Chapter Eight
LAWYERS
"I’m gonna get rich patenting a better mousetrap."
"Not me, I’m gonna get rich finding a bigger loophole."
Conversation between two law school students
Harold Ackerman was a 51-year-old south Florida vegetable importer who was arrested in 1992 for smuggling cocaine. At first he staunchly maintained his innocence, a position that was highly questionable, especially when Gilberto Rodriguez Orejuela, head of the Cali cartel, and his brother Miguel went public with a passionate plea for Ackerman’s release. It was a curious thing for them to do. And a bunch of people at the Justice Department started asking questions.
Described at the time by the DEA as the highest-ranking Cali trafficker to be arrested in the US, Ackerman first came to their attention in late 1991, after a raid on a Miami warehouse uncovered 15 tons of cocaine in hollowed-out concrete fence posts. In the spring of 1992, agents found six more tons of coke in a shipment of broccoli and okra in Ft. Lauderdale. The investigation led to the arrest of several Colombians operating in south Florida, plus Jaime Garcia-Garcia, a 43-year-old Cali laundryman in Bogota. The good guys picked up $600,000 in cash, four planes, a cache of weapons, a network of computers, 94 bank accounts in Latin America and seven more in the States.
Ackerman now changed his tune, contending that he'd been forced to sell drugs by left-wing paramilitary groups in Colombia who'd threatened to kidnap his family if he didn't cooperate. The jury didn't buy it and convicted him. In a show of support, the Orejuela boys published an open letter to the DEA, pleading Ackerman’s innocence and accusing the agency of "unfounded, permanent aggression." The DEA responded by inviting the brothers to come to Florida to make their case in person.
Understandably, the brothers refused. But as a result of their intervention, prosecutors’ now looked beyond Ackerman, towards some of the seemingly legitimate acquaintances he had in common with Gilberto and especially Miguel. Financial documents and Ackerman’s computer files had been seized at the time of his arrest, and a closer appraisal of those turned up what appeared to be a group of lawyer criminals.
One of the men who caught their attention was Michael Abbell, a partner in a Washington DC law firm with an office in Florida. In 1981, his 14th year as an attorney at the Justice Department, he’d worked on a case that the government was making against one of the Cali cartel leaders, Jose Santacruz Londono. Part of his job was to try to secure information from the Swiss about bank accounts held by Londono.
When he left the Justice in 1984, he joined Kaplan, Russin & Vecchi where within six months he was hired to help Gilberto fight an extradition charge. Orejuela been arrested in Spain and the US wanted him to face charges in New York. After obtaining a conflict-of-interest clearance from the Justice Department, Abbell testified as an expert witness against the very people he’d worked with at Justice, who’d prepared the extradition request. Instead of being extradited to New York, the Spanish returned him to Colombia. Orejuela was tried there and Abbell was in the courtroom. Apparently he’d been hired to brief Orejuela’s lawyers because of his extensive knowledge of the evidence. In 1987, he was again working for Orejuela, this time to write a legal opinion about Colombia's ban on extraditing its citizens to the US. The next year, he submitted statements to the Senate Foreign Relations Committee during a review of evidence-gathering provisions in legal assistance treaties with various countries. Abbell’s position was consistent with a often heard plea from lawyers defending Colombian drug traffickers, that defendants should have greater use of foreign obtain evidence. In 1989, he showed up in Miami for the drug trafficking trial of Luis Echeverri Santacruz, Jose Londono’s half-brother. Supposedly retained by Orejuela and Londono to assist on legal and factual issues, he was not otherwise participating at the trial. Sitting next to him throughout the case in the back of the courtroom was Joel Rosenthal, a defense attorney in Miami who had been similarly retained to help the defense.
It was around this time when Abbell and the firm of Kaplan, Russin & Vecchi parted company, citing incompatible interests. He went into practice with Bruno Ristau, who’d directed the Justice Department’s Office of Foreign Litigation for 18 years. They opened an office in Washington and another in Florida which they eventually stocked with Francisco Laguna, a Bogota born attorney.
