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The public knew he was crooked in 2009. Big banks helped him stash millions until 2017.

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JPMorgan Chase, America’s largest bank, helped move millions of dollars for a New Jersey con man long after he was first accused of ripping off customers looking for good deals on the used cars of their dreams.

Many borrowed from family and friends to pay car dealer Sergey Kapustin for vehicles that had been hurricane-damaged or, in some cases, didn’t even exist.

JPMorgan, a Wall Street banking giant, told the U.S. Treasury Department in 2015 that it had moved money for Kapustin, his family members and his companies, according to confidential reports filed with the U.S. Treasury Department’s Financial Crimes Enforcement Network, known as FinCEN.

Two years later, U.K.-headquartered Standard Chartered Bank told FinCEN that it, too, had moved money for Kapustin, according to documents.

JPMorgan and Standard Chartered Bank helped move $9.3 million for Kapustin and his companies after he was first publicly accused of fraud in 2008, according to an analysis of the documents and other records by the International Consortium of Investigative Journalists.

BuzzFeed News provided thousands of leaked FinCEN reports to ICIJ, which coordinated the efforts of more than 400 reporters in the FinCEN Files investigation. The probe revealed that banks continued to profit from moving criminals’ money after promising U.S. authorities that they would crack down on financial crime.

In reporting Kapustin’s story, ICIJ examined leaked FinCEN documents and hundreds of pages of court filings. Reporters spoke with lawyers and victims around the world.

“In my nine years as a judge, I have never seen someone so willing to lie and cheat and steal than you,” U.S. District Judge Noel L. Hillman said in 2015 during a civil case brought by victims against Kasputin.

Years later, a different U.S. federal judge jailed Kapustin for money laundering after he tricked customers in Russia and other former Soviet republics into buying used cars from the U.S. that were not delivered or were damaged by storms.

Kapustin was “cruel,” “cold” and “calculating in taking advantage of these individuals,” U.S. District Judge Susan D. Wigenton said.

Sergey Kapustin. Image: via VKontake

Kapustin, 51 and who says he has limited English, asked his daughter, Maria Kapustina, to respond to questions.

“He’s not a bad guy,” Kapustina said. “He didn’t intentionally defraud a bunch of people and lose the business that he built from the ground up.”

The 2007-2008 financial crisis and Hurricane Sandy, which damaged cars that Kapustin was unable to recoup through insurance, sent the company into a tailspin, she said. “He acknowledges that he messed up along the way somewhere and that perhaps he should have gone about some things differently,” Kapustina said.

Kapustina rejects the negative characterizations of her father, who she describes as hardworking, hands-on with customers and unmaterialistic. It can be easy to misread him in court, she said. “He doesn’t smile often, he’s very serious, he’s a big Russian guy…But that’s every stereotypical Russian man.”

Kapustina was eating breakfast at home with her family around New Year’s Day when the FBI came to arrest her father. She was shocked. “You can’t treat any person like that, no matter what they do,” Kapustina told ICIJ. “It was as if you’d just caught a murderer or a mass drug dealer.”

For years before the federal court cases, Kapustin’s victims — hundreds of them — told anyone who would listen that the car salesman was bad news. They grumbled on online chat groups, pleaded with U.S. embassies and the FBI, and hired attorneys.

Kapustin’s reputation preceded him. Various banks, which opened at least 11 accounts for him and his companies, were among the last to notice.

Irina Glazunova, an accountant from the northern Russian city of Murmansk, recalled her last phone call with one of Kapustin’s employees, in 2013. She was trying to locate the second-hand Lexus she’d purchased.

The employee laughed, she said, and told her, “We are crooks.” Then, she said, he threatened legal action: “Come get me across the ocean … and we will sue you.”

Kapustin made use of a ready arsenal of legal threats as he pocketed millions from victims who were promised cheap used cars from the U.S. Some never arrived. Others, snapped up at salvage auctions, had been submerged during Superstorm Sandy in 2012. The victims in Ukraine, Russia and Kazakhstan lost from $6,000 to $65,000 each, according to the judgment in a lawsuit filed by nearly two dozen victims in U.S. federal court in New Jersey.

Kapustin and his accomplices operated “slick Internet websites” advertising bargains on gently used vehicles but often had no cars to sell, the lawsuit claimed. They used images of cars pilfered from other online car-sales sites to lure customers in a “bait and switch” scheme,  the suit alleged.

