Month: February 2023

Source: United States Department of Justice Criminal Division

From the outset of Russia’s unprovoked, full-scale invasion of Ukraine, one year ago today, the Department of Justice has prioritized enforcing the sweeping sanctions, export restrictions, and economic countermeasures that the United States has imposed alongside our global partners. Today, the Department continues that work by actions in two separate federal cases to disrupt sanctions evasion and smuggling networks supporting the Russian regime.  

“Over the past year, the Ukrainian people have shown the world what courage looks like,” said Attorney General Merrick B. Garland. “For as long as it takes, the Department of Justice will continue to stand shoulder-to-shoulder with our Ukrainian and international partners in defense of justice and the rule of law.”

“It has been one year since Russia launched an unprovoked invasion of its neighbor, but the FBI has been working with our Ukrainian partners for years to battle Russian aggression there — and we aren’t going anywhere,” said FBI Director Christopher Wray. “The FBI’s commitment to Ukraine remains unwavering, and we will continue to stand against Russia at home and abroad.”

The U.S. Attorney for the Southern District of New York has filed a civil forfeiture complaint against six real properties located in New York, New York; Southampton, New York; and Fisher Island, Florida, worth approximately $75 million. The complaint alleges that the properties beneficially owned by Russian oligarch Viktor Vekselberg are the proceeds of sanctions violations and were involved in international money laundering transactions. The case arises in the wake of the indictment of Vekselberg’s alleged strawman, Vladimir Voronchenko, a fugitive previously charged in the Southern District of New York. In the Eastern District of New York, a five-count indictment was unsealed today charging Ilya Balakaev, 47, of Moscow, with various offenses related to a years-long scheme to illegally smuggle sensitive devices used in counterintelligence operations from the United States to Russia for the benefit of the Federal Security Service of the Russian Federation (FSB), the principal intelligence and security agency of the Russian government. Balakaev is further charged with illegally exporting a gas detector and related software from the United States to Russia for the benefit of the Democratic People’s Republic of Korea (DPRK or North Korea). Concurrent with today’s action in the Eastern District of New York, the Department of Commerce separately issued a Temporary Denial Order denying the export privileges of Balakaev and his company, Radiotester OOO (aka Radiotester LLC), for 180 days with the possibility of renewal. 

Today’s actions coincide with the one-year mark of Russia’s unprovoked war in Ukraine. Read more about the Justice Department’s efforts to hold Russia accountable here. 

The Vekselberg Properties 

According to court documents, on April 6, 2018, the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) designated Vekselberg as a Specially Designated National (SDN) in connection with its finding that the actions of the Government of the Russian Federation in Ukraine constituted an unusual and extraordinary threat to the national security and foreign policy of the United States.

Prior to his designation by OFAC, between in or about 2008 and in or about 2017, Vekselberg, through a series of shell companies, acquired six real properties in the United States, today worth approximately $75 million:   

• 19 Duck Pond Lane, Southampton, New York 11968. 
• 515 Park Avenue, Units Units 21 and 2I, New York, New York 10022. 
• 7002 Fisher Island Drive, Unit 7002 PH2, Miami Beach, Florida 33109.  
• 7183 Fisher Island Drive, Units 7182 and 7183, Miami Beach, Florida 33109. 

The FBI and HSI are investigating the case. The Justice Department’s National Security Division and Office of International Affairs, and OFAC provided valuable assistance.  

Assistant U.S. Attorneys Jessica Greenwood, Joshua A. Naftalis, and Sheb Swett for the Southern District of New York are prosecuting the case. 

United States v. Ilya Balakaev 

As alleged in the indictment, between 2017 and the present, Balakaev contracted with a part of the FSB that is responsible for the Russian government’s communication security and cryptology, to repair spectrum analyzers and signal generators, devices used to detect surveillance equipment and to transmit covert communications. Because the devices were not readily available in Russia, the defendant established a network of individuals in the United States to assist him in purchasing the equipment, which the defendant then smuggled out of the United States, in violation of U.S. export control and sanctions laws.    