Next, Abbell found himself representing Londono’s wife. The DEA had uncovered a significant laundry cycle with a money trail leading to Luxembourg and $60 million that they said belonged to Londono. They also located $12 million in New York. Abbell, now accompanied by Laguna, attended court hearings in both places, then filed a claim for the money in New York on behalf of Ampara Castro de Santacruz. He asserted her right to it as her inheritance from her father. But the jury said no.
Ironically, after the US District Court judge who’d heard the case labeled Londono a well-organized, multi-national drug trafficking fugitive, Abbell wrote a letter, criticizing him for misrepresenting his client’s husband. This, just nine years after Abbell had pursued her husband’s money because it had belonged to a well-organized multi-national drug dealer.
Five years later, in part through evidence uncovered in Ackerman’s files, Abbell stood accused of knowingly securing false sworn statements from arrested members of the Cali cartel; submitting fraudulent documents to courts in New York and Luxembourg on behalf of the cartel; arranging, receiving and transmitting cartel drug money; racketeering; conspiracy; drug trafficking; and money laundering.
By this time, Laguna was also attracting attention. During a 1992 DEA sting operation, undercover agents picked up cash for Londono in various cities around the country. When $1.2 million was seized in Chicago, the undercover agents were contacted by a cartel representative who’d come to the States to investigate the bust. He ordered them to speak with Laguna. Questioning the undercover agents whom he believed to be laundrymen, Laguna allegedly demanded, "Why don't you tell me what you know? We're trying to find out what is happening here." Some months later, a federal indictment charged 21 people with money laundering, and Laguna as an unindicted co-conspirator.
Also under investigation was Joel Rosenthal. So were three other Florida attorneys linked to Ackerman and Orejuela. William Moran William Moran, a former federal prosecutors in Miami, was a partner in Moran and Gold, and first dealt with Orejuela in 1985. He was hired to represent members of the gang who’d been arrested in Florida. Ackerman was introduced to him in 1990 by a mutual friend, who supposedly identified Ackerman as the person to call if and when any gang member got arrested. Donald Ferguson, had also been an assistant US Attorney in Miami and now worked for himself. He was recruited by Abbell in 1990 to help with the civil forfeiture suit in New York and since then represent arrested members of the Orejuela gang. Robert Moore was the attorney hired by the cartel to defend Ackerman.
Moran was indicted on a multiple of charges, including for arranging bail for gang members whom he knew would jump bail; aiding and abetting the flight of gang members whom he knew to be criminals; preparing, presenting and arranging knowingly false affidavits; and arranging for and forwarding monthly subsistence payments from Orejuela to the families of arrested gang members to ensure that they would not cooperate with the government. Ferguson was similarly indicted on a multiple of charges and included the delivering of drug money to be used for legal fees, bail and subsistence expenses.
The 163-page indictment that named Abbell, Ferguson and Moran also charged 56 other people at all levels of the cartel, among them the Orejuela brothers and Londono. Laguna, Rosenthal and Moore were not named as they had already pleaded guilty to reduced charges. In fact, Ferguson cut a deal with the government, pleading guilty to conspiracy to obstruct justice and money laundering and, in exchange for a minimum sentence, an agreement to testify against the remaining two.
That left Abbell and Moran to tough it out, facing possible life imprisonment for their part in a massive drug trafficking and money laundering scheme.
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To make their case against the lawyers, the government needed to get inside their offices. But where an attorney’s involvement is suspected in a crime, the normal rules don’t apply. Very specific steps must be taken, not to protect the lawyers, but to protect their clients.
Because a search warrant allows access to an attorney’s computers and other files, before they can get that warrant the FBI needs to obtain the approval of senior officials at the Justice Department who conclude that there is sufficient evidence to justify what is seen as a drastic step. Once the Justice Department agrees, corroborating approval must come from a federal magistrate who, separately and independently, reaches the same conclusion.
The reason everyone treads so lightly is because information exchanged between an attorney and his client is considered confidential. It is not for the government to see except in the rarest of circumstances. Attorney client privilege is one of the foundations on which we’ve built our legal system. It is also why lawyers make the perfect laundrymen.
