Opinion ID: 3058598
Heading Depth: 3
Heading Rank: 9

Heading: Andres Martinez

Text: Andres Martinez owned Design Builders. He and Mario Edgardo Varela Rivera, who was in charge of personnel and payroll for Design Builders, met Caro in February 2006. Rivera testified that Caro recommended that Design Builders use 34 Mira to pay its workers and avoid payroll taxes and workers’ compensation insurance premiums. Originally, La Bamba cashed checks for Design Builders’ employees every Friday because most of its workers were illegal aliens. La Bamba loaned the payroll money to Design Builders and permitted the money to be repaid one week later. La Bamba charged Design Builders a commission of 2% for employees’ checks and 3% for its cash advances. This continued until May 2006, when Caro suggested that Design Builders simply make the checks payable to Mira. Caro explained to Rivera that Design Builders would avoid payroll taxes, and workers’ compensation premiums by making checks payable to Mira. Eventually, Martinez, Rivera and Valle met at La Bamba, and Valle offered Mira’s services for a 6% check fee. Valle subsequently provided Design Builders with a copy of Mira’s insurance certificate. Design Builders wrote its first check to Mira in May 2006, and for six or seven months thereafter. Design Builders wrote checks to Mira until Valle instructed Rivera to make the checks payable to Huber, Valle’s new company. Design Builders’ checks to Huber were cashed at La Bamba for the same 6% commission. The Huber arrangement continued for another seven or eight months until it was replaced with DJ, yet another one of Valle’s companies. Design Builders’ first 35 check to DJ was written in March 2007. Design Builders wrote checks for $575,188.20 to Huber; for $1,071,258.93 to Mira; and for $1,340,180.56 to DJ. No one at Design Builders ever worked for Huber, Mira, or DJ. Design Builders never endorsed the checks made payable to Valle’s companies. 10. Joseph Dieppa Contractor Joseph Dieppa was the owner of Advanced Surface Restoration, Inc. (“Advanced”). Dieppa obtained from Caro the names of shell companies to write checks to so that he could pay his workers in cash, and avoid payroll taxes and workers’ compensation insurance premiums. In 2005, Dieppa’s company obtained a $60 million contract to construct a condominium building on Fisher Island, a small island off Miami Beach. When Dieppa encountered difficulties in retaining subcontractors, he contacted Caro, who had a reputation for having a connection to subcontractors. Dieppa’s labor shortfall continued prompting him to assemble his own team of workers and to obtain from Caro the name of Morgan Construction (“Morgan”) to write checks to in order to allow the payment of wages to those workers. By writing checks to Morgan, Dieppa was able to pay his workers cash and avoid payroll taxes. Dieppa also avoided the expense of premiums for workers’ compensation insurance because his workers used Morgan’s insurance certificate. 36 Still another benefit of Caro’s service, Dieppa hired illegal aliens who could be paid with cash. Caro charged Dieppa a 10% fee per check and gave him copies of Morgan’s articles of incorporation and certificate of insurance. Every two weeks, Dieppa wrote a check to Morgan for the workers’ salaries, adding a 10% commission for Caro. After receiving the amount from Dieppa, Caro personally delivered the cash to Dieppa, at his Fisher Island office. Caro also brought Dieppa invoices on Morgan letterhead. The money Caro delivered to Dieppa was packaged in manila envelopes and boxes. When Caro was not available to bring the cash to Dieppa, Caro’s sister or Chaoui came in his place. In 2006, Deippa assembled his own laborers for another project. Again he used Caro’s services. This time, Caro gave him the name of Mira to write payroll checks to. The Mira scheme operated in the same manner as with Morgan. Caro furnished a copy of Mira’s insurance certificate and delivered Mira invoices to Dieppa, along with cash. In addition to Morgan and Mira, Dieppa wrote his payroll checks to the following shell companies provided by Caro: Huber; SAS; Trebol; GQ; Petrillo Construction; and Aly Trucking. Caro also provided Deippa with false lien releases from the shell payee companies to whom Deippa had written checks. A lien release indicates that a 37 contractor has been paid; the contractor releases the invoice. Without this signed release, a subcontractor cannot be paid. Caro gave Dieppa releases from the owners of Huber, Mira, and SNF. Dieppa’s business with Caro ended only when Caro was arrested in January of 2008. By that time, Dieppa had written a total of $3.9 million in checks to Caro provided companies. 