TRANSCRIPT OF THE ALLOCUTION HEARING
PURSUANT TO THE GUILTY PLEA OF LUCY EDWARDS
In the United States District Court
for the Southern District of New York
February 16, 2002

1

 1 USTATES STATES DISTRICT COURT
        SOUTHERN DISTRICT OF NEW YORK

2 ----------------------------------------------------------------------------------------X

3 UNITED STATES OF AMERICA,                        

4                           v.                                                                                                          99 Cr. 914 (SWK)

5 PETER BERLIN, LUCY EDWARDS, BENEX INTERNATIONAL CO.,
        BECS INTERNATIONAL CO., INC. and LOWLAND, INC.,
6                                                       Defendants.
        -------------------------------------------------------------------------------------X
7                                                       

8   

9                     10 February 16, 2000 10:00 a.m.

11                 Before:         HON. SHIRLEY WOHL KRAM,

12                 District Judge

13                           APPEARANCES:         MARY JO WHITE
                                                                        United States Attorney for the                          
14                                                                     Southern District of New York

15

16                

17

18                                                                          GARY STEIN, DEBORAH LANDIS,

19                                                                          Assistant United States Attorneys

20                                                                            CURTIS, MALLET-PREVOST, COLT & MOSLE

21                                                                          Attorney for Defendants

22                                                                          New York, New York

23                                                                         101 Park Avenue
                                                                            T. BARRY KINGHAM, ESQ.,
                                                                            SANUAL ROSENTHAL, ESQ.,       
24                                                                         Of counsel

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1 THE COURT: All right. Mr. Berlin, Ms. Edwards,

2 would you stand, please.

3 I have been advised that it is your desire to waive

4 indictment today, to consent to the filing of the superseding

5 information and to plead guilty to the charges that are

6 contained in that superseding information.

7 I also understand that three corporations controlled

8 by Mr. Berlin will also waive indictment and enter pleas of

9 guilty today to the charges in the superseding information.

10 Is that correct?

11 DEFENDANT BERLIN: Yes, your Honor.

12 DEFENDANT EDWARDS: Yes, your Honor.

13 THE COURT: I have also been advised that both of the

14 individual defendants and the three corporations are all

15 represented by the same attorneys, T. Barry Kingham and Samuel

16 Rosenthal of the law firm of Curtis, Mallet.

17 Is that correct?

18 DEFENDANT BERLIN: Yes.

19 DEFENDANT EDWARDS: Yes, your Honor.

20 THE COURT: Before we can proceed further, I must

21 ascertain whether you are fully prepared to proceed today all

22 represented by the same attorneys.

23 I want to advise you that the United States

24 Constitution guarantees every criminal defendant the right to

25 be represented by an attorney whose loyalties are to that

 

 

 

 

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1 defendant and to that defendant alone. However, a criminal

2 defendant also has the right under most circumstances to be

3 represented by the attorney of his or her choice. Two or more

4 defendants can be permitted to be represented by the same

5 lawyer so long as they all understand the nature of the

6 possible conflict of interest that can arise in such

7 circumstances and so long as they voluntarily waive their

8 right to have an attorney that only represents one client.

9 In order for me to determine whether you each

10 understand your right to a conflict-free counsel and desire to

11 waive that right, I must ask you some questions.

12 Mr. Berlin how old are you?

13 DEFENDANT BERLIN: Forty-five, your Honor.

14 THE COURT: Ms. Edwards, how old are you?

15 DEFENDANT EDWARDS: I'm 41, your Honor.

16 THE COURT: How far did each of you go in school?

17 How many years did you attend school, Mr. Berlin?

18 DEFENDANT BERLIN: Sixteen years.

19 THE COURT: And you graduated from --

20 DEFENDANT BERLIN: I graduated in Russia from Moscow

21 Physical Technical Institute and I have a Ph.D. degree.

22 THE COURT: And you?

23 DEFENDANT EDWARDS: I have high school and two years

24 of college.

25 THE COURT: Each of you speak and read English?

 

 

 

 

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1 DEFENDANT EDWARDS: Yes, your Honor.

2 DEFENDANT BERLIN: Yes, your Honor.

3 THE COURT: It is important that you understand

4 everything that is said during these proceedings today. If at

5 any time something is said that you do not understand or you

6 want something explained to you, you should inform me right

7 away so that explanation can be made.

8 Have either of you recently consulted a doctor for

9 any medical condition?

10 DEFENDANT EDWARDS: No.

11 DEFENDANT BERLIN: No.

12 THE COURT: Have you within the past 24 hours taken

13 any alcohol, drugs or pills of any kind?

14 DEFENDANT EDWARDS: No.

15 DEFENDANT BERLIN: No.

16 THE COURT: Ms. Edwards, you are currently

17 represented by T. Barry Kingham and Samuel Rosenthal.

18 Are you aware that Mr. Kingham and Mr. Rosenthal also

19 currently represent your husband, Peter Berlin, as well as the

20 corporations Benex, BECS and Lowland?

21 DEFENDANT EDWARDS: Yes, your Honor.

22 THE COURT: Mr. Berlin, you are currently represented

23 by the same two attorneys.

24 Are you aware that Mr. Kingham and Mr. Rosenthal also

25 currently represent your wife, Lucy Edwards, and the three

 

 

 

 

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1 corporations I just mentioned?

2 DEFENDANT BERLIN: Yes, your Honor.

3 THE COURT: Have both of you discussed with your

4 lawyers the fact that under certain circumstances your

5 interests and the interest of your spouse might differ? Do

6 you understand that your individual interests and the

7 interests of the three corporations might be different?

8 DEFENDANT EDWARDS: Yes.

9 DEFENDANT BERLIN: Yes, your Honor.

10 THE COURT: Now I want to give you some examples of

11 how the two of you can have different interests in a criminal

12 case and how a conflict of interest could arise if one lawyer

13 is representing both of you.

14 For example, each of you must decide whether to stand

15 trial in this case or to plead guilty. It might be in the

16 interest of one of you to plead guilty, but not in the

17 interest of the other one. If you were represented by

18 separate attorneys, each attorney would advise you with only

19 your own best interest in mind. But if you are represented by

20 the same lawyer, that lawyer would have to compromise the

21 interests of one client for the sake of the other. In other

22 words, your attorney would have divided loyalties rather than

23 being in a position to focus solely and exclusively on your

24 own individual needs.