Kapustin fake car yard ad
A 2013 federal lawsuit alleges that the Kapustins included a New Jersey address on “beautifully-designed websites” they developed to advertise vehicles for sale, but did not operate from that location, which was home to an entirely separate car dealership.

In 2015, Judge Hillman ruled in the victims’ favor and ordered that 17 of them be repaid. For many customers, however, it was already too late. Kapustin’s companies “diverted” money to foreign bank accounts after customers asked a federal court to freeze his assets, victims alleged. Judge Hillman ruled that Kapustin’s companies filed “fraudulent bankruptcies” to avoid payouts.

Glazunova began to suspect that Kapustin was a crook in 2013. A dozen lawsuits alleged that he was as early as 2008. New Jersey’s attorney general said Kapustin’s car dealership had knowingly misled customers in a 2009 false-advertising complaint.

Despite the trail of allegations, JPMorgan and Standard Chartered moved Kapustin’s money — even after U.S. authorities fined the banks and placed them on probation for helping other criminals move illicit funds.

It’s impossible that the banks didn’t know. Everything was on the public record. — Lawyer Anna Brown

In all, according to court and bank records, at least two other banks with U.S. operations allowed Kapustin to shift cash through their accounts: Wells Fargo Bank and Rhode Island-headquartered Citizens Bank.

“The first thing my clients did was complain to their banks,” said Anna Brown, who represented Glazunova and others in the federal lawsuit in New Jersey, filed in 2013. “It’s impossible that the banks didn’t know. Everything was on the public record.”

JPMorgan, Standard Chartered, Citizens Bank and Wells Fargo declined to answer questions for this story.

In 1998, Kapustin moved to New York City from Moscow, where he operated a car dealership. Within a year, the goateed father of four bought Global Auto, which sold used cars from a small lot in Delran, in central New Jersey. He became a U.S. citizen and sold used cars domestically and overseas, including to a niche market in the former Soviet Union, where customers perceived American car dealers as more trustworthy than local ones.

Kapustin grew wealthy and invested in a Finnish motel, Motel Road 66, near the Russian border. The motel holds a Summer Bike Fest where young women shake golden pom-poms while men arm wrestle and rev motorcycle engines loudly. The festival stage is decked out in Finnish, American and Confederate flags.

Two New Jersey residents alleged in 2008 civil complaints filed in state court that he and others had doctored car sales contracts. One victim said her signature was forged on a document to require an additional payment of more than $11,000 after she had paid nearly $30,000 for a used BMW.

Kapustin and his companies denied wrongdoing. The cases were settled confidentially.

Henry Furst, the attorney for both plaintiffs, said he raised the car dealer’s past with Bank of America. He remembers asking, “How could you deal with this guy when all of these cases were chock-full of fraud?”

Holding banks accountable requires financial resources and know-how that most victims of car scams don’t have, Furst said.

“These are people earning $18 an hour,” Furst said. “They just need a car to get to work or to transport their kids. And they’re going to fight Bank of America?”

Bank of America declined to respond to questions about its relationship with Kapustin.

Months after the first New Jersey complaint against Kapustin, a Spanish customer paid for a white Mercedes, according to state court records. Kapustin took the money, and then told the customer that the car was no longer available because of “customs issues,” but he did not refund the payment, according to the complaint. Kapustin denied wrongdoing and settled out of court.

“Mr. Kapustin’s version of events was ridiculous,” the victim’s attorney, Carolyn Gilinsky, told ICIJ. He “depended on his victim’s unwillingness to undertake the expense and effort necessary to pursue an international fraud claim.”

Gilinsky said she is not surprised that banks worked with Kapustin after the 2008 accusations. “I always work under the assumption that most laws are written by banks and insurance companies and they are written in a way so that they always win,” Gilinsky said.

The same year, New Jersey’s attorney general filed a false-advertising complaint against one of Kapustin’s companies that sought to force an end to “unfair or deceptive acts.” The company misled customers about prices, failed to disclose damage to vehicles and persuaded one person to sign a blank sales document, according to the complaint.

The company, Global Auto Inc., settled with the state and paid $123,000 in penalties and legal costs. It denied wrongdoing and did not make restitution to victims.

Kapustin was released from prison in October. He now lives off $182 per week unemployment benefits, his daughter said.