11. Nevin Shapiro Caro always sought opportunities to expand his client base. In early 2007, when Caro met Nevin Kerry Shapiro at a Miami Heat basketball game, he offered Shapiro a loan of $7,000 cash with no terms. Shapiro testified that Caro who had the cash on his person, gave the money to Shapiro with only a handshake to seal their agreement. Shapiro was to repay the money with a $500 fee. Shapiro repaid the loan by writing a check for $7,523.23 from his real estate company to Huber, at Caro’s direction. Shapiro then borrowed $50,000 from Caro in October 2007 and repaid the loan by writing a personal check for $52,500 to DNC. The $2,500 represented interest on the loan and Shapiro did not endorse the check before personally delivering it to Caro. The loans from Caro and repayments from Shapiro continued for five more transactions. Caro sent someone to Shapiro’s office to pick up Shapiro’s check or Shapiro gave the check to Caro personally at a Heat game or by visiting La Bamba. 38 To repay the loans, Shapiro wrote checks to AFC Painting and Huber, entities who had never performed any work for him, and finally, to La Bamba. Although Caro insisted that the other companies Shapiro had written the checks to were “his,” Shapiro was uncertain about the others. Caro agreed reluctantly to permit Shapiro to write the final two checks, one for $50,000 and one for $52,000, directly to La Bamba. 12. Caro and his bank Caro frequently complained about scrutiny from his bank. Madeline Jenkins, Peninsula Bank’s senior compliance officer, testified Caro’s complaints were well founded because Peninsula Bank was constantly reviewing La Bamba’s BSA compliance. Jenkins explained that money service businesses, like La Bamba, are one of the highest-risk accounts for a bank. Therefore, the bank monitors those accounts more than the average. Jenkins explained that what made those accounts so risky is a money service business (“MSB”) is responsible for its own due diligence on its customers before processing a check, to maintain its business license. Jenkins explained this as “Know Your Customer;” or knowing who they are an who they claim to be. If the MSB is not conscientious in knowing its customer, however, the bank can be placed at risk. This risk to the bank could result in closure or bank members being prosecuted. 39 When Peninsula established accounts for La Bamba in 2004, it imposed the conditions that separate accounts be maintained for depositing checks to individuals and corporations. Peninsula also required La Bamba to maintain a certificate of deposit on account as collateral for the other accounts. Initially Peninsula limited La Bamba to a maximum of $30,000 an item and $100,000 a company per day. This limitation was meant to prevent fraud. Caro approached Peninsula about increasing these limits. Peninsula, agreed to the increase provided that Caro establish a savings account and deposit $1 million to be used as collateral when he wanted to draw against uncollected funds. This arrangement worked for a few months until Caro requested cash in amounts that exceeded the balances in all La Bamba accounts. Caro also requested to withdraw cash from the $1 million savings account to fulfill his orders. Jenkins wrote Caro seeking an explanation of the changes in La Bamba that necessitated this amount of cash. According to Caro, La Bamba serviced customers on the weekends, La Bamba’s mobile units were increasingly being used, and La Bamba had six offices in South Florida. Interestingly, Caro failed to mention La Bamba’s relationship with Cashflow or its increased business with construction companies. After an internal review of its policies, Peninsula began transactional testing. Jenkins testified the bank began looking at the items La Bamba was 40 actually depositing and the pattern of dollars to individuals or corporations. Based on this initiative, Peninsula discovered La Bamba permitted some corporations to use a stamp to endorse checks, and that La Bamba’s exceeded the limits that had been imposed on deposits. Peninsula attempted to have a special software program installed at La Bamba. This program, for all Peninsula’s MSB clients, looked for patterns in activity. Only after being assured that Peninsula would not be able to remove data from the system, was La Bamba willing to accept the software. Interestingly, when Peninsula received the software’s data from La Bamba, it only included information from La Bamba’s branch stores not the main office. Jenkins questioned Caro about this, and he responded another software system existed at the main store. However, that was never shared with Peninsula. In an e-mail, dated May 30, 2007, Chaoui provided Peninsula with a list of La Bamba’s mobile units and La Bamba’s quarterly report. This quarterly report provided the number of checks cashed for the preceding three months, the fees received from cashing checks, and the fees from other services. Absent from this report was any reference to the millions of dollars in transactions it had monthly with Cashflow. Still wanting to