25 Similarly, if there were a trial in this case, it

 

 

 

 

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1 might be in your individual interest to offer certain evidence

2 or proof or to make certain legal arguments on your own

3 behalf, but those same arguments could be harmful to your

4 spouses defense, and if you both have the same lawyer that

5 lawyer would then be forced to choose one client's interest

6 over the other.

7 The same could happen at the time of sentencing. At

8 sentencing there might be certain facts or arguments, your

9 lawyer would want to bring to my attention that would be

10 helpful to one of you but harmful to the other. As a result,

11 not wanting to hurt one of you, your attorney might decide not

12 to mention the facts or the argument that would help the

13 other. This is what can happen when an attorney has divided

14 loyalties.

15 Do you understand what I have explained to you?

16 DEFENDANT BERLIN: Yes, your Honor.

17 DEFENDANT EDWARDS: Yes.

18 THE COURT: Do you understand that you have the right

19 to counsel free of conflict whose loyalty to you is absolutely

20 undivided, who is not subject to any factor that might in

21 anyway intrude upon his loyalty to your interests?

22 DEFENDANT EDWARDS: Yes.

23 DEFENDANT BERLIN: Yes, your Honor.

24 THE COURT: The examples I have just given also apply

25 to the three corporations.

 

 

 

 

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1 Do you understand that?

2 DEFENDANT BERLIN: Yes, your Honor.

3 DEFENDANT EDWARDS: Yes.

4 THE COURT: Have you discussed with Mr. Kingham or

5 Mr. Rosenthal the fact that they represent both of you and the

6 three corporations and this might present a conflict of

7 interest?

8 DEFENDANT BERLIN: Yes, your Honor.

9 DEFENDANT EDWARDS: Yes.

10 THE COURT: Mr. Berlin, would you please explain to

11 me in your own words what you understand to be the potential

12 conflict of interest in this case as a result of the facts

13 that I have just described to you.

14 DEFENDANT BERLIN: In the case of conflict of

15 interest, it might happen that our lawyer representing both of

16 us should make a decision in favor of one of us and

17 disadvantaged the other. I completely understand that.

18 THE COURT: Well, I think you understand it.

19 Ms. Edwards, can you explain to me what your

20 understanding is of what I said.

21 DEFENDANT EDWARDS: I understand that being

22 represented by the same lawyer, my husband and I, certainly

23 evidence can be used in my husband's advantage or mine in one

24 way or the other, but we are very satisfied and we would like

25 to have Mr. T. Barry Kingham and Mr. Sam Rosenthal as lawyers.

 

 

 

 

8

 

 

1 We would like to keep them.

2 THE COURT: All right. Do you understand that each

3 of you and each of the corporations has the right to consult

4 with a lawyer other than Mr. Kingham or Mr. Rosenthal in order

5 to determine whether you wish them to continue to represent

6 you?

7 DEFENDANT BERLIN: Yes.

8 DEFENDANT EDWARDS: Yes.

9 THE COURT: You have to say yes or no.

10 DEFENDANT EDWARDS: Yes.

11 THE COURT: You understand if you wish to consult

12 with another lawyer and cannot afford to pay another lawyer

13 other than Mr. Kingham or Mr. Rosenthal, that this court will

14 appoint another lawyer for that purpose?

15 DEFENDANT EDWARDS: Yes, your Honor.

16 DEFENDANT BERLIN: Yes, your Honor.

17 THE COURT: That lawyer will not be associated with

18 Mr. Kingham or Mr. Rosenthal.

19 Would either of you like to consult with separate

20 counsel or obtain separate advice on behalf of the

21 corporations?

22 DEFENDANT BERLIN: No, your Honor.

23 DEFENDANT EDWARDS: No.

24 THE COURT: Have either of you received any

25 inducement or promise that may have influenced your choice to

 

 

 

 

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1 have Mr. Kingham or Mr. Rosenthal represent you and the

2 corporations in this case?

3 DEFENDANT EDWARDS: No.

4 DEFENDANT BERLIN: No, your Honor.

5 THE COURT: Have either of you been threatened in any

6 way concerning your choice to have Mr. Kingham and

7 Mr. Rosenthal represent you and the corporations in this case?

8 DEFENDANT BERLIN: No, your Honor.

9 DEFENDANT EDWARDS: No.

10 THE COURT: You are entitled to take time to think

11 about these matters carefully before we proceed.

12 Would either one of you like some additional time to

13 consider this matter?

14 DEFENDANT EDWARDS: No, thank you.

15 DEFENDANT BERLIN: No, your Honor.

16 THE COURT: Mr. Berlin, understanding that

17 Mr. Kingham and Mr. Rosenthal also represent Ms. Edwards in

18 this case, do you wish to go forward today with them as your

19 lawyers?

20 DEFENDANT BERLIN: Yes, your Honor.

21 THE COURT: Ms. Edwards, you have the same

22 understanding that Mr. Kingham and Mr. Rosenthal also

23 represent Mr. Berlin in this case. Do you wish to go forward

24 today with these attorneys representing you?

25 DEFENDANT EDWARDS: Yes, your Honor.

 

 

 

 

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1 THE COURT: Mr. Berlin, I understand you are the

2 president of all three corporations, Benex, BECS and Lowland,

3 and, therefore, you have the authority to act on their behalf,

4 is that correct?

5 DEFENDANT BERLIN: Yes, your Honor.

6 THE COURT: On behalf of the three corporations, Mr.

7 Berlin, do you wish to go forward today with these attorneys

8 as lawyers for the three corporations?

9 DEFENDANT BERLIN: Yes, your Honor.

10 THE COURT: Each of you having agreed to retain

11 Mr. Kingham and Mr. Rosenthal as your lawyers and to proceed

12 today, do you understand that if I agree to accept your plea

13 of guilty, neither you nor the corporations will be able to

14 complain later that you should each have had your own lawyer

15 representing you?

