the brain that control pain and emotion.  Then they drive up dopamine levels in the brain’s reward areas, producing a state of euphoria and relaxation.  On the streets this drug is combined with cocaine or morphine, making it more addicting and requiring higher dosages which usually lead to overdoses and killing those who consume it.

According to the Florida Sun Sentinel, the indictment explained that the drug ring was operated from January 2013 through August 2016 with two organizers participating from a Canadian prison and another operating out of China. The ring moved more than 400 grams of fentanyl and more than 100 grams of a fentanyl analog online using internet sites designed to be hidden from the public. The drugs were obtained from China and Canada, records show, and distributed in Florida, California, Colorado, Georgia, Maryland, North Carolina, North Dakota, New Jersey, Ohio, Oregon and South Carolina where records also show that the drug has been the cause of many deaths in those states due to drug overdose.

Both Anthony and Lisa Gomes and the other members of their drug trafficking ring could be punished with life sentences or a fine of up to 8 million dollars due the alleged charges on the indictment.

Increasingly the U.S. Attorney’s office has been actively pursuing men and women who were placed on Federal probation but have either stopped checking in or have violated their probation with a new arrest.   Federal probation is a sentence, just as is Florida state probation.  Violations of probation are most frequently one of the following:

  • Failing to report a change of address or get approval to move from the probation officer
  • Failing to follow the terms of current probation
  • Committing another crime while still on probation
  • Failing to pass or submit a urinalysis
  • Failing to pass or submit a drug analysis
  • Failing to pay for restitution
  • Failing to report to the probation officer

5aebe3eb57581e1d811f05221f078474-300x199Probation is often part of a sentence and follows incarceration.  Violating probation has severe consequences.  If you are currently on probation, make certain that you are aware of all the terms and conditions. Please see 18 U.S. Code §3563, for the terms and conditions of federal probation. Florida Statute § 948.03 is the statute that contains the basic elements of what probation requires in Florida state court.

When and if one is placed on federal probation one is informed by a probation officer at the time of sentencing immediately after the federal judge imposes the sentence in open court.  You and your attorney will go from the courtroom to the Probation Office in the courthouse where you will be instructed.

If you have a violation of probation warrant, contact a criminal defense attorney.  Depending on your state or federal jurisdiction, the warrant can be handled in several ways.  One way is to appear before a judge and explain why you failed to appear (i.e. if the service was to a wrong address or you were hospitalized or incarcerated most judges will set aside the warrant).

The substantive elements of a violation of probation are two: a willful act which substantially violates the terms and conditions of probation.  Rule 32.1 of the Federal Rules of Criminal Procedure contains the post incarcerate laws on modifying probation or supervised release.

Upon being summoned, the Rule requires the federal judge or magistrate to advise you of what you did in violation of your probation or supervised release, and your right to be represented by an attorney.  If you cannot afford a private attorney, the federal judge will appoint a federal public defender.

You are entitled to a preliminary hearing, and at the federal preliminary hearing, the issue of jurisdiction (are you in the correct federal district), is primary.  If you are being held in the wrong federal district the court will transfer you to the jurisdiction of your conviction.  The magistrate can detain (keep you in custody) or release you.  If you are released, you must appear within a few days in the correct federal court.  The purpose of the hearing then becomes a court inquiry.  Taking documents and allegations of fact into consideration the magistrate must determine if probable cause exists to support the allegations of violation.  The federal magistrate must provide you with written accusations specifically identifying what conditions of probation or supervised release were allegedly violated.  The disposition is covered by 18 U.S. Code § 3565 and 18 U.S. Code § 3583.

If after an evidentiary hearing the magistrate makes a finding based on the evidence that a violation has occurred, one of three things can occur:

  1. The federal magistrate can return the probationer to probation without modification.
  2. The second option is to modify the terms of probation by adding new terms, extending the probation or requiring some prison time.
  3. Lastly, the federal judge or magistrate can impose a prison sentence.

The only limitation on the length of any extension or probation or any term of incarceration is the maximum sentence under the Federal Sentencing Guidelines for the crime of conviction for which you were placed on probation.  Time served can and often is granted or credited toward any new prison sentence.  A sentence imposed by a magistrate can be reviewed by a federal judge.  If you are before a magistrate and not a federal judge your criminal defense attorney can follow the procedure to have the findings and rulings of a federal magistrate reviewed by a federal judge.

