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3rd Circuit Reverses Decision in Plaza Extra Money Laundering Case

Aug. 25, 2006 – The 3rd U.S. Circuit Court of Appeals has overturned a decision made by District Court Judge Raymond Finch in the Fathi Yusuf money laundering, fraud and conspiracy case.
In September 2003, Yusuf and five others were charged in a 78-count indictment with various criminal offenses, including money laundering, currency structuring, tax violations, mail fraud, obstruction of justice and conspiracy (See "Nissman Gives Seven Cases Their Day in Court").
Nearly two years later Finch ruled that the affidavit in the case used to obtain search warrants contained statements made with "reckless disregard for the truth," and therefore all evidence gained during raids on the Plaza Extra Stores owned by Yusuf was inadmissible in the case (See "Judge Throws Out Evidence from Plaza Extra Raid").
The 3rd Circuit opinion, filed Thursday, said: "We find that the disputed representations in the affidavit were not made with 'reckless disregard for the truth' because the FBI agent did not have an 'obvious reason to doubt the truth' of the information supplied" by the V.I. Bureau of Internal Revenue.
The VIBIR had provided inaccurate information to the FBI relative to amounts paid in gross receipts. The 3rd Circuit holds that this did not constitute reckless disregard for the truth. In fact, the FBI later acknowledged having used inaccurate information in the affidavit, but said it had no way of knowing at the time that the information was inaccurate.
The case was sparked by raids in 1999 on the Plaza Extra stores, owned by Yusuf, relative to illegal immigrants Yusuf was charged with employing. He was subsequently convicted and held under house arrest for six months in that case. But while searching the stores, FBI agents found large amounts of cash in one store's safe. A manager of the store who opened the safe told the agents that the money, which was in denominations of $50 and $100, totaled between $3 million and $7 million. Bank records obtained in the investigation revealed that United Corporation, the parent corporation of Plaza Extra, never made any deposits of that magnitude in 1999, the 3rd Circuit opinion said. But in 2001, in one week, $1.9 million was deposited – far more than the store's normal deposits, the court documents said. Furthermore, the deposits consisted solely of $50 and $100 bills and were structured in a way that they were made in smaller increments over a period of days.
A footnote to the 3rd Circuit opinion says: "According to the affidavit, criminals with large amounts of cash often seek out money launderers to conceal the source of funds realized through criminal activity. The affidavit states that money launderers are typically individuals who are in a position to deposit large amounts of cash into banks without suspicion – such as bars, restaurants, liquor stores, and supermarkets."
The 48-page 3rd Circuit opinion contains information from the affidavit which quotes a reliable foreign services agency as saying that Yusuf was part of a network of Middle Eastern merchants who owned retail businesses in St. Maarten that made cash deposits of more than $2.2 million into their respective accounts in 2000 – "an amount far in excess of the legitimate cash proceeds of their retail sales."
It also says three confidential informants who have provided the government with reliable information in the past reported that: a "known drug trafficker" had been in touch with Plaza Extra managers; that one of the defendants, Waheed Hamed, had illegally purchased food stamps from Middle Eastern merchants who were not authorized to collect reimbursements; and further, that Hamed had arranged to smuggle more than $2 million in U.S. currency in Muslim robes to Saddam Hussein during the first Persian Gulf War.
The same informant –who documents say is willing to testify — described a conversation with
Fathi Yusuf in which Yusuf allegedly said that "[a]ny man who can't take out $1 million a year in cash from a business like this is a fool."
The appeal, argued in May by S. Robert Lyons on behalf of the U.S. government of the Virgin Islands, was heard by circuit judges D. Michael Fisher, Jane R. Roth and Robert E. Cowen.
Assistant U.S. Attorney James Carroll III said Friday the case will now go to trial in the Virgin Islands. "It will be remanded back to Judge Finch," he said.
"Whether or not he actually tries the case will be a matter decided by the District Court," Carroll said. To read the entire opinion, click here .
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