16 DEFENDANT BERLIN: Yes, your Honor.

17 DEFENDANT EDWARDS: Yes, your Honor.

18 THE COURT: Is there anything I have said to you that

19 you want me to explain to you further?

20 DEFENDANT EDWARDS: No, thank you.

21 DEFENDANT BERLIN: No, thank you.

22 THE COURT: All right. I hereby find, based upon the

23 statements made by the individual defendants and by Mr. Berlin

24 on behalf of the three corporate defendants, that the waiver

25 of conflict-free counsel is knowing and voluntary and that all

 

 

 

 

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1 five defendants may proceed today represented by Mr. Kingham

2 and Mr. Rosenthal.

3 The defendants must be arraigned on the pending

4 indictments before we proceed. All right. Proceed.

5 THE CLERK: Arrangement on case number 99 Crim. 914,

6 United States of America versus Peter Berlin, Lucy Edwards,

7 Benex International Company Incorporated, BECS International

8 and Lowland Incorporated.

9 MR. STEIN: Your Honor, I am handing your deputy the

10 indictment.

11 THE COURT: I am indicating the courtroom deputy is

12 to administer the oath.

13 LUCY EDWARDS,

14 the defendant, having been duly sworn

15 testified as follows:

16 PETER BERLIN.

17 the defendant, having been duly sworn

18 testified as follows:

19 THE CLERK: Have you seen a copy of this indictment?

20 DEFENDANT EDWARDS: Yes.

21 DEFENDANT BERLIN: Yes.

22 THE CLERK: Would you like this indictment read to

23 you at this time?

24 DEFENDANT EDWARDS: No, thank you.

25 DEFENDANT BERLIN: No.

 

 

 

 

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1 THE CLERK: How do you plead on Count 1 of this

2 indictment?

3 DEFENDANT EDWARDS: Not guilty.

4 DEFENDANT BERLIN: Not guilty.

5 THE CLERK: On Count 2 of this indictment?

6 DEFENDANT EDWARDS: Not guilty.

7 DEFENDANT BERLIN: Not guilty.

8 THE CLERK: And Counts 3 and 4 also include the

9 corporations. They have already been arraigned on this

10 matter.

11 MR. KINGHAM: Your Honor, not guilty pleas have

12 already been entered by the corporations on the original

13 indictment.

14 THE COURT: Mr. Berlin and Ms. Edwards, the court is

15 informed that you wish to plead guilty to this information.

16 Is that correct?

17 DEFENDANT EDWARDS: Yes, your Honor.

18 DEFENDANT BERLIN: Yes, your Honor.

19 MR. KINGHAM: Your Honor, may the defendants be

20 seated during this inquiry, because it will take some time.

21 THE COURT: Yes, it is rather lengthy and I think

22 that is appropriate.

23 Before accepting your guilty pleas, I will ask you

24 both a number of questions to assure that your plea is valid.

25 If you don't understand any one of the questions or at any

 

 

 

 

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1 time you wish to consult with your attorney, please say so,

2 because it is essential for a valid plea that you understand

3 everything that transpires here today.

4 Earlier you both informed me that you have not taken

5 any drugs or alcohol in the past 24 hours.

6 You understand what is happening here today?

7 DEFENDANT EDWARDS: Yes, your Honor.

8 DEFENDANT BERLIN: Yes. Yes, your Honor.

9 THE COURT: Yes?

10 MR. STEIN: Your Honor, the defendants need to waive

11 indictment. I don't know if you are getting to that or if you

12 were going straight to the allocution, but that is something

13 that needs to happen first.

14 We have not filed a superseding information yet

15 because they have not waived indictment.

16 THE COURT: I'm sorry, what?

17 MR. STEIN: They need to waive indictment and agree

18 to the filing of charges based on an information.

19 They have executed --

20 THE COURT: I thought they had already done that.

21 MR. STEIN: Well, they have executed waivers of

22 indictment, which I have handed up to your clerk. She has the

23 originals. But we would ask the court to advice the

24 defendants of their right to be indicted by a grand jury as

25 opposed to proceeding by way of information and make sure that

 

 

 

 

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1 they knowingly and intelligently waive it.

2 THE COURT: I thought that was done when they were

3 arraigned on the indictment.

4 MR. STEIN: No. Mr. Berlin and Ms. Edwards had not

5 appeared previously before the court. They remain on the

6 indictment that was filed several months ago up to a few

7 moments ago, and the instrument to which they will be pleading

8 guilty is the information, the superseding information which

9 has been handed up to your clerk but has not been filed.

10 THE COURT: I understand that. But I had understood

11 that they had been arraigned on the original indictment --

12 MR. STEIN: Just now.

13 THE COURT: So what is your problem?

14 MR. STEIN: That we would ask that the court -- it

15 may be incorporated in what you are about to do, I don't know

16 what you are planning to do --

17 THE COURT: I am asking them --

18 MR. STEIN: Make sure they waive indictment --

19 THE COURT: I am attempting to proceed with the

20 allocution on the information.

21 MR. STEIN: Right. And as part of that --

22 THE COURT: Ms. Landis, I'm sorry, I think you

23 handled the arraignment. What is the problem?

24 MS. LANDIS: Your Honor, the two individual

25 defendants have never appeared before today and so their

 

 

 

 

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1 arraignment on the original pending indictment just occurred a

2 moment ago and so in order for them now to enter a guilty plea

3 to the superseding information they have to on the record

4 waive indictment so we can technically file that information

5 before they can plead guilty.

6 THE COURT: All right.

7 Will the two defendants stand, please.

8 Go ahead.

9 THE CLERK: Mr. Berlin and Ms. Edwards, have you seen

10 a copy of this superseding information, S1 99 Crim. 914,

11 United States of America versus Peter Berlin, Lucy Edwards,

12 Benex International, BECS International and Lowland, Inc.?

13 DEFENDANT EDWARDS: Yes.

14 DEFENDANT BERLIN: Yes, we have.

15 THE CLERK: Have you seen a copy of the waiver of

16 indictment?

17 DEFENDANT EDWARDS: Yes, we did.

18 DEFENDANT BERLIN: Yes, I have.

19 THE CLERK: Before you signed it, did you discuss it

20 with your attorney?