In addition to his scheme to evade Russian sanctions, the defendant also illegally exported U.S. technology on behalf of a North Korean government official, in violation of U.S. export laws. As alleged, the defendant contracted with the First Secretary of the North Korean Embassy to the Russian Federation, based in Moscow, to obtain hazardous gas detectors and software from the United States for the benefit of the North Korean government. 

If convicted on all counts, Balakaev, currently a fugitive, faces a maximum of 75 years in prison.  

The FBI, HSI, Commerce Department’s Office of Export Enforcement (OEE), and CBP are investigating the case. 

Assistant U.S. ​Attorney​ Sara K. Winik for the Eastern District of New York is prosecuting the case with assistance from Trial Attorney Scott A. Claffee of the National Security Division’s Counterintelligence and Export Control Section.  

* * * 

These cases were coordinated through the Justice Department’s Task Force KleptoCapture, an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export controls, and economic countermeasures that the United States, along with its foreign allies and partners, has imposed in response to Russia’s unprovoked military invasion of Ukraine. Announced by the Attorney General on March 2, 2022, and under the leadership of the Office of the Deputy Attorney General, the task force will continue to leverage all of the department’s tools and authorities to combat efforts to evade or undermine the collective actions taken by the U.S. government in response to Russian military aggression. 

Source: United States Department of Justice News

A five-count indictment was unsealed today in federal court in Brooklyn, New York charging Ilya Balakaev with various charges related to smuggling devices commonly used in counterintelligence operations out of the U.S. to Russia for the benefit of the Federal Security Service of the Russian Federation (FSB) and Democratic People’s Republic of Korea (“DPRK” or “North Korea”).    

As alleged, between 2017 and the present, the defendant Ilya Balakaev entered into multiple contracts through his company Radiotester LLC with the FSB—the principal intelligence and security agency of the Russian government—to repair spectrum analyzers and signal generators.  The devices that the defendant was tasked to repair were frequently used as part of counterintelligence operations to sweep for surveillance bugs and to transmit covert communications.  Because the devices were not readily available in Russia, the defendant created a network of individuals in the U.S. to assist him in purchasing the equipment in the U.S. which he used to repair the FSB devices, in violation of U.S. sanctions.   

The defendant worked closely with Russian government officials from FSB Center 8’s Military Unit 43753, the agency responsible for Russia’s communication security and cryptology.  In furtherance of his scheme, the defendant entered into at least 10 contracts with FSB Military Unit 43753, purchased approximately 43 devices in the U.S., and traveled to the U.S. approximately 14 times in the span of approximately four years. 

In addition to his scheme to evade Russian sanctions, the defendant also provided U.S. technology to a North Korean government official, in violation of U.S. sanctions against North Korea.  The defendant contracted with the First Secretary of the North Korean Embassy to the Russian Federation, based in Moscow, to obtain hazardous gas detectors and software from the U.S. for the benefit of the North Korean government. 

Breon Peace, United States Attorney for the Eastern District of New York, Michael J. Driscoll, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), Special Agent in Charge Jonathan Carson., US Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, New York Field Office, Ivan Arvelo, Special Agent-in-Charge, Homeland Security Investigations, New York (HSI), Francis J. Russo, Director of Field Operations, U.S. Customs and Border Protection, New York Field Office (CBP) and Andrew Adams, Director, Task Force KleptoCapture, announced the charges.

“As alleged, the defendant violated U.S. law by procuring, smuggling, and repairing counterintelligence operation devices for the benefit of Russia’s secret police and the North Korean government,” stated United States Attorney Peace. “Today’s indictment demonstrates our Office’s commitment to vigorously prosecute those who evade sanctions for a profit, both for their wallet and for Russia as they continue their aggression against Ukraine.”

“The defendant allegedly operated schemes to smuggle software and devices from the United States and provide them to hostile foreign government services in violation of U.S. sanctions.  FBI New York and our partners will continue to protect the national security of the United States by disrupting the procurement of sanctioned equipment and technology,” stated Assistant Director-in-Charge Driscoll.  

