Addis Greenberg & Schultz, L.L.C.

The Money Laundering Control Act of 1986, 18 U.S.C. §§ 1956-1957, was enacted to deter organized crime and narcotics traffickers from "money laundering," defined as the process by which one conceals the existence, illegal source, or illegal application of income, and disguises that income to make it appear legitimate.

This Act provides criminal sanctions for anyone who conducts a monetary transaction knowing, or with reason to know, that the funds involved were derived from unlawful activity.

While this Act was aimed at "the lifeblood of organized crime," it has been utilized by prosecutors against numerous corporations and otherwise legitimate businesses because it enables prosecutors to reach proceeds of criminal conduct, such as tax offenses.

The Obstruction of Justice and Perjury statutes, 18 U.S.C. §§ 1501 et seq., are popular

statutes for federal prosecutors. These laws, which are designed to protect the integrity of judicial proceedings -- before grand juries, federal agencies and Congress -- are often utilized to pursue criminal investigations, with otherwise marginal evidence of substantive offenses, because of (a) concealment, alteration or destruction of documents; or (b) encouraging or rendering of false testimony.

Over the past decade, federal prosecutors have turned to the "RICO" (Racketeer Influenced and Corrupt Organizations Act of 1970) statute, 18 U.S.C. §§ 1961-1968, as a tool in prosecuting legitimate businesses and their officers. While enacted in 1970 as a "frontal attack" on organized crime, prosecutors have taken advantage of the Act's specific statement that it should be interpreted "liberally. . . to effectuate its remedial purposes" to justify its use in other contexts.

The Act prohibits "any person" from: (a) using income received from a pattern of racketeering activity or through collection of an unlawful debt to acquire an interest in an enterprise affecting interstate commerce; (b) acquiring or maintaining through a pattern of racketeering activity or through collection of an unlawful debt an interest in an enterprise affecting interstate commerce; (c) conducting or participating in the conduct of, through a pattern of racketeering activity or through collection of an unlawful debt, the affairs of an enterprise affecting interstate commerce; or (d) conspiring to participate in any of these activities.

Federal prosecutors utilize the RICO statute as a powerful weapon to prosecute offenses such as mail and wire fraud, bankruptcy fraud, and securities fraud. Prosecutors also take advantage of the statute's provisions authorizing courts to enter restraining orders prior to conviction to prevent the transfer of potentially forfeitable property.

Both the Securities Act of 1933, 15 U.S.C. §§ 77a et seq., and the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq., provide for criminal penalties for various types of conduct. See,~, 15 U.S.C. § 77e(a) (sale of unregistered securities); 15 U.S.C. § 77q(b) (unlawful use of interstate commerce for purpose of offering securities for sale); 15 U.S.C. § 78j(a) (unlawful short selling of securities); 15 U.S.C. §§ 78g(c), 78(h), 780, 78q(a), (unlawful conduct of brokerdealer); 15 U.S.C. § 78n(a) (unlawful proxy solicitation); 15 U.S.C. § 78n(e) (false practices in connection with tender offers); 15 U.S.C. § 78p(a) (inside ownership).

The most popular statute utilized by prosecutors in criminal prosecutions of securities fraud cases is Section 10(b) of the 1934 Act and Rule 10b-5 promulgated thereunder, provide for criminal sanctions if there is: (1) substantive fraud, including material misrepresentations or omissions, a scheme or artifice to defraud, or a fraudulent act, practice or course of business; (2) in connection with the purchase or sale of a security or in the offer or sale of a security; and (3) the use of interstate commerce or the mails.

A. 26 U.S.C. § 7201 is the "capstone of the system of sanctions" under the lax laws. Sansone v. United States, 380 US. 343, 350 (1965). This section provides criminal sanctions for one "who wilfully attempts in any manner to evade or defeat any tax [deficiency]."

B. 26 U.S.C. § 7202 criminalizes both the willful failure to collect taxes and the willful failure to truthfully account for and pay taxes. It is perhaps the least utilized of criminal tax statutes.

C. 26 U.S.C. § 7203 provides a misdemeanor offense for persons who have willfully failed to file their returns, to supply information or to pay their taxes.

D. 26 U.S.C. § 7206(1) provides criminal sanctions for willfully subscribing to a false tax return, statement or other document.

E. 26 U.S.C. § 7206(2) provides criminal sanctions for willfully aiding and assisting in the preparation of a false tax return, affidavit or other document.

IX. Civil Remedies

18 U.S.C. § 1345 provides for a civil injunction prohibiting the withdrawing, transferring or disposing of property obtained as a result of various offenses of Title 18 as well as conspiracies to defraud (and false claims and statements to) the United States (or any agency thereof) and banking violations.