The early New Jersey court cases were resolved through “a common understanding” after “full disclosure” during the sales process, Kapustina said. The state’s law sides with customers, she said. “It was very easy for us to seem like the bad guys.”

Kapustina rejects allegations that her father filed fraudulent bankruptcies to avoid repaying debts. “There were no offshore companies and no secret bank accounts,” she said. No one working for her father would have said they were crooks, Kapustina said.

The FinCEN documents indicate that JPMorgan called attention to Kapustin activities seven years after the 2008 New Jersey fraud cases.

In October 2015, JPMorgan alerted FinCEN to almost $4 million in wire transfers, from January 2012 to September 2014, tied to Kapustin, his family and his companies. Standard Chartered reported its suspicions in June 2017 after having worked with Kapustin and others until at least September 2015.

The eight names that JPMorgan sent to FinCEN match people and companies that attorney Anna Brown listed as defendants in 2013.

Banks often file suspicious activity reports in response to negative publicity, court cases or government inquiries. It is unclear why JPMorgan and Standard Chartered alerted FinCEN when they did.

In December 2016, U.S. prosecutors announced criminal charges against Kapustin. “Bank records from Kapustin accounts, beginning as early as January 2009, reflect wire transfers from dozens of victims, and the absence of any apparent refunds,” according to an FBI affidavit related to the case.

Mikhail Matveev, a manager at British American Tobacco in St. Petersburg, Russia, lost $14,920 on a Honda SUV that wasn’t delivered. “I have a disabled child and I needed the car for my child’s transportation to the hospital, day-care center and rehabilitation facilities,” Matveev said in an affidavit.

Matveev borrowed money from family and friends to buy the car. He never received a refund.

Other victims included a Russian truck driver earning $500 a month, a retired military officer, a jazz musician and a Kazakh engineer who is the father of a child with a severe brain disorder. The engineer borrowed money from his mother to buy a $21,000 Honda that never arrived, he told the court.

In March 2018, Kapustin pleaded guilty in federal court to one count of money laundering. He agreed to repay more than $1 million to at least 61 victims with individual payments as high as $89,960 and as low as $2,920. One year later, during sentencing, he apologized for his behavior.

The judge told him that he had gotten off lightly.

Glazunova, the Murmansk accountant, said she hadn’t received a penny despite two U.S. judges’ orders that entitled her to more than $150,000 in monetary and other damages.

Glazunova came to the United States and testified against Kasputin before a grand jury. Other victims called Glazunova to share their stories, she said, including a young woman who said that her mother had suffered a stroke and her father had died of a heart attack after learning that they had been cheated.

Glazunova bristles at the memory of hearing during the trial that he used victims’ money to send one of his children to a modeling school that cost $200,000. The Kapustin family says it never paid such money or sent children to such a school.

“He spat in our face,” she said. “The bottom line is, I think we lost after all.”

The post The public knew he was crooked in 2009. Big banks helped him stash millions until 2017. appeared first on ICIJ.

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Election Integrity

Analyzing the Case for Election Fraud

Despite the overwhelming pressure, if you can’t help but feel that tingling sense of knowing that is telling you there’s more to the story, you are not alone. In fact, according to a new Rassmussen poll, nearly 50% of voters believe the election had issues. A quick look at the data blatantly shows that indeed, shenanigans abound (how can a state have 1+ million more mail-in ballots tallied than they sent out?). But was it fraud or masterful gamesmanship?

Adryenn Ashley

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The world, or at least the global media, has spoken: Biden won the 2020 Election.

UPDATED FREQUENTLY WITH NEW INFORMATION – Last update 12/21/2020

A quick Google search reveals pages upon pages of reports of why the Trump team’s assertions of vote fraud and election fraud and vote flipping are flat out fallacies. YouTube has announced a ban on any videos questioning the election results. And now on Monday all 538 electors have voted, formalizing Biden’s 306-232 win. And while there is still Congress to get through, and the inauguration, based on social media and television news and practically every other point of information bombarding society today, Biden is now the President-elect.

But why now, after Government officials confirmed during Senate testimony that a foreign adversary, Russia, attempted to interfere in the 2016 United States Presidential Election via “a multi-faceted approach intended to undermine confidence in our democratic process.” According to U.S. intelligence official reports, Russia targeted voter registration databases in at least 21 states and sought to infiltrate the networks of voting equipment vendors, political parties, and at least one local election board. And if their purpose was not so much to “hack” the election but create chaos and sow seeds of uncertainty around our election process, I would say they have won. But what if this cycle, it was Russia who somehow manipulated extra ballots and placed the blame on the Democrats? What if…?

