Monthly Archives: May 2016

DoJ announced on May 9, 2016, that Gregg R. Mulholland, a dual U.S. and Canadian citizen of San Juan Capistrano, California and Vancouver, Canada, Age: 46 and secret owner of Legacy Global Markets S.A. (Legacy), an offshore broker-dealer and investment management company based in Panama City, Panama, and Belize City, Belize, pleaded guilty to money laundering conspiracy for fraudulently manipulating the stocks of more than 40 U.S. publicly-traded companies and then laundering more than $250 million in profits through at least five offshore law firms. 

When sentenced, Mulholland faces up to 20 years in prison. 

Between 2010 and 2014, Mulholland controlled a group of individuals (the Mulholland Group) who together devised three interrelated schemes to:

1. Induce U.S. investors to purchase stock in various thinly-traded U.S. public companies through fraudulent promotion of the stock, concealment of their ownership interests in the companies, and fraudulent manipulation of artificial price movements and trading volume in the stocks of those companies; 
2. Circumvent the IRS’s reporting requirements under the Foreign Account Tax Compliance Act (FATCA); and 
3. Launder the fraudulent proceeds from the stock manipulation schemes to and from the United States through five offshore law firms.  Through these schemes, the Mulholland Group laundered more than $250 million in fraudulent proceeds.

To facilitate the interrelated schemes, the Mulholland Group used shell companies in Belize and Nevis, West Indies, which had nominees at the helm. 

This structure was designed to conceal the Mulholland Group’s ownership interest in the stock of U.S. public companies, in violation of U.S. securities laws, and enabled the Mulholland Group to engage in more than 40 “pump and dump” schemes. 

Mulholland used the services of a U.S.-based lawyer to launder the more than $250 million generated through his stock manipulation of CYNK and other U.S. companies – directing the fraud proceeds to five law firm accounts and transmitting them back to members of the Mulholland Group and its co-conspirators. These concealment schemes also enabled Mulholland to evade reporting requirements to the IRS.

Although the Justice Department has been aggressively targeting offshore tax evasion by U.S. taxpayers since 2009, this case represents the first time that the government has brought criminal charges based upon alleged violations of FATCA.  With FATCA’s provisions only becoming effective on July 1, 2014, and with the Justice Department’s offshore crackdown showing no signs of slowing down, we expect to see more criminal prosecutions in the future alleging violations of FATCA’s provisions.

On May 10, 2016 we posted The Saga of the "Panama Papers" Has Only Just Begun! where we discussed that on May 6, 2016 the ICIJ announced that the unknown source behind a leak of 11.5 million financial and legal documents regarding shell companies from the Panamanian law firm Mossack Fonseca has offered to provide the same documents to governments that he gave to a team of reporters.  

The offer of cooperation came in the form of an 1,800 word manifesto blasting lawyers, tax evasion, weak lawmakers and income inequality. In it, the leaker, “John Doe” whose identity is said to remain unknown even to the journalists he communicates with, said he is worried about weak protections for whistleblowers, and called on Congress and other global lawmakers to make it easier for people like him to get immunity.

On April 26, 2016 we posted Mossack Fonseca Law Firm Leak & Attorney-Client Privilege where we discussed that current and former clients of the law firm subject to the leak now face the potential exposure of their confidential documents and conversations spanning nearly 40 years.

Whenever confidential attorney files are leaked, innocent clients, as well as those who may have been seeking to cover up wrongdoing, face the potential of their personal information and confidential files being reviewed by reporters, members of the public and government investigators.

Even when only a subset of the stolen documents are publicized, the DOJ can often obtain additional, nonpublic material through grand jury subpoenas served on the entities or individuals that now possess the stolen files or through mutual legal assistance treaties to foreign authorities. 

This raises the question of whether U.S. government investigators are able to make use of these "Privileged Materials" that appear to have been hacked from Mossack Fonseca, an overseas law firm?

Law 360 and Baker & McKenzie both discuss Attorney-Client Privilege And A Law Firm Leak including whether the 4th amendment and/or privilege applies to these hacked materials