21 DEFENDANT EDWARDS: Yes.

22 DEFENDANT BERLIN: Yes.

23 THE CLERK: Did he explain it to you?

24 DEFENDANT BERLIN: Yes.

25 DEFENDANT EDWARDS: He did.

 

 

 

 

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1 THE CLERK: Do you understand you are under no

2 obligation to waive indictment?

3 DEFENDANT EDWARDS: Yes.

4 DEFENDANT BERLIN: Yes.

5 THE CLERK: Do you understand if you do not waive

6 indictment, if the government wants to prosecute you, they

7 will have to present this case to a grand jury which may or

8 may not indict you?

9 DEFENDANT EDWARDS: Yes.

10 DEFENDANT BERLIN: Yes.

11 THE CLERK: Do you realize that by signing this

12 waiver of indictment, you have given up your right to have

13 this case presented to a grand jury?

14 DEFENDANT EDWARDS: Yes.

15 DEFENDANT BERLIN: Yes.

16 THE CLERK: Do you understand what a grand jury is?

17 DEFENDANT BERLIN: Yes.

18 DEFENDANT EDWARDS: Yes.

19 THE CLERK: And you have seen a copy of this

20 information?

21 DEFENDANT EDWARDS: Yes.

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1 DEFENDANT BERLIN: No.

2 THE CLERK: How do you plead on this new superseding

3 information?

4 MR. KINGHAM: Your Honor, I believe the pleas will be

5 guilty to Counts 1 and 2 on behalf of the individual

6 defendants and Counts 3 and 4 on behalf of the corporate

7 defendants.

8 I'm sorry, 1, 3 and 4 for the corporate defendants.

9 It will be guilty of the individuals on Counts 1 and

10 2, guilty for all three corporation as to 1, 3 and 4 after the

11 court has conducted the allocution.

12 THE COURT: They have signed the waivers and that is

13 now part of the court records.

14 MR. STEIN: That's correct, your Honor.

15 THE COURT: All right.

16 THE CLERK: I have to ask Mr. Berlin the same

17 questions pertaining to the corporations itself.

18 Mr. Berlin, on behalf of the corporations, Benex,

19 BECS and Lowland Incorporated, you have signed a copy of this

20 waiver of indictment on behalf of all three corporations?

21 DEFENDANT BERLIN: Yes.

22 THE CLERK: And, again, you did sign it and you

23 discussed it with your attorney?

24 DEFENDANT BERLIN: Yes, I did.

25 THE CLERK: And they explained it to you thoroughly?

 

 

 

 

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1 DEFENDANT BERLIN: Yes.

2 THE CLERK: Is it your intention to plead guilty on

3 behalf of the corporations to the superseding information as

4 well?

5 DEFENDANT BERLIN: Yes.

6 MR. STEIN: Thank you, your Honor.

7 THE COURT: Earlier you both informed me that you

8 have not taken any drugs or alcohol in the past 24 hours, and

9 you will both understand what is happening here today?

10 DEFENDANT EDWARDS: Yes, your Honor.

11 DEFENDANT BERLIN: Yes, your Honor.

12 THE COURT: Does either counsel have any question

13 regarding the defendants' competence to plead?

14 MR. STEIN: I do not, your Honor.

15 MR. KINGHAM: No, your Honor.

16 THE DEFENDANT: Counsel?

17 MR. ROSENTHAL: No, your Honor.

18 THE COURT: Then I will make the finding for the

19 record that the defendants are competent to plead.

20 Have you each discussed your case with your attorney?

21 DEFENDANT EDWARDS: Yes, your Honor.

22 DEFENDANT BERLIN: Yes.

23 THE COURT: And do you feel you have discussed it

24 adequately?

25 DEFENDANT BERLIN: Yes.

 

 

 

 

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1 DEFENDANT EDWARDS: Yes.

2 THE COURT: Are you satisfied with your attorneys'

3 representation of you?

4 DEFENDANT EDWARDS: Yes, your Honor.

5 DEFENDANT BERLIN: Yes, your Honor.

6 THE COURT: I am now going to make sure you are aware

7 of your constitutional rights.

8 Do you understand that under the Constitution and the

9 laws of the United States, you are entitled to a trial by a

10 jury on the charges contained in this information?

11 DEFENDANT BERLIN: Yes, your Honor.

12 DEFENDANT EDWARDS: Yes.

13 THE COURT: Do you both understand that at that trial

14 you would be presumed to be innocent and the government would

15 be required to prove you guilty by competent evidence beyond a

16 reasonable doubt before you could be found guilty and that you

17 would not have to prove you were innocent?

18 DEFENDANT EDWARDS: Yes, your Honor.

19 DEFENDANT BERLIN: Yes, your Honor.

20 THE COURT: Do you both understand that in the course

21 of that trial, witnesses for the government would have to come

22 to court and testify in your presence and your attorney could

23 cross-examine the witnesses for the government and object to

24 evidence offered by the government?

25 DEFENDANT EDWARDS: Yes, your Honor.

 

 

 

 

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1 DEFENDANT BERLIN: Yes, your Honor.

2 THE COURT: Do you both understand that at that trial

3 you would have the right to offer evidence on your own behalf,

4 including the right to call and subpoena witnesses to testify

5 in your behalf?

6 DEFENDANT EDWARDS: Yes, your Honor.

7 DEFENDANT BERLIN: Yes, your Honor.

8 THE COURT: Do you both understand at that trial,

9 while you would have the right to testify if you wanted to do

10 so, you also would have the right not to testify and the right

11 not to be compelled to incriminate yourself and that no

12 inference or suggestion of guilt could be drawn from the fact

13 that you did not testify?

14 DEFENDANT EDWARDS: Yes, your Honor.

15 DEFENDANT BERLIN: Yes, your Honor.

16 THE COURT: Do you understand that you have the right

17 to be represented by an attorney at every stage of these

18 proceedings and, if necessary, an attorney could be appointed

19 to represent you?

20 DEFENDANT EDWARDS: Yes, your Honor.

21 DEFENDANT BERLIN: Yes, your Honor.

22 THE COURT: Do you both understand that the

23 government would have to prove its case against you beyond a

24 reasonable doubt to all the jurors?