“To prevent the continuance of violations identified in the indictment, the defendant is now subject to a Commerce temporary denial order, which restricts his ability to access U.S. technologies,” said Jonathan Carson, Special Agent-in-Charge of the New York Field Office, Office of Export Enforcement.  “These coordinated actions highlight our vigilance and ability to leverage our unique combination of criminal and administrative enforcement authorities to address evasions of U.S. export controls.”

“U.S. Customs and Border Protection is uniquely positioned to enhance the safety of our country. We will continue to work with our partners to be exceptionally focused on addressing the threats posed by counterintelligence activities, terrorism, transnational criminal organizations, and others who wish to do us harm,” said Francis J. Russo, Director New York Field Office.  “CBP’s combined efforts with our law enforcement partners in this case serve as a reminder that we will continue to combat and prosecute modern transnational criminal organizations.”

“From the outset of the Task Force, the Department has prioritized the investigation and prosecution of case involving criminal violations of our export controls pertaining to Russia. As today’s case demonstrates, facilitators like this defendant provide smuggling services for all manner of dangerous actors and regimes – it is not possible to disentangle the FSB’s smuggling networks from those servicing other sanctioned state actors, and we must support and applaud comprehensive charges like those set forth in the Eastern District’s indictment,” stated Task Force KleptoCapture Director Adams.

If convicted, the defendant faces a maximum of 75 years’ imprisonment.  The charges in the indictment are allegations, and the defendants are presumed innocent unless and until proven guilty.

The government’s case is being handled by the Office’s National Security and Cybercrime Section.  Assistant United States Attorney Sara K. Winik is in charge of the prosecution, with assistance from Trial Attorney Scott A. Claffee of the National Security Division’s Counterintelligence and Export Control Section.

The Defendant:

ILYA BALAKAEV
AGE: 47
MOSCOW, RUSSIA

E.D.N.Y. Docket No. 23-CR-79

Source: United States Department of Justice News

Damian Williams, the United States Attorney for the Southern District of New York, Andrew C. Adams, the Director of Task Force KleptoCapture, Ivan J. Arvelo, the Special Agent in Charge of the New York Field Office of Homeland Security Investigations (“HSI”), and Maged Behnam, Acting Special Agent in Charge of the Miami Field Office of the Federal Bureau of Investigation (“FBI”), announced today the filing of a civil forfeiture complaint against six real properties located in New York, New York, Southampton, New York, and Fisher Island, Florida, worth approximately $75 million.  The Complaint alleges that the properties, which are beneficially owned by Russian oligarch Viktor Vekselberg, are the proceeds of sanctions violations and were involved in international money laundering in promotion of sanctions violations committed by, among others, Vladimir Voronchenko, a/k/a “Vladimir Vorontchenko,” who was indicted on February 7, 2023. 

U.S. Attorney Damian Williams said: “Today’s action, filed on the anniversary of Russia’s full-scale invasion of Ukraine, seeks forfeiture of six luxury properties owned by Viktor Vekselberg that his associate Vladimir Voronchenko maintained by funneling millions of dollars into the United States.  With the filing of this complaint, the United States sends a strong message to those who violate sanctions and engage in money laundering that the United States will use every available tool to forfeit criminal proceeds and will use that money to help our allies in Ukraine under the newly enacted law.”

Director of Task Force KleptoCapture Andrew C. Adams said: “Strawmen, corrupt professionals, and shell companies may be the hallmarks of money laundering and sanctions evasion, but they are obstacles that diligent, dedicated investigators and prosecutors will surmount.  Today’s filing marks yet another step that the Department of Justice and our partners at HSI and FBI have taken toward dislodging ill-gotten gains from those who would attempt to evade U.S. sanctions, and toward making the value of these properties available for aid to Ukraine.”

HSI Special Agent in Charge Ivan J. Arvelo said: “For years, Russia’s weaponization of corruption has relied on opaque legal structures – and Western enablers – to move, hide, and spend stolen wealth, enriching its oligarchs and ultimately resourcing the war in the Ukraine.  Since the invasion, HSI New York and our partners have worked tirelessly to cut Russia’s corruptocrats and their assets out of the American financial system.  Today we continue our active measures and remove jewels from the crown of yet another oligarch, stripping him of the luxury assets he so cherishes.”