The U.S. Department of Justice announced on July 22, 2016 the unsealing of what will be an epic Medicare fraud sweep involving members of the South Florida community, both in Miami and Fort Lauderdale.  This is the largest Medicare Fraud crime federal indictment in the history of the U.S. Department of Justice.  It involves a network of doctors, hospitals, health care providers, adult living facilities (ALF’s), nursing homes, and private physicians and health care providers who have collectively, (allegedly) fraudulently billed Medicaid and Medicare in excess of one billion dollars.

Named in 300px-FBISealthe unsealed indictment is the owner of a business that owns and operates over 30 facilities for profit that provide nursing and assisted living services.  The allegations include conspiracy, bribery, kickbacks and fraudulent billing of services either not provided or, as some unconfirmed reports indicate; provided to dead people.  The unsealed indictment is one of many that the joint task force anticipates will be bring dozens of people to court as criminal defendants in federal court in South Florida.  The Office of the Inspector General of the U.S. Department of Health announced it believes in excess of $2.5 Billion of fraudulent charges are paid out every year by Medicare and Medicaid fraudulently and that South Florida is the focus of the task force.  Also named in the unsealed indictment is Odette Barcha, 49, and Arnaldo Carmouze, 56, all of Miami-Dade County.

Philip Esformes, the owner of more than 30 facilities, was named as the “mastermind” of the conspiracy.  He is represented by attorney Marissel Descalzo and Michael Pasano of the Carton Fields law firm.  In 2013, Attorney Michael Pasano  also represented Karen Kallen-Zury who was convicted and found guilty,  along with others, of running a $70 million Medicare fraud and bribery scheme involving mental health hospitals.  Also convicted in the Southern District of Florida in that case was Daisy Miller of Hollywood and Michele Petrie of Fort Lauderdale.

The Miami Herald wrote that Philip Esformes, age 47, is one of the richest men in Miami and his involvement in the one billion dollar scheme is the source of his accumulated wealth. According to the government, hospitals owned and controlled by the conspirators referred some of the thousands of Medicare patients (whose names are not revealed because of HIPA regulations) for outreach mental health care.

One of the hospitals not named in the indictment is the Larkin Community Hospital in South Miami.  The Justice Department alleged in the indictment some of the kickbacks were ‘disguised’ as payments for “escort services” provided to Mr. Esformes as well as related travel and hotel expenses reportedly billed to Medicare for providing mental health services to Medicare and Medicaid patients, all of whom remain unnamed.

The press release from the U.S. Department of Justice stated, “This is the largest single criminal healthcare fraud case ever brought against individuals by the Department of Justice.”  Mr. Esforme’s criminal defense lawyers Marissel Descalzo and Michael Pasano issued a statement that their client committed no wrongdoing, further saying, “Mr. Esformes is a respected and well-regarded businessman.”  The attorneys did not elaborate on the full scope of their client’s business activities, and did not comment on the allegations that escort and hotel services were allegedly paid for by Medicare and Medicaid in connection with services provided to patients.

Slavery and trafficking are synonymous.  Human trafficking includes Philippine young women who are transported to Saudi Arabia and confined as domestic servants, as well as commercial sex operations.  Human trafficking is defined as the use of fraud, coercion or force to exercise physical and psychological control of an individual to purpose the victim into commercial sex acts, confined labor or both.  For more a world-wide perspective on human trafficking, go to: National Human Trafficking Resource Center and the UN Office on Drugs and Crime. Defining criminality and prosecutions under federal laws is a three step analysis beginning with: 1) The act; 2) The means; and 3) The purpose.

Florida has a sex trafficking and human trafficking criminal statute which is quite comprehensive.  In Florida, local jurisdictions, such as Miami and Fort Lauderdale, prosecute sex trafficking and human trafficking cases under Florida criminal law.  Often, the scope of commercial sex trafficking operations crosses city and county jurisdictional lines.  A prosecutor in Fort Lauderdale cannot successfully prosecute a sex trafficking operation that is outside Broward County.  Because commercial sex operators are inter-jurisdictional operations, there is a federal task force in place.  The task force is active in Tampa, Orlando, Miami, West Palm Beach, and Fort Lauderdale.  Federal prosecutions are often undertaken when local state prosecutors decline to prosecute or refer a sex or human trafficking case to a federal task force.