strengthen its policies to MSBs, Peninsula retained an attorney to create an agreement for Peninsula’s MSBs to sign and return. Jenkins 41 testified that this agreement required MSBs to: guarantee to the bank that they were fulfilling their responsibilities for their licenses; provide information on their transactions and corporate structure; and warranty use of its collateral. La Bamba failed to return a signed copy of the form. Later, Jenkins sought information on the identities of some of the companies listed in La Bamba’s transactions. Chaoui replied that La Bamba had acquired two vendors under La Bamba’s license, but Cashflow was again absent from this list. Finally, at the end of October 2007, Peninsula conducted an on-site audit of La Bamba to assess its BSA compliance. This audit concluded that La Bamba needed improvement. A deficiency that was found, according to Jenkins, was La Bamba’s apparent carelessness in filing its CTRs. Although the CTRs were timely filed, about 10% of them, or 300 out of 3,250, were returned “because of errors or legibility problems.” The audit recommended that the CTR personnel receive additional training. Moreover, the audit noted that La Bamba was overdue for its annual BSA training. The auditors, further, found La Bamba’s due diligence deficient and recommended that its compliance officer and its staff receive more training. The results of the audit were shared with Caro and La Bamba. 13. Government Agents IRS Agent Rondon testified about his involvement in the investigation into La Bamba, and detailed PAW checks that the IRS provided to Obispo, who in turn 42 delivered them to La Bamba. Rondon specifically testified regarding the circumstances surrounding Counts Eight through Seventeen. Rondon detailed how the IRS provided Obispo these checks, how Obispo took them to La Bamba, and how La Bamba filed false CTRs for those transactions. Rondon testified that he reviewed approximately 1,500 CTRs filed by La Bamba in connection with this investigation. None of these CTRs were accurate, according to Rondon, because they reported transactions involving shell companies that were not engaged in construction. IRS Agent Vincent Lozowicki explained that Peninsula provided the IRS with monthly statements from La Bamba’s bank accounts. A review of those accounts revealed that in 2006 and 2007, La Bamba deposited a total of over $600 million in checks each year for all sources. Over $400 million of that total were from checks made payable to corporations and business entities. The remaining $200 million were made payable to individuals. La Bamba averaged $50 to $60 million a month in check deposits in 2006 and 2007. Lozowicki, further, explained that he reviewed some of the checks that La Bamba had deposited for the shell corporations listed in the superseding indictment. He observed that some of these checks had a stamped endorsement, and he described this as unusual. Isabel Fleitas, a senior investigative analyst with the IRS, was able to locate 43 all the CTRs filed by La Bamba for the shell companies named in the superseding indictment. From August 2005 to January 18, 2008, La Bamba filed 1,559 CTRs reflecting a total of $132,773,648.47 in transactions from only shell corporations. Fleitas also explained that she determined that all of the companies who filed CTRs filed them for more than $100,000 in a twelve month period. 14. Termination of Conspiracy On January 18, 2008, agents executed a search warrant at La Bamba’s headquarters and its warehouse. On the same day, agents arrested Caro, Chaoui, and Gonzalez. Among the items found in the La Bamba store were client files containing forms and copies of driver’s licenses and articles of incorporation for companies, including the documents for PAW and other fictitious companies; training manuals on BSA compliance and forms showing that such training had been conducted at La Bamba; boxes of business cards for DJ and SNF; and envelopes for commissions for the recruiters of the shell companies, including one with Valle’s name on it. While out on bond following his arraignment, Caro met contractor Dieppa at the Beach Club on Fisher Island. Caro asked Dieppa to “remove” the subcontractors’ releases from his files. Dieppa interpreted this remark to mean, “make them disappear.” In addition, Caro urged Dieppa to tell the investigators 44 that the work had been performed. Based on this and other evidence, the jury found Caro guilty of Counts One, Two, Six, and Eight through Seventeen. La Bamba was convicted of Counts One, Eighteen, Nineteen, and Twenty-Two through Thirty-Three. The District Court declared a mistrial as to Gonzalez and Chaoui. Both Chaoui and Gonzalez subsequently pled guilty to corruptly endeavoring to obstruct and impede administration of internal revenue laws, in violation of 26 U.S.C. § 7212(a), and received three-year custodial sentences.