Financial Fraud: A Group of Individuals Charged With International Money Laundering and Wire Fraud

Financial Fraud
A Group of Individuals Charged With International Money Laundering and Wire Fraud

Manhattan U.S. Attorney Announces Charges Against Six Individuals For Their Role In International Money Laundering Scheme Involving Over $100 Million

Defendants Transferred Funds Through Dozens Of Shell Companies In The United States and Mexico As Part Of A Scheme To Fraudulently Obtain Tax Refunds From the Government of Mexico

Preet Bharara, the United States Attorney for the Southern District of New York,  William J. Cotter, Special Agent-in-Charge of the San Antonio Field Office of the Internal Revenue Service, Criminal Investigations (“IRS-CI”), and Terence S. Opiola, Special Agent in Charge of the Newark Field Office of the Department of Homeland Security, Homeland Security Investigations (“HSI”), announced today a complaint charging CARLOS DJEMAL, ISIDORO HAIAT, BRAULIO LOPEZ, MAX FRAENKEL, DANIEL BLITZER, and ROBERT MORENO with international money laundering and wire fraud as well as conspiracies to commit these same offenses.  DJEMAL was arrested in Chicago, Illinois; MORENO was arrested in Dallas, Texas; FRAENKEL was arrested in Austin, Texas.  BLITZER will be presented this afternoon in Manhattan federal court before U.S. Magistrate Judge Andrew J. Peck.  HAIAT and LOPEZ have not been apprehended.

Manhattan U.S. Attorney Preet Bharara said:  “As alleged, Carlos Djemal, Isidoro Haiat, and their co-defendants used the U.S. banking system to commit an international fraud scheme that deprived the Mexican government of substantial tax revenue and involved the laundering of over $100 million.  Thanks to the outstanding investigative work of HSI and the IRS, these alleged criminals will now face charges in an American court.”

IRS-CI Special Agent-in-Charge William J. Cotter said:  “This investigation took law enforcement above and beyond its traditional role in financial crimes.  In effect, it put us squarely in the middle of the high-tech world of banking and the sophisticated electronic movement of money.  This investigation serves to remind us that there is no such thing as free money and there are no awards or incentives for creativity when it comes to crime.”

According to the allegations in the Complaint unsealed today in Manhattan federal court:

Beginning in or about June 2011 through in or about at least May 2016, CARLOS DJEMAL, ISIDORO HAIAT, BRAULIO LOPEZ, MAX FRAENKEL, DANIEL BLITZER, and ROBERT MORENO were engaged in a scheme to defraud the Mexican government of tax revenue relating to Mexico’s value added tax (“VAT”) and then launder the proceeds of the scheme throughout the United States and Mexico.  The Mexican government imposes VAT on goods sold from one Mexican company to another; however, when certain goods (such as cellular phones) are exported from Mexico, the previously-paid VAT is refunded to the exporter.  DJEMAL, HAIAT, LOPEZ, MORENO, FRAENKEL, and BLITZER created and controlled dozens of companies (the “Front Companies”) purportedly doing business as importers and exporters of cellular phones in order to fraudulently obtain VAT refunds from the Mexican government.

In order to carry out the scheme, DJEMAL and HAIAT caused Front Companies in Mexico to purchase outdated cellular phones from other companies seeking to sell outdated inventory.  DJEMAL and HAIAT then caused these phones to be exported to Front Companies in the United States owned and operated by others involved in the scheme.  During the export process, DJEMAL and HAIAT obtained fraudulent invoices and created export documents that each falsely inflated the value of the phones being exported, thereby enabling them to fraudulently seek inflated VAT refunds from the Mexican tax authority.

Once the phones were shipped to the United States, they were transferred to one or more Front Companies in the United States created by LOPEZ, MORENO, FRAENKEL, or BLITZER, and then shipped back to a different Front Company in Mexico.  Through this process, the phones were shipped repeatedly in a circular fashion between Front Companies controlled by the defendants and their co-conspirators in Mexico and the United States, enabling DJEMAL and HAIAT, to obtain multiple fraudulent VAT refunds for the same phones.

In order to create the appearance of legitimate cell phone sales, each transfer of phones was generally accompanied by a transfer of funds to and from accounts held in the name of the relevant Front Companies and owned and controlled by the defendants or their co-conspirators.  As part of the scheme, each defendant or co-conspirator who controlled a Front Company receiving funds as part of the scheme retained approximately 1% for his participation in the scheme.

Between approximately June 2011 to approximately May 2016, DJEMAL, HAIAT, LOPEZ, MORENO, FRAENKEL, and BLITZER moved more than $100 million dollars through dozens of accounts maintained by Front Companies in this fashion, including through accounts maintained at a financial institution in the Southern District of New York.

Mr. Bharara praised the outstanding work of HSI and IRS-CI for their investigative efforts and ongoing support and assistance with the case.

The prosecution of this case is being overseen by the Office’s Money Laundering and Asset Forfeiture Unit.  Assistant U.S. Attorney Jaimie L. Nawaday is in charge of the case.

The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

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