Russian Experience With Voter Fraud

The 2004 presidential election in Ukraine saw suspiciously high turnout rates that “even Stalinist North Korea would envy,” the State Department declared!

Back then, the U.S. government decried as corrupt an earlier election where special voting boxes were created to help citizens vote from home, election observers were expelled from vote counts, pre-election polls were wildly off, and voter turnout in certain communities exceeded 90%.

But the story of that Ukrainian election as recounted by then-Ambassador John Tefft to a Senate committee in December 2004 raises a tantalizing question for voters distrustful of the Nov. 3 elections results in our own 2020 Presidential Election: If tactics and outcomes in the Ukrainian election back then were enough to cry foul, why can’t Americans debate similar concerns here?

Tefft’s testimony raises an important question: Should America, the greatest democracy in the world, share any of the fraudulent attributes of a Ukrainian election? The answer for most Americans is hopefully resounding “No.”

And despite continued and repeated headlines that there was no fraud, according to the Harvard Kenney School report on Election Integrity this cycle, expert assessments indicate that compared with 2016, the performance of this contest displays several warning flags, namely worsening confidence in the integrity of American elections and falling public trust, challenges to legitimacy arising from threats of campaign violence,legal disputes about the process and results, and public protests about the outcome, as well as growing attempts at voter suppression. 

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Investigations

Advocates celebrate major US anti-money laundering victory

Landmark laws to thwart the use of U.S. shell companies by terrorists, human traffickers, arms dealers and kleptocrats are set to be enacted after more than a decade of lobbying and politicking with rare bipartisan support.

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Advocates celebrate major US anti-money laundering victory

The sweeping anti-money laundering reforms hitched a lift in the annual defense spending bill that passed the Senate 84-13 today, and was approved by the House 355-78 earlier this week.

The Corporate Transparency Act requires U.S. companies to report their true owners to the Treasury Department’s Financial Crimes Enforcement Network, known as FinCEN — largely ending anonymous shell companies in the country.

The International Consortium of Investigative Journalists has repeatedly documented how the rich, the powerful and the criminal have used anonymous entities to hide their wealth, including in the 2016 Panama Papers and the 2020 FinCEN Files investigations.

Welcoming the clampdown, Transparency International’s U.S. director Gary Kalman said, “It is rare for such a simple measure to promise such an enormous impact.” Kalman added that the long sought anti-corruption reforms would “move us into a new era of enforcement.”

The new legislation will allow law enforcement agencies and financial institutions to request company ownership information from FinCEN. The data will not be publicly available.

FinCEN Files was based on a trove of suspicious activity reports filed by banks and other financial institutions to FinCEN. BuzzFeed News obtained the secret documents and shared them with ICIJ and more than 100 other media organizations.

The global investigation exposed how a broken U.S.-led enforcement system allows banks to continue to profit from moving dirty money tied to drug cartels, trafficking rings fueling the opioid crisis, fraud, organized crime, sanctions evasion, ruinous real estate schemes, and terrorism.

“Too many times, people … think money laundering is a federal, victimless crime. It is certainly not that,” Sen. Sherrod Brown of Ohio, the top Democrat on the Senate banking committee, told reporters on a call organized by the advocacy group the FACT Coalition. “Sinaloa cartel actors, fentanyl traffickers have been destroying thousands of families in my state and across the country.”

Earlier this year, Brown credited FinCEN Files for revealing the lack of forceful enforcement against banks that repeatedly violate the law. Advocates said a number of proposed bipartisan bills, including one co-sponsored by Brown, were instrumental in generating the support needed to attach the reforms to the spending bill.

“This is a really big deal to get this passed,” Brown said Thursday. “No more hiding these abuses in anonymous shell companies. It also cracks down on bank officials who look the other way or actively aid money laundering.”

A long time coming

ICIJ has shown how offshore shell companies have been used for dubious financial dealings and tax avoidance through a series of global exposés, including the Secrecy for Sale investigation, Panama Papers and Paradise Papers. U.S. lawmakers have repeatedly cited the investigations in proposing reforms over the years.

Countries like the United Kingdom, Indonesia and members of the European Union also took steps toward ending anonymous shell companies in response to ICIJ reporting.