25 DEFENDANT BERLIN: Yes, your Honor.

 

 

 

 

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1 DEFENDANT EDWARDS: Yes, your Honor.

2 THE COURT: If you plead guilty and I accept your

3 plea, do you understand that you will waive your right to a

4 trial and all the other rights I have just discussed, there

5 will be no trial and I will enter a judgment of guilty and

6 sentence you on the basis of your guilty plea after

7 considering a presentence report?

8 DEFENDANT EDWARDS: Yes, your Honor.

9 DEFENDANT BERLIN: Yes, your Honor.

10 THE COURT: If you plead guilty and I accept your

11 plea, do you understand that I will ask you questions about

12 what you did in order to satisfy myself that you are guilty as

13 charged, that you will have to waive your right not to

14 incriminate yourself, that you will have to acknowledge your

15 guilt and that any false statements you made today could be

16 used in future court proceedings against you for perjury or

17 false statements?

18 DEFENDANT EDWARDS: Yes, your Honor.

19 DEFENDANT BERLIN: Yes, your Honor.

20 THE COURT: Do you fully understand that you have the

21 right to maintain your plea of not guilty and the right to go

22 to trial on all counts of this information?

23 DEFENDANT BERLIN: Yes, your Honor.

24 DEFENDANT EDWARDS: Yes, your Honor.

25 THE COURT: Now that I have told you your rights, do

 

 

 

 

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1 you still want to plead guilty?

2 DEFENDANT EDWARDS: Yes, your Honor.

3 DEFENDANT BERLIN: Yes, your Honor.

4 THE COURT: If I accept your plea, you will be

5 sentenced under the sentencing guidelines.

6 Has your attorney explained to you that the

7 sentencing guidelines apply to this case and how they will

8 affect your sentencing?

9 DEFENDANT EDWARDS: Yes, your Honor.

10 DEFENDANT BERLIN: Yes, your Honor.

11 THE COURT: Do you understand that a sentencing range

12 will be calculated in accordance with the sentencing

13 guidelines and that I retain the discretion under certain

14 circumstances to impose a sentence within the guideline range

15 or a lesser or greater sentence up to the maximum permitted by

16 law? If I impose a lesser sentence than the guideline range,

17 the government has the right to appeal my sentence, and if I

18 impose a sentence greater than the guideline range, you will

19 have the right to appeal my sentence.

20 Do you understand that under the sentencing

21 guidelines, parole has been abolished and that if you are

22 sentenced to prison you will not be released on parole?

23 DEFENDANT BERLIN: Yes, your Honor.

24 DEFENDANT EDWARDS: Yes, your Honor.

25 THE COURT: You have received a copy of the

 

 

 

 

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1 superseding information?

2 DEFENDANT EDWARDS: Yes, your Honor.

3 DEFENDANT BERLIN: Yes, your Honor.

4 THE COURT: You have discussed that information with

5 your attorney?

6 DEFENDANT EDWARDS: Yes, your Honor.

7 DEFENDANT BERLIN: Yes, your Honor.

8 THE COURT: Have you discussed with your attorney the

9 specific charges in that information to which you intend to

10 plead guilty?

11 DEFENDANT EDWARDS: Yes, your Honor.

12 DEFENDANT BERLIN: Yes, your Honor.

13 THE COURT: Do you want to have that information read

14 to you now?

15 DEFENDANT BERLIN: No.

16 DEFENDANT EDWARDS: No, your Honor.

17 THE COURT: All right.

18 I will now describe the charges against you and what

19 the government would have to prove for you to be found guilty

20 of them.

21 Count 1 of the superseding information charges that

22 between 1995 and September 1999, the two individual

23 defendants, Peter Berlin and Lucy Edwards, and the three

24 corporate defendants, Benex International Company, Inc.,

25 (Benex), BECS International, L.L.C., (BECS), and Lowland,

 

 

 

 

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1 Inc., (Lowland), unlawfully, willfully and knowingly

2 participated in a conspiracy together with other individuals

3 to violate various laws and to defraud the Internal Revenue

4 Service in violation of the Title 18, United States Code,

5 Section 371.

6 The conspiracy charged in the information had

7 multiple goals which included:

8 1. One conducting unauthorized and unregulated

9 banking activities in violation of Title 12, United States

10 Code, 378(a)(2.)

11 2. Establishing a branch of a foreign bank in the

12 United States without the approval of the Board of Governors

13 of the Federal Reserve in violation of Title 12, United States

14 Code, section 3105(d)(1) and 3111.

15 3. Operating an illegal money-transmitting business

16 in violation of Title 18, United States Code, Section 1960.

17 4. Laundering money through international funds

18 transfers intended to promote criminal activity, including a

19 wire fraud service scheme to defraud the Russian government of

20 customs duties and tax revenues in violation of Title 18,

21 United States Code, Section 1956(a)(2)(A).

22 5. Corruptly making payments to a bank employee with

23 intent to influence that employee in violation of Title 18,

24 United States Code, Section 215(a)(1).

25 6. Corruptly receiving payments as a bank officer

 

 

 

 

25

 

 

1 with the intent to be rewarded in connection with the business

2 of the bank in violation of Title 18, United States Code,

3 Section 215(a)(1).

4 7. Evading the payment of individual income taxes to

5 the United States in violation of Title 26, United States

6 Code, Section 2701.

7 8. Fraudulently obtaining visas for Russian

8 nationals to enter the United States in violation of Title 18,

9 United States Code, Section 1546(a).

10 And 9, laundering unlawful payments to a bank officer

11 through offshore accounts in violation of Title 18, United

12 States Code, Section 1956(a)(2).

13 The information is quite detailed. The following

14 statement summarizes the allegations contained in Count 1

15 which describe how this scheme was carried out.

16 Count 1 charges that the conspiracy began in late

17 1995 when Peter Berlin and his wife, Lucy Edwards, who was

18 then a vice president in the Bank of New York Eastern European

19 Division in Manhattan, entered into an agreement with certain

20 co-conspirators, including Russian individuals who acquired

21 control of a Russian bank called DKB. The members of the

22 conspiracy agreed that Berlin would open an account at the

23 Bank of New York so that the Russian co-conspirators could

24 again access to electronic banking software called

25 micro/CASH-Register which would enable the members of the

 

 

 

 

26

 

 

1 conspiracy to effect wire transfers out of the account.