Confess a crime to your clergyman and in certain jurisdictions he can be called to testify against you. On the odd chance that a court were to subpoena him, it’s almost certain that a clergyman would refuse to violate the sanctity of your confession. But clerical privilege is not ironclad.
Nor is medical privilege. Certain states oblige a physician treating a bullet wound to report the name of his patient to the police. Certain states oblige a psychiatrist to report to the authorities a patient under his care for child molestation who admits that he is going to commit the crime again. As rare as it might be to find a doctor testifying against his patient, there are times when a court can demand testimony or hold the doctor in contempt.
Privilege is even less obvious for journalists. Some states acknowledge the importance confidential news sources. Others don’t. Serious journalists will almost always automatically invoke their right to keep such secrets, even where that right doesn’t exist in law. But they do so knowing that they can be shipped off to jail.
Attorney-client privilege is, however, set in stone. Lawyers are not supposed to lie on your behalf, or countenance your own perjury. But if you are charged with a crime, tell your lawyer that you committed it and still want to plead not-guilty, he is bound by professional ethics to enter that plea on your behalf and never to betray the trust you’ve placed in him by repeating to anyone your admission of guilt. In other words, conversations you have with your attorney are private. So is whatever business he conducts on your behalf.
When an attorney holds money in trust for someone else, it is customary for that money to be put in the attorney’s client account, a segregated trust which is deemed to be protected. Because it is often a direct reflection of the business done by him for his client, it is logically considered just as confidential as the conversation which instructed the lawyer in the use of those funds. It means that, if a banker wants to know the source of funds being held by an attorney, the lawyer can tell the banker that it is privileged information. If the banker calls the cops, the lawyer can tell them the same thing.
Banking with your lawyer is, therefore, as close to secret banking as anyone can get in a country where banking secrecy doesn’t exist. The charges against those six attorneys indicted in Miami outline some 59 transactions totaling $6,911,497. Many of them involved cash. Most of them passed through one client account or another. It goes without saying that given enough time and determination, the courts can get inside an attorney’s client account. And in this case they did. But it’s a long, involved process and one which legislators seem reluctant to make any easier. But then, most legislators are by profession, lawyers.
Although attorney-client privilege is generally thought to derive from the Sixth Amendment of the Constitution, and privilege is usually argued as a Sixth Amendment issue, it not specifically spelled out there. All that amendment says about attorneys is that anyone accused of a crime has the right to "the assistance of Counsel for his defense."
Privilege actually evolved from the courts having decided that a just defense is only possible when an accused is free to speak to Counsel without fear of Counsel being an agent for the prosecution. And that is a privilege vigorously defended.
In 1989, the Internal Revenue Service took aim at lawyers, their client’s accounts and cash-paying clients --- notably drug traffickers, who are known to pay for most things, including legal services, with cash --- stipulating that they must fill out CTRs for any cash received in excess of $10,000. It was, the IRS said, exactly the same condition that had been imposed on banks and other trades. And as it is with banks and other trades, an attorney’s failure to file reports is a felony offense.
Significantly, the first group of lawyers to protest to the IRS ruling were the criminal defense attorneys. They objected on the grounds that it unquestionably violated attorney-client privilege.
The problem is compounded by the fact that it happens to be against the law for anyone, including lawyers, knowingly to accept dirty money in payment of a fee. If the case can be proven, a lawyer who knowingly accepts drug money in payment of a fee can be subjected to various penalties, including fee forfeiture. But because the key word is "knowingly," many lawyers who defend cash-rich criminals either don’t ask where their fees are coming from and make certain that their cash-rich criminals don't offer explanations, or they allow their clients to supply just enough information that would lead them reasonably to believe the fee was being paid out of legally obtained funds. That way, everyone's virtue remains smugly in tact. At least, it does, in public. In private, there is plenty of cash running around, and it’s not only on offer to lawyers who defend dope dealers.
A well-known and highly respected international law firm was approached by a client, for whom they’d acted in the past, to purchase an ocean-going yacht. For the senior partners of the firm, it sounded like a terrific way to make some easy money. The gentleman instructed them to find something that would meet his requirements in the $10-$15 million range.