FBI Acting Special Agent in Charge Maged Behnam said: “The mission of the interagency Task Force KleptoCapture is to enforce sanctions, export restrictions, and economic countermeasures imposed by the United States in response to Russia’s unprovoked military invasion of Ukraine one year ago.  This civil forfeiture complaint is an example of the Task Force’s ongoing work to fulfill this mission.  I commend the hard work, dedication, and cooperation of this team of professionals.”

According to the allegations in the Complaint filed in Manhattan federal court today:[1]

On April 6, 2018, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) designated Vekselberg as a Specially Designated National (“SDN”) in connection with its finding that the actions of the Government of the Russian Federation in Ukraine constituted an unusual and extraordinary threat to the national security and foreign policy of the United States.  On or about March 11, 2022, OFAC redesignated Vekselberg as an SDN and blocked Vekselberg’s yacht and private airplane.

Prior to his designation by OFAC, between in or about 2008 and in or about 2017, Vekselberg, through a series of shell companies, acquired six real properties in the United States, specifically, (i) two apartments on Park Avenue in New York, New York, (ii) an estate in Southampton, New York, (iii) two apartments on Fisher Island, Florida, and (iv) a penthouse apartment also on Fisher Island, Florida (collectively, “the Properties” or the “Defendants-in-rem”).  As of the date of the Complaint, the Properties were worth approximately $75 million. 

Voronchenko, Vekselberg’s close friend and business associate, retained an attorney (the “Attorney”), who practiced in New York, New York, in connection with the acquisition of the Properties.  The Attorney also managed the finances of the Properties, including by paying common charges, property taxes, insurance premiums, and other fees associated with the Properties in U.S. dollar transactions from the Attorney’s interest on lawyer’s trust account (“IOLTA account”).

Prior to Vekselberg’s designation as an SDN, between approximately February 2009 and March 2018, companies owned by Vekselberg sent approximately 90 wire transfers totaling approximately $18.5 million to the IOLTA account.  At the direction of Voronchenko and his family member who lived in Russia, the Attorney used these funds to make various U.S. dollar payments to maintain and service the Properties. 

Immediately after Vekselberg’s designation as an SDN, the source of the funds used to maintain and service the Properties changed.  The IOLTA Account began to receive wires from a bank account in the Bahamas held in the name of a shell company controlled by Voronchenko, Smile Holding Ltd., and from a Russian bank account held in the name of a Russian national who was related to Voronchenko.  Between approximately June 2018 and March 2022, approximately 25 wire transfers totaling approximately $4 million were sent to the IOLTA account.  Although the source of the payments changed, the management of the payments remained the same as before: Voronchenko and his family member directed the Attorney to use these funds to make various U.S. dollar payments to maintain and service the Properties.  Additionally, after Vekselberg was sanctioned in 2018, Voronchenko and others tried to sell both the Park Avenue apartment and the Southampton estate.  No licenses from OFAC were applied for or issued for any of these payments or attempted transfers.  

On or about May 13, 2022, federal agents served Voronchenko on Fisher Island with a Grand Jury subpoena, which called for his personal appearance for testimony and his production of documents, including documents relating to the Properties.  Approximately nine days later, on or about May 22, 2022, Voronchenko took a flight from Miami, Florida, to Dubai, United Arab Emirates, and then went to Moscow, Russia.  Voronchenko failed to appear before the Grand Jury and has not returned to the United States.

*                *                *

The Properties subject to the forfeiture action are as follows:

• 19 Duck Pond Lane, Southampton, New York 11968;
• 515 Park Avenue, Units 21 and 2I, New York, New York 10022;
• 7002 Fisher Island Drive, Unit 7002 PH2, Miami Beach, Florida 33109; and
• 7183 Fisher Island Drive, Units 7182 and 7183, Miami Beach, Florida 33109.

Mr. Williams praised the outstanding work of the New York and Miami field offices of HSI and the FBI.  Mr. Williams further thanked the Department of Justice’s National Security Division and Office of International Affairs and OFAC for their assistance and cooperation in this investigation.