2 The information charges that in furtherance of this

3 scheme in early 1996, Peter Berlin opened a corporate account

4 at the Bank of New York in the name of Benex; that the Bank of

5 New York authorized Benex to utilize the micro/CASH-Register

6 software, and that Lucy Edwards installed the software in a

7 computer located in an office in Forest Hills, Queens.

8 According to the information, that Queens office was managed

9 by individuals who were working for the Russian bank DKB. DKB

10 would transfer funds into the Benex account in bulk amounts on

11 a daily or an almost daily basis and then DKB would issue

12 daily instructions from its offices in Moscow directing

13 employees in the Queens office to transfer funds out of Benex'

14 account utilizing the micro/CASH-Register software to various

15 third party transferees located around the world.

16 In approximately July 1996, according to Count 1, at

17 the behest of the Russian co-conspirators, Peter Berlin opened

18 a second account at the Bank of New York in the name of BECS.

19 The bank also provided the micro/CASH-Register software for

20 the BECS account and the members of the conspiracy began using

21 BECS as well as Benex to transfer huge sums to third party

22 beneficiaries throughout the world.

23 Count 1 goes on to further charge that in the fall of

24 1998 the Russian co-conspirators explained to Peter Berlin and

25 Lucy Edwards that they would be acquiring control of another

 

 

 

 

27

 

 

1 Russian bank called Flamingo Bank and that they wanted to set

2 up a new bank account through which they could transmit funds

3 on behalf of Flamingo Bank.

4 The information charges that Berlin then opened a

5 third account at the Bank of New York in the name of Lowland

6 and obtained a micro/CASH-Register software for use with the

7 Lowland account. Russian members of the conspiracy traveled

8 to the United States to set up an office for Lowland in New

9 Jersey. Mr. Berlin aided them by hiring an individual to work

10 for Flamingo Bank in the New Jersey office.

11 The information charges that in April 1999, Flamingo

12 Bank began transferring large sums of money into the Lowland

13 account using micro/CASH-Register software located in Russia

14 to wire transfer funds out.

15 As alleged in the information, during the course of

16 the conspiracy Benex, BECS and Lowland conducted no actual

17 commercial activity through the micro/CASH-Register accounts

18 and did not participate in the import, export, manufacture,

19 distribution or shipping of goods. Instead, they operated as

20 front companies for the Russian co-conspirators and the

21 Russian banks they controlled.

22 Count 1 charges that Benex, BECS and Lowland were not

23 licensed to act as money-transmitting businesses or to conduct

24 banking operations in the United States on behalf of DKB or

25 Flamingo Bank and that using this scheme the members of the

 

 

 

 

28

 

 

1 conspiracy were able to secretly and illegally transfer funds

2 in and out of Russia and conduct illegal banking activities in

3 the United States.

4 As summarized in the information, a large number of

5 Russian individuals and businesses uses this illegal banking

6 operation to transfer and receive money in violation of

7 Russian currency control limitations and to promote schemes to

8 defraud the Russian government of custom duties and taxes.

9 Count 1 charges that the illegal money-transmitting scheme was

10 also used to facilitate other criminal activity, including the

11 payment of $300,000 in ransom on behalf of a Russian

12 businessman who had been kidnapped in Russia.

13 Ultimately, as alleged in the information, a total of

14 more than $7 billion of funds was deposited in and transmitted

15 through the Benex, BECS and Lowland accounts at the Bank of

16 New York.

17 The information further charges in Count 1 that the

18 Russian co-conspirators paid Peter Berlin and Lucy Edwards

19 commissions based on the dollar value of transfers through the

20 Benex, BECS and Lowland accounts and that from February 1996

21 to July 1999 Berlin and Edwards received a total of

22 approximately $1.8 million in commission payments. The

23 receipt of these payments by Edwards constituted receipt by a

24 bank officer of unlawful payments.

25 The information further charges that Berlin and

 

 

 

 

29

 

 

1 Edwards caused these funds to be transferred, among other

2 places, into offshore accounts that they had opened in the

3 names of corporations they controlled and they concealed this

4 commission income on their personal tax returns they filed

5 with the Internal Revenue Service and failed to disclose the

6 existence of foreign bank accounts.

7 The information further alleges that after moving

8 from New York to London in 1996, Peter Berlin and Lucy Edwards

9 enlisted the help of another Bank of New York employee who

10 worked in New York to assure the smooth functioning of the

11 money-transmitting accounts in their absence. This bank

12 employee dealt with problems that arose with particular wire

13 transfers and notified Berlin about the volume of funds that

14 passed through Benex, BECS and Lowland accounts so that he and

15 Edwards could calculate their commissions. In exchange for

16 these services, Berlin and Edwards paid the bank employee

17 hundreds of dollars monthly. These payments constituted

18 unlawful payments to a bank employee.

19 Count 1 further charges that Edwards used her

20 position at the Bank of New York to help hundreds of Russian

21 nationals, most of them affiliated with the Russian banking

22 industry, to enter the United States illegally.

23 Now, the elements of Count 1:

24 In order to prove the crime of conspiracy in

25 violation of Title 18, United States Code, 371, the government

 

 

 

 

30

 

 

1 must prove three elements beyond a reasonable doubt. These

2 elements are:

3 One, an agreement between two or more people to

4 accomplish an illegal objective.

5 Two, the defendants' willing participation in the

6 conspiracy.

7 And three, at least one overt act committed by one

8 co-conspirator in furtherance of the conspiracy.

9 Count 2 of the superseding information charges the

10 substantive violation of Title 12, United States Code,

11 Sections 3105(d)(1) and 3111 and Title 18, United States Code

12 Section 2. Title 12, United States Code, Sections 3105(d)(1)

13 and 3111 make it a crime for a foreign bank to establish a

14 branch or agency in the United States without the prior

15 approval of the Board of Governors of the Federal Reserve.