With a handsome fee in the offing, the lawyers contacted ships' agents in several pleasure ports, including the Mediterranean. It was only a matter of days before an agent in France faxed back to them the particulars of a $14 million yacht that sounded perfect. The lawyers forwarded the details to their client and he decided, almost on the spot, that it was exactly what he was looking for. He told them, buy it.
Negotiations were quickly concluded, the conveyancing went smoothly and the appropriate agreements were drawn up. Just before the time came to sign the final papers, the attorneys asked their client how he'd be paying for the purchase.
Under normal circumstances, money would be transferred from the gentleman's bank, somewhere in the world, to the law firm's client account. Once all the documents were exchanged, completing the sale, the law firm would wire the money from their client account to the client account of the attorneys acting for the seller. But evidently, this wasn't normal circumstances. The gentleman buying the yacht told his attorneys that he intended to pay for it with cash.
The lawyers were admittedly bewildered, as it's not every day they do $14 million cash deals. Obviously, there are people in the world who traditionally pay cash for everything. It’s common practice, for instance, in many Gulf states. But that wasn't the case here. And although the lawyers knew enough to worry, they were apprehensive for the wrong reason.
Their concern with $14 million in cash was that they might somehow be risking unforeseen tax liabilities. So they called for their in-house tax specialist who inspected every inch of the deal. As the deadline for closing drew near, he reported that while this might be highly out of the ordinary, there were no material tax risks to the law firm. His only recommendation was that arrangements should be made for guards to protect the money en route to the bank.
That money launderers often attempt to put cash into extravagant objects which can then be legitimately resold all over the world, presumably never dawned on any of the lawyers.
Once they were reassured about their tax position, they set a date for the signing. Only one minor detail remained --- how the cash would be transferred. The client explained that his money was in a bank's safe deposit box and that he wanted the attorneys to rent their own safe deposit box next to his. They would go into the bank vault together, he would open his safe deposit box, count out $14 million and hand it to them. They would put it in their safe deposit box and give him a receipt for it. At that point he'd walk away with the title and keys to his boat. Once he was gone, he said, the lawyers were free to do anything they wanted with the money.
The senior partners were instinctively nervous about exchanging so much money in such a bizarre manner, but they were looking at a handsome fee and that tended to quiet their anxieties. However, one of the partners was actually amused by such a cloak and dagger payoff and casually mentioned it to one of the junior partners.
He was the one who suddenly screamed, "Have you ever heard of money laundering?" And the deal was immediately killed.
In the United States today, the three trades reporting the largest amounts of cash income are car dealers, real estate agents and lawyers.
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Many lawyers argue that by grouping attorneys with all other businessmen and requiring them to put the name of a cash paying client on the IRS Form 8300, the government has found a way around attorney-client privilege.
John Zwerling, a partner in the Richmond Virginia firm of Moffitt, Zwerling and Kemler happens to be one of them. "Our system is founded on an individual’s right to seek counsel. So putting a client’s name on the IRS Form 8300 is perhaps not a problem for a person who’s willing to have the Government know that he's gone to see a lawyer. But, for someone who decides that he doesn’t want every IRS agent, every Assistant US Attorney, every bureaucratic cop in the federal system to know his business, in the end, he may choose not to seek counsel. By threatening attorney-client privilege you strike at the heart of the right to seek counsel."
An obvious argument is that in a criminal defense practice, people who come bearing cash to seek counsel are probably criminals who have obtained that money through criminal procedures. And they should not be permitted to use their ill-gotten gains to further their own defense. Despite the arguments of lawyers who claim that the Constitution guarantees representation by the Counsel of your choice, it says no such thing. And under our system, anyone who cannot afford Counsel, whether it be of his choice or not, is guaranteed Counsel by having one appointed to serve him.
Zwerling however does not quite see it that way. "There are a lot of people who have cash. Retailers have cash. Restaurateurs have cash. There are a lot of people in this country who don't use banks. Or, if they do, they only use banks minimally, so they can write checks to pay the rent. They keep the rest of their money under the mattress. It may be not very bright but they do it because they’re afraid of losing their savings in a bank. Why shouldn't they be able to pay in cash without inferring that they're criminals?"