Federal criminal codes 18 U.S.C §§ 1591 and 1594 are the most commonly used criminal cases filed in Federal Court.  The White-Slave Traffic Act of 1910, known as the Mann Act, outlawed prostitution and unlawful sexual activities which “cross state lines.”  Historically, the Mann Act was used to arrest and prosecute men, and women, who crossed from one state to another, and who were either unmarried or engaging in commercial sex.   The Mann Act has penalties of ten years.  The Human Trafficking Federal Statutes (18 U.S.C § 1591) prosecutions are more targeted to incarcerate operators of commercial sex enterprises in which prostitutes, both male and female, of age 14 or under are held as sex workers.  The age of the person providing commercial sex and the age of the “John” place different sentencing schemes to defendants.  The statute begins with a mandatory minimum of ten years to a 15 year minimum mandatory to life in prison.  If the age of the “John” is under 21 and the age of the sex partner is under 14, the 15 year minimums apply.   The Sentencing Guidelines provide for enhancements and a recommended sentencing range.  Please seek out more information on the guidelines for more insight into the sentencing exposure of defendants.

We have seen in recent months that increasingly the federal sex trafficking and human trafficking laws have been applied to “Johns” in greater and greater numbers.  As a criminal defense attorney, my office sees this as a disturbing trend in law enforcement.  Human trafficking and the forced enslavement of victims is a problem of international scope.  It is appropriate for federal criminal authorities to use prosecutorial resources to impact on sex traffickers.  It is an unwise allocation of federal resources to arrest individuals who respond to internet ads for escorts and are swept into the federal system.

mateenNoor Zahi Salman, (the second and current wife of the Orlando shooter, Omar Mateen),  told the FBI she knew of Mateen’s plan for a mass murder shooting, accompanied him to scout out potential targets, went with him to the Pulse Club in Orlando, and accompanied him to buy a holster and ammunition.

Is that enough to charge Mateen’s wife as aiding and abetting the murders?  Can the law support a conviction?  Is arresting her a public relations issue or a law enforcement issue? These are all questions that investigators will be looking to answer in the next few days.

Decide for yourself. But first understand the law.  Aiding and abetting means “assisting in the commission of someone else’s crime.”  According to 18 U.S. Code § 2, Salman, if convicted of aiding and abetting, could be punished as a principal.

Jury instructions are the place to start reading about the elements of crimes.   I always work with clients at the start by reading jury instructions. Jurors hear the instructions at the conclusion of criminal trials.  Jury instructions are the court’s distillation of statutes and case law of the crime(s) defendants are indicted.

Read the Manual of Model Criminal Jury Instructions, 5.1 Aiding and Abetting. There are four elements that must be proven beyond a reasonable doubt. In Salman’s case, to be found guilty of aiding and abetting Mateen of murder, the first thing that must be proven is that the crimes occurred, which they did.

Second, that Salman aided in at least one element of the crime. This may be provable, if it’s true that Mateen’s wife helped him scout out the scene of the crime and went with him to procure things he needed to murder all those people.

Third, that Salman acted with the intent to facilitate the crime. What does “facilitate” mean?  Mateen’s wife must have not only associated with the person who committed the crime, but she must have helped Mateen, knowing he intended to commit a crime.  You decide if Mateen’s wife acted knowing that Mateen intended to use guns to kill people and that there still was a realistic opportunity for him to withdraw from the crime.

The fourth element to be proven is whether Salman acted before the crime was completed.

As more facts become known, you can weigh what you read in the papers and see on TV.  You can mull it over and come to your own conclusion.  But, if you are a prosecutor, you don’t mull and consider if it is a politically popular thing to do. The decision to prosecute is a decision by the U.S. Attorney and the State Attorney in Orlando.  What the prosecutor looks for is sufficient evidence to survive a judgment of acquittal at the conclusion of the government’s case.  Juries decide if the evidence meets the government’s burden of proof beyond a reasonable doubt.  Can prosecutors prove the elements of aiding and abetting the charge of murder, the murder of 49 people?  That is a jury question and that’s what jury trials do: They weigh evidence.  If you believe it is a question of proof, then you should encourage the U.S. Attorney and the State Attorney (the prosecutor’s office in Orlando) to charge Mateen’s wife with aiding and abetting.   Let the proof come out in a trial.  A jury can decide if it meets the test of proof beyond a reasonable doubt.

Most U.S. taxpayers do not run afoul of the Internal Revenue Service’s Criminal Investigation Division.   Known as the CID, it has special agents who work either with other criminal prosecution agencies, in or with inter-agency task forces, or are assigned on a case by case basis to a U.S. Attorney office.  Understand that the Internal Revenue Service does not commonly begin a taxpayer collection action with a Criminal Investigation Division special agent.  The most common I.R.S. taxpayer recovery begins with a telephone call to the target.  The caller is an I.R.S. collection agent, not a C.I.D. agent.