On March 2, 2022, the Attorney General announced the launch of Task Force KleptoCapture, an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export restrictions, and economic countermeasures that the United States has imposed, along with allies and partners, in response to Russia’s unprovoked military invasion of Ukraine.  The Task Force will leverage all the Department’s tools and authorities against efforts to evade or undermine the economic actions taken by the U.S. government in response to Russian military aggression.

This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorneys Jessica Greenwood, Joshua A. Naftalis, and Sheb Swett are in charge of this action. 

Source: United States Department of Justice

The Justice Department today issued the following statement from Attorney General Merrick B. Garland on the Anniversary of Russia’s Invasion of Ukraine:

“For the past year, the United States and the world have seen the horrific images and heard the heart-wrenching accounts of brutality and death resulting from Russia’s unjust and unprovoked invasion of Ukraine.

“Today, the Department of Justice reiterates its resolute commitment to standing with our Ukrainian partners in pursuit of justice.

“Prosecutors with the Department’s War Crimes Accountability Team are working closer than ever before with our Ukrainian counterparts to investigate specific crimes committed by Russian forces, including attacks on civilian targets. At the same time, Congress has expanded our authority to prosecute alleged war criminals who are found in the United States.

“Our Task Force KleptoCapture — a group of prosecutors, agents, analysts, translators, and other Department personnel and law enforcement partners — continues to bring prosecutions and effect seizures against sanctioned enablers of the Kremlin and Russian military. 

“And we are also exercising new authority granted by Congress to transfer certain assets we have seized from Russian oligarchs for the rebuilding of Ukraine. Earlier this month, I authorized the first-ever transfer of such assets to the State Department to support the people of Ukraine.  More will follow.

“I am proud of this work and of the many Department personnel supporting it. 

“Over the past year, the Ukrainian people have shown the world what courage looks like. And for as long as it takes, the Department of Justice will continue to stand shoulder-to-shoulder with our Ukrainian and international partners in defense of justice and the rule of law.”

Ukrainian

Source: United States Department of Justice News

A former City of Atlanta Commissioner of Watershed Management was sentenced today to four and a half years in prison for accepting bribes from an Atlanta contractor in exchange for steering city business worth millions of dollars to the contractor’s company.

According to court documents, Jo Ann Macrina, 66, of Daytona Beach, Florida, served as the Commissioner of Atlanta’s Department of Watershed Management from 2011 through May 2016. During Macrina’s tenure, the City of Atlanta awarded millions of dollars in contracts to an architectural, design, and construction management and services firm based in Atlanta. Macrina took multiple steps to steer lucrative contracts toward the firm’s joint venture. Those actions included casting aside prior final scores ranking potential vendors where the joint venture ranked near the bottom, replacing two evaluators who previously represented the Department of Watershed Management with herself and Macrina’s employee, and scoring the joint venture higher than all other evaluators during a reevaluation.

In exchange for providing the firm’s executive vice president with access to confidential information and preferential treatment on City of Atlanta projects, Macrina was offered a job and accepted things of value. For instance, Macrina accepted $10,000 in cash, a diamond ring, a room at a luxury hotel in Dubai, and landscaping work at her home from the firm’s executive vice president either directly or through another employee of the firm. Shortly after Macrina’s employment with the City of Atlanta ended, she began working for the firm. Between June 2016 and September 2016, the firm and its executive vice president paid Macrina $30,000 in four separate payments.

In October 2022, Macrina was convicted at trial of conspiracy and federal program bribery.

Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division, U.S. Attorney Ryan K. Buchanan for the Northern District of Georgia, Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division, Special Agent in Charge Keri Farley of the FBI Atlanta Field Office, and Special Agent in Charge James Dorsey of the IRS Criminal Investigation (IRS-CI) Atlanta Field Office made the announcement.

The FBI Atlanta Field Office and IRS-CI investigated the case.

Trial Attorney Jolee Porter of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Nathan P. Kitchens for the Northern District of Georgia prosecuted the case.