A criminal defense lawyer’s first responsibility is, quite plainly, to provide competent, legal counsel: To stand up on his client’s behalf; to make sure that any evidence presented against his client has been lawfully obtained; to make certain that the Government’s proof is adequate; to assure that his client’s side of the story is presented in a meaningful way; and if his client is convicted, to see that the sentence is no greater than is required under the law. Zwerling argues that the government’s use of the IRS Form 8300 where it pertains to lawyers, is putting the entire system in jeopardy because it becomes a weapon with which the government can turn a lawyer against his client.
In May 1990, the FBI busted a 35-year old, northern Virginia auto mechanic named William Paul Covington for drug trafficking. In the course of the investigation, they obtained seizure warrants for a safe deposit box, several vehicles and Covington's residence. To defend himself, Covington hired a local law firm. But in July 1991, the FBI hit Covington with another series of search and seizure warrants, which got them into several of his bank accounts. At that point, Covington decided to seek new counsel. Claiming that the government had scared his lawyers out of the case, he approached Moffitt, Zwerling, Kemler.
When William Moffitt and John Zwerling met with Covington, he explained that as the target of a federal cocaine investigation, many of his assets had already been seized by the government based on probable cause. He admitted to them he’d dealt cocaine since 1985 but insisted it was always small quantities. He claimed that the government's allegations against him were drastically overstated.
During that initial meeting, which took place on Wednesday, August 21, 1991 and lasted nearly five hours, Moffitt and Zwerling asked extensive questions about Covington's background. He told them that since 1970 he had been steadily employed as a mechanic and had earned substantial sums of legitimate money. He said his father had always advised him to keep a nest egg of cash, something for a rainy day, so he’d hoarded cash all his life. He referred often to times pre-dating any drug trafficking when he had as much as $100,000 in his safe deposit box, all of it legitimately earned. That’s about when Covington asked if he could pay Moffitt and Zwerling in cash.
The lawyers responded that cash would only be acceptable under three conditions: First, the cash would be deposited in a bank so there would be a record of it. Second, they would comply with the law and file an IRS Form 8300 reporting the transaction. While they would not name Covington as the source of the cash, claiming attorney-client privilege, his identity might have to be disclosed if the government petitioned the court to know it. Third, they would not accept drug money.
The next day, Thursday, Moffitt and Zwerling informed Covington that their fee to defend him would be $100,000. He handed them a down payment of $17,000 in cash and returned Friday with a further $86,800 in cash. Myth has it that Covington delivered the cash stuffed in a Ritz cracker box. Zwerling recalls it was, instead, a shoe box. In any case, the lawyers deposited it in their bank on Monday, the 26th, and filed the required 8300 Form a week or so later. Keeping their word, they did not name the source of the cash.
Meeting with the prosecutors, Moffitt and Zwerling were able to establish several critical points: That Covington did indeed have access to large amounts of legitimate cash through his business; that he had always hoarded cash; that he’d been a nickel-dime dealer; and that the assets already seized from him more than covered the amount he most probably earned from drug dealing. They then set about trying to get their client a deal. But the government insisted that Covington admit to distributing l5-50 kilos of cocaine, which he refused to do, maintaining his position that the actual quantity was significantly lower. When the negotiations failed, a grand jury indicted him.
Two weeks into October, the government monitored a conversation with Covington's girlfriend where he discussed the cash payment to Moffitt and Zwerling. Immediately, the prosecutors dipped into an IRS database and found the law firm’s CTR. With just six weeks to go before the trial was scheduled to begin, the government served a subpoena on Moffitt and Zwerling, demanding to see the firm's fee records relating to its representation of Covington. They threatened felony tax prosecution against the lawyers for having withheld client-identifying information from the IRS Form 8300 and, unbeknownst to the lawyers, executed a search warrant for the firm’s bank records.
Immediately, Moffitt and Zwerling retained separate counsel for Covington, for the law form and for all three principals of the firm. They then filed motions to quash the subpoena and moved to order withdrawal of the threatening letter. In response, the prosecutors sought approval from the Department of Justice Asset Forfeiture Office to claim back the $103,800 fee Covington had paid Moffitt and Zwerling, claiming it was drug money. Approval was granted by that office, which is merely a formality, so they filed against the firm. Moffitt and Zwerling quickly filed a defense.