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Source: bragertaxlaw.com

If your first contact from the I.R.S. is a C.I.D. agent call you know that the ultimate outcome is most likely a criminal prosecution.  It is best to retain a criminal defense attorney if you are called by a C.I.D. special agent.  All customary investigations begin with a request for production.  The request is either by letter or by verbal communication from an I.R.S. agent.  Compliance is not voluntary but is mandatory so do not disregard an IRS request for production of records.  You can negotiate the time and delay factor but you cannot fail to comply.  Additionally, be very aware that your response must include all records requested.  Any selective response by you, or any omission of records is an open door to a criminal prosecution.  When we look over our law office records of criminal prosecutions for tax evasion it is common that the prosecutor includes several counts of obstruction of justice for failure to provide complete tax records.  If the first contact  you have with an IRS agent is a subpoena then you can conclude for certain that you are the subject of a criminal investigation.  Anyone whose first contact from the IRS is from a CID special agent would be well advised to retain a criminal defense lawyer at the outset.  The investigatory phase can last as long as six months.  As the subject of an IRS review you are entitled to be represented by an attorney, but it is not always needed.  Most if not all IRS inquiries resolve with an agreed resolution requiring payment of back taxes, fines and interest.  Very few IRS contacts resolve with a criminal prosecution.

You must keep in mind that IRS compliance actions are entirely paper based and records based.  An inculpatory statement  (admission of guilt) is rarely a part of an IRS criminal prosecution so be candid and open in your conversation with counsel and, if so advised, with the IRS agent.  Unlike most other criminal prosecutions, the government does not have to establish beyond a reasonable doubt the elements of the crime of tax evasion.  The standard is willfulness and intent; and your tax filings are almost always sufficient to establish all the legal elements the government must prove up in a tax evasion prosecution.

This week the Security and Exchange Commission (SEC) announced that E.S. Financial Services, a Miami based brokerage firm, settled what could have been a major criminal case with an agreed $ 1 million penalty payment to settle the charges and possibly avoid criminal prosecution.

The SEC issued a press release which suggested that the E.S. Financial, now known as Brickell Global Markets, Inc., committed acts that substantially violate anti-money laundering statutes and related rules.  The agreed allegations are that the brokerage firm allowed non-U.S. individuals to sell and buy securities without revealing the people who are the beneficial owners.

The SEC’s continued investigation led to their issuance of an order, which instituted a settled administrative proceeding, in lieu of a criminal indictment.  And while no fraud occurred in this case, the SEC investigation concluded that there were significant “holes” or shortcomings in the framework and implementation of the firm’s customer identification program (CIP), which required brokers to, “…at a minimum…, implement reasonable procedures to verify the identity of any person seeking to open an account.”

According to the SEC’s order, E.S. Financial maintained a brokerage account for a bank from Central America that was trading for its own benefit.  It went on to say that 13 non-United States entities, involving 23 non-U.S. citizens, were the beneficial owners of the securities involved and that more than $23 million of securities transactions were involved in the allegations.  These actions were in violation of Section 17(a) of the Securities Exchange Act of 1934. Specifically:

  • Rule 17a-3, which requires exchange members, brokers, and dealers to make and keep certain all books and records relating to its business.
  • Rule 17a-4, which requires exchange members, brokers, and dealers to preserve such required records for a prescribed period of time.
  • Rule 17a-8, which requires every broker to comply with the reporting, record keeping, and record retention requirements in regulations implemented under the Bank Secrecy Act, including the requirements in the CIP rule applicable to broker-dealers.

The anti-money laundering statutes require that non-U.S. citizens who buy, sell or beneficially own securities in the U.S. must reveal and verify their names.  This applies to any individual who is the beneficial owner or ultimate person who will own the securities.

The SEC identified that in examining the books and records of the firm, there was a failure to provide and produce the records identifying the foreign customers the firm was soliciting and or providing financial advice.

Under the SEC rules cited above, financial institutions must maintain records which adequately identify their customers.  To ensure that money launderings statutes are followed, FINRA published the Know Your Customer Rule (FINRA Rule 2090), which requires regulated brokerage firms to know with whom they are dealing.   The “Know Your Customer” Rule imposed upon financial institutions is intended to eliminate or reduce money laundering.

As part of the agreed settlement, E.S. Financial Services agreed and confirmed to the SEC that a complete review of their internal policies, practices and procedures over the next two years would be undertaken, which is in addition to the $1 million fine they agreed to pay.