16 Title 18, United States Code, Section 2, makes it a

17 crime to aid or abet another person in committing a crime.

18 Specifically, Count 2 charges that Peter Berlin and

19 Lucy Edwards unlawfully, willfully and knowingly assisted the

20 two Russian banks mentioned earlier, DKB and Flamingo Bank, in

21 establishing places of business in the United States at which

22 deposits were received and accepted without the prior approval

23 of the Board of Governors of the Federal Reserve. In other

24 words, according to the superseding information, the

25 defendants assist DKB and Flamingo in using the Benex, BECS

 

 

 

 

31

 

 

1 and Lowland accounts at the Bank of New York and the offices

2 set up in Queens and New Jersey to operate an unlicensed

3 branch of these foreign banks.

4 Count 2 incorporates by reference the facts alleged

5 in the earlier conspiracy count.

6 The elements of Count 2 which the government must

7 prove, there are five elements which must be proven beyond a

8 reasonable doubt.

9 One, the existence of a place of business in the

10 United States at which deposits are received or accepted.

11 Two, that this place of business is established and

12 controlled by a foreign bank.

13 Three, that the place of business does not have the

14 approval of the Federal Reserve to operate.

15 Four, that the defendants established this place of

16 business or aided in establishing this place of business

17 knowingly, in other words, that he or she knew that the

18 approval of the Federal Reserve was required and knew that the

19 business did not have approval.

20 And five, that the defendant acted with intent to

21 deceive, to gain financially, or cause financial gain to

22 another.

23 Now, do you both understand that the offense charged

24 in Count 1 of the information carries a maximum sentence of

25 five years imprisonment, a maximum term of three years

 

 

 

 

32

 

 

1 supervised release, a maximum fine of the greatest of

2 $250,000, or twice the gross pecuniary gain derived from the

3 offense or twice the gross pecuniary loss to a person other

4 than the defendant as a result of the offense, and a mandatory

5 $100 special assessment?

6 You could also be ordered to pay restitution. In

7 addition, you are subject to forfeiture of the proceeds you

8 derived from your criminal conduct, specifically including two

9 Swiss Bank accounts, a brokerage account and real property

10 located in London.

11 Do you understand that the offense charged in Count 2

12 of the information carries a maximum sentence of five years

13 imprisonment, a maximum term of three years supervised

14 release, a maximum fine of $1 million for each day the offense

15 continued, and a mandatory $100 special assessment? You could

16 also be ordered to pay restitution. You must understand that

17 in this case I must impose a special assessment of $100 on

18 each count totaling $200.

19 You must understand the maximum sentence on both

20 counts to be ten years imprisonment.

21 DEFENDANT EDWARDS: Yes, your Honor.

22 DEFENDANT BERLIN: Yes, your Honor.

23 THE COURT: I am sorry, did you have a question?

24 MR. KINGHAM: I think, your Honor, the defendants

25 were responding they understand the sentencing information the

 

 

 

 

33

 

 

1 court just read.

2 THE COURT: Fine.

3 In addition, you should be aware that if a term of

4 supervised release is imposed and the conditions of the

5 supervised release term are violated, you may be required to

6 serve a further term of imprisonment equal to the period of

7 supervised release with no credit for the time already spent

8 on supervised release.

9 Now, has anyone threatened either one of you or

10 anyone else or forced you in any way to plead guilty?

11 DEFENDANT EDWARDS: No.

12 DEFENDANT BERLIN: No.

13 THE COURT: Has there been any agreement entered into

14 between you and the counsel for the government?

15 DEFENDANT EDWARDS: Yes, your Honor.

16 THE COURT: Is there an agreement and do you have a

17 copy of that agreement?

18 MR. STEIN: I do.

19 THE COURT: Would you hand it up, please.

20 MR. STEIN: Yes, your Honor. I am handing up

21 originals of agreements between --

22 THE COURT: We are not going to mark them as

23 exhibits.

24 MR. STEIN: -- Mr. Berlin and Ms. Edwards dated

25 February 16, 2000.

 

 

 

 

34

 

 

1 The government asks that they not be marked and not

2 made a part of the record and they be returned to the

3 government at the conclusion of the proceedings.

4 THE COURT: The court has been given two documents.

5 One relates to Mr. Berlin and one relates to Ms. Edwards.

6 Mr. Berlin, did you sign this agreement?

7 DEFENDANT BERLIN: Yes, I did, your Honor.

8 THE COURT: Do you want to see it?

9 DEFENDANT BERLIN: I have a copy.

10 MR. KINGHAM: Your Honor, the defendant has a copy.

11 DEFENDANT BERLIN: Yes, I have a copy.

12 THE COURT: I want you to look at the copies I have

13 and make sure you signed those two, and that Ms. Edwards

14 signed as well.

15 (Handing to the defendants)

16 (Pause)

17 DEFENDANT EDWARDS: Yes, your Honor.

18 DEFENDANT BERLIN: Yes, your Honor.

19 THE COURT: Do all the parties agree that these

20 documents contain the substance of the plea agreement?

21 MR. KINGHAM: Yes, your Honor.

22 MR. STEIN: Yes, your Honor.

23 THE COURT: Counsel for the defendants as well?

24 MR. ROSENTHAL: Yes, your Honor.

25 MR. KINGHAM: We do, your Honor.

 

 

 

 

35

 

 

1 THE COURT: Has anyone made any promise other than

2 what is in these agreements that induced you to plead guilty?

3 DEFENDANT BERLIN: No, your Honor.

4 DEFENDANT EDWARDS: No, your Honor.

5 THE COURT: Has anyone made any prediction or a

6 promise to you as to what your sentence will be?

7 DEFENDANT BERLIN: No, your Honor.

8 DEFENDANT EDWARDS: No, your Honor.

9 THE COURT: I want you to understand that any

10 recommendation of sentence agreed to by you and the

11 prosecution or any agreement that the prosecution will not

12 oppose your attorneys' request at sentence or anyone's

13 predictions are not binding on the court and that you might,

14 on the basis of your guilty plea, receive up to the maximum

15 sentence I described to you earlier?