“When the Panama Papers leaked, there was a huge flurry of interest because there’s all of a sudden this recognition that it was kleptocrats, money launderers, corrupt officials the world over, as well as criminals, were all using a very common structure to help evade law enforcement, which was setting up an anonymous company,” Lakshmi Kumar, policy director of Global Financial Integrity, said.

The phenomenon is not limited to the exotic offshore tax havens of popular imagination. U.S. jurisdictions like Delaware, Wyoming and Nevada are among the world’s top locations to set up anonymous companies. Legislation to require corporations to disclose their true owners was first proposed in the U.S. over a decade ago, co-sponsored by then-senator Barack Obama, and similar bills have been introduced over the years.

Advocates credit years of lobbying a broad coalition of stakeholders, including the U.S. Chamber of Commerce which had previously been a leading opponent, in getting the reforms across the finish line this year.

“What’s changed now is a growing understanding among various constituencies about the harms that anonymous companies pose, and the threats that they pose for our financial system, to our businesses,” Clark Gascoigne, senior policy advisor at FACT Coalition, said.

But it’s not a done deal quite yet.

Although the anti-money laundering proposals have had the support of the administration, President Donald Trump has repeatedly threatened to veto the National Defense Authorization Act over provisions unrelated to financial secrecy.

Both the House and the Senate votes surpassed the two-thirds margin that would be needed to override a veto, although some Republicans have indicated that they would not support what would be the first veto override of the Trump presidency.

But the NDAA has been reliably passed by Congress every year for six decades and advocates are confident that the time has come for the landmark financial transparency measure that’s included in the omnibus bill.

“It’s one of the few areas where the outgoing Trump administration agrees with the incoming Biden administration,” Gascoigne said. “It may be the first bill in the history of Congress that has the support of both Dow Chemical and Friends of the Earth. Heck, the state of Delaware even supports reform.”

The post Advocates celebrate major US anti-money laundering victory appeared first on ICIJ.

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Investigations

Muslim Brotherhood suspect and Saudi billionaire linked to same offshore companies, Austrian report says

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One of 30 people in Austria suspected to be members of the Islamic fundamentalist group Muslim Brotherhood was the director of offshore companies linked to a Saudi billionaire, according to an investigation by Austrian media outlets profil and Ö1.

The man, described as a 37-year-old Viennese entrepreneur with Iraqi roots, is suspected of “participating in a terrorist, subversive and criminal organization” and was a target of the police investigation into the group and the Palestinian extremist organization Hamas, the report said

The inquiry, which led 930 officers to raid 60 apartments, shops and clubs in four federal states last month, had no connection to the Vienna terror attack that killed four and injured 23 on November 2, according to officials cited by Deutsche Welle.

The Austrian report ー based on police records ー does not name the suspect, nor the Saudi businessman, for fear of hampering the ongoing probe into possible terror financing.

The pair’s link to shell companies in the British Virgin Islands and other offshore financial centers was revealed for the first time after the reporters’ examination of Paradise Papers, a trove of leaked documents obtained by Süddeutsche Zeitung and shared with the International Consortium of Investigative Journalists in 2017.

The 13.4 million files include incorporation documents, emails, contracts and other records from two offshore service providers and the company registries of some of the world’s most secretive countries.

The Austrian man was listed as the director of several companies in the BVI, Malta and the Bahamas, the media report said. His address on the documents referred to an apartment in Vienna that belongs to the wife of one of the main suspects in the police investigation, according to a review of Austria’s land registry records.

By cross-checking the confidential files with property records, the reporters also found that the shell companies owned properties in the U.K., including two office buildings, a commercial property and a retail park, worth about $73 million in total.

The documents show that a Liechtenstein trust owned by the Saudi businessman was behind those companies. The man is also known as a philanthropist who has financed Islamic studies at various European universities in recent years, including in Austria, the report added.

The complex offshore structure identified by the journalists is legal, the report said, but “can be used to disguise the flow of money and the identity of the true economic beneficiaries.”

Profil and Ö1, two ICIJ media partners in Austria, asked the Viennese suspect about the purpose of the offshore company network and his link with the Saudi billionaire. A lawyer representing him declined to comment.

The post Muslim Brotherhood suspect and Saudi billionaire linked to same offshore companies, Austrian report says appeared first on ICIJ.

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