In the meantime, the subpoena was quashed and the threatening letter was withdrawn. But the damage had been done. The government had successfully set up a series of smoke screens, which not only prevented Moffitt and Zwerling from properly defending their client, it created a situation where Moffitt and Zwerling could be called as witnesses against to testify about cash against the very person who’d come to them for help. The government had used the IRS Form 8300 and the attorney-client privilege issue to drive the defense attorneys out of the case.
On July 16, 1992 the government asked the court to disqualify the law firm. Four weeks later, Moffitt and Zwerling were officially removed from the matter. Shortly thereafter, Covington pleaded guilty and was sentenced to 21 years. Moffitt and Zwerling were now in an even more dangerous situation.
Once a person is convicted under the sentencing guidelines, there's only one avenue for him to take to get the sentence reduced. It’s called, "substantial assistance to the Government." In other words, that person is invited to sit down with the prosecutors and say, "I will help you make a case against another human being, and in turn you will reduce my sentence." So go after their friends, their family, and sometimes, their attorney. And if cash has been involved in a criminal defense --- which the government can determine through the IRS Form 8300 --- especially drug related crimes, the convicted man’s lawyer has to worry that he’s going to be the next defendant because his former client was trying to get his sentence reduced.
Which is exactly what the government did in this case. They offered Covington a chance to reduce his sentence by convincing him to help them in their fee forfeiture case against Moffitt and Zwerling. The courts have proven reluctant to order the entire fee forfeited, the government has scored points in every round. Moffitt and Zwerling continue to appeal and promise to do so up to the US Supreme Court.
Several questions lie at the heart of the matter. Can a drug dealer use illicitly obtained funds to pay for the counsel of his choice? Apparently not. Is it a breach of attorney-client privilege if the attorney is forced to divulge the nature and/or source of his fees. There are those who argue it is. Would the government have been able to split Covington away from his lawyers had he paid for their legal services with a check? Clearly not. Has the government violated any of Covington’s rights by using the IRS Form 8300 to get around attorney-client privilege? The American Civil Liberties Union seems to think even if they didn’t, at the very least, they’ve taken a very dangerous step in that direction.
In a brief submitted as a friend of the court, the ACLU held, "If the government can unilaterally inject fee forfeiture into a criminal case in a manner that leads to defense attorney disqualification, the government can improperly deny an accused the constitutional right to counsel of choice in cases the government selects."
Adds Zwerling, "We don’t believe that the Department of Justice has the ability, in and of itself, to void the language that’s on every dollar bill in the United States where it says, this is legal tender for all debts, public and private."
In fact, the law does permit exemptions for lawyers under "special circumstances" from naming a cash paying client on the IRS Form 8300. But the law does not spell out what those special circumstances should be. Although there have been some dissenting opinions among attorneys, the profession as a whole continues to voice concern over the matter. The American Bar Association, along with the National Association of Criminal Defense Lawyers, has met on several occasions with the Department of Justice and the IRS, asking them to stop this. But so far, the government has refused to budge. Some lawyers hope that, eventually, the law requiring a cash paying client’s name will be struck down as unconstitutional. But so far, the Supreme Court has declined to take an IRS Form 8300 case. Although, the Justices often watches how an issue is treated in the lower courts before they look at it.
At the end of 1995, the government brought out a revised IRS Form 8300, making it shorter and slightly easier for banks to use. But it did not make any sort of gesture towards attorneys. And therein lies another contradiction. Generally, it is the honest lawyer who fills out the form and then refuses to disclose the identity of his client. He’s the one reporting the information, telling the IRS about it, ethically trying to live up to the responsibility of keeping a client's confidence. It's the unethical lawyer who tells the Government what he knows about the client in direct conflict with attorney-client confidentiality, or the lawyer criminal who doesn't fill out the form.
Case in point: The number of IRS 8300 Forms filed for the cash transactions that the six indicted Miami lawyers made on behalf of the Cali cartel: none.
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