16 DEFENDANT BERLIN: Yes, your Honor.

17 DEFENDANT EDWARDS: Yes, your Honor.

18 THE COURT: Mr. Berlin, will you explain to me in

19 your own words what it is you did and how you violated the

20 law?

21 DEFENDANT BERLIN: Yes, your Honor.

22 From 1993 onward I was the president of Benex, and

23 later BECS and Lowland. I agreed with my wife, Lucy Edwards,

24 and other people and entities to set up accounts at the Bank

25 of New York for three entities, Benex, BECS and Lowland. This

 

 

 

 

36

 

 

1 was done for various purposes which were illegal under U.S.

2 law. I did so to facilitate the movement of funds into and

3 out of Russia and to accomplish a number of objects which I

4 either knew were unlawful, or I deliberately closed my eyes to

5 what I had reason to know was unlawful. I personally

6 undertook various acts in order to further this illegal

7 agreement.

8 In late 1995, my wife was approached by certain

9 people involved in the banking industry in Russia whom she

10 knew from her work at the Eastern European Division at the

11 Bank of New York. They wanted to have installed a Bank of New

12 York software product, known as micro/CASH, to help them

13 transfer funds through the Bank of New York. Micro/CASH is an

14 electronic banking system that permits a customer to initiate

15 and execute wire transfer instructions to an account. As a

16 result, I agreed to open an account at the Bank of New York in

17 the name of my company, Benex, to get the micro/CASH software.

18 This software was later installed at the Queens office, and

19 was run by associates of the Russian bankers. Later in 1996,

20 I established another company, BECS, to do the same business.

21 I also opened an account at Bank of New York for BECS which

22 obtained the micro/CASH software.

23 The Benex and BECS accounts were set up on behalf of

24 the Russian bankers, who had acquired control of a Russian

25 bank in Moscow, DKB. I knew that the Benex and BECS accounts,

 

 

 

 

37

 

 

1 as well as the Queens office, were operated by DKB to

2 facilitate the movement of large amounts of money out of and

3 into Russia.

4 Later on, in 1998, the DKB people asked us to set up

5 another U.S. company and account at the Bank of New York to

6 transfer money using the micro/CASH software. To this end, I

7 set up a company called Lowland in Jersey City, and an account

8 for Lowland at the Bank of New York.

9 In exchange for setting up these accounts and helping

10 with the transfer of funds, my wife and I were paid

11 commissions by other members of the conspiracy. These

12 commissions were a percentage of the total amount of money

13 which flowed through the Benex, BECS and Lowland accounts. In

14 these transactions, I acted to benefit myself, my wife and my

15 family.

16 I understood that using the offices in Queens and New

17 Jersey and the bank accounts of Benex, BECS and Lowland at

18 Bank of New York the Russian bankers were conducting banking

19 operations in the United States and essentially operating like

20 they had a branch or agency in the United States. I knew that

21 they needed a license to operate a bank in the United States,

22 and specifically, that a foreign bank had to have approval

23 from the Federal Reserve to operate in the United States. I

24 knew that DKB did not have such a license or approvals.

25 I nevertheless assisted Benex, BECS and Lowland to

 

 

 

 

38

 

 

1 facilitate the transfers of money both into and out of Russia,

2 knowing that the bank in Russia responsible for initiating

3 these transfers, DKB, was not approved by the Federal Reserve

4 to operate a branch or agency in the United States. I also

5 knew that when DKB first began using Benex to transfer money

6 into and out of Russia, it did not have the necessary license

7 from the Russian government to maintain an account in the

8 United States.

9 I knew that Benex, BECS and Lowland were in the

10 business of transmitting money. Although I did not know

11 specifically at the time that money-transmitting businesses

12 require a particular license, I now understand that others

13 involved in this scheme were aware that a license was required

14 in order to conduct the money-transmitting business. I knew

15 that Benex, BECS and Lowland never acquired any licenses. I

16 knew that the banking business in New York was heavily

17 regulated and that some banking functions must be approved or

18 licensed by authorities. And I did not want the authorities

19 to interfere with the operations of Benex, BECS and Lowland so

20 I made no effort to inquire about a license.

21 I knew that banks in Russia would assist customers in

22 transferring funds out of Russia in violation of currency

23 control regulations so as to deprive the Russian government of

24 taxes or customs duties. I did not know the extent to which

25 persons and entities using Benex, BECS and Lowland to

 

 

 

 

39

 

 

1 accomplish money transfers were doing so in order to deprive

2 the Russian government out of taxes or duties. On occasion, I

3 personally assisted other individuals to transfer money

4 through the Benex, BECS and Lowland accounts when I knew that

5 the reason, intent and purpose of using these entities was to

6 evade the payment of taxes and duties in Russia.

7 However, a number of facts suggested to me, and I in

8 fact suspected, that the accounts of Benex, BECS or Lowland

9 were being used for illicit purposes, and specifically to

10 prevent the Russian government from collecting tax and duties

11 from transactions. These facts included:

12 There was no convincing explanation from DKB as to

13 why it would use Benex, BECS and Lowland to accomplish

14 transfers after DKB obtained its own account at Bank of New

15 York.

16 I learned during the course of the operation of the

17 accounts from DKB that it had destroyed documents to keep them

18 away from the Russian tax police.

19 In 1998, DKB instructed us to cease using BECS for

20 fear of attracting attention after the FBI began making

21 inquiries.

22 DKB had asked me for, and I gave them, the Benex

23 corporate seal which I knew they might use to create false

24 documents.

25 I knew that DKB had a bank of Nauru called Sinex bank

 

 

 

 

40

 

 

1 which it was using to make transfers to the Benex and BECS

2 accounts. I was aware that American banks were suspicious of

3 banks in Nauru. I noticed that in the transfer records, DKB

4 was describing Sinex bank as being located in Australia, which

5 I assumed was a way of disguising the fact that it was a Nauru

6 bank to make things look better.

7 Based upon all of these facts and others, I assumed

8 that one reason DKB probably was using Benex, BECS and Lowland

9 to transfer money into and out of Russia was so that their

10 customers could evade payment of taxes and duties in Russia.

11 However, I deliberately closed my eyes and did not try to

12 determine if this was, in fact, the case.

13 In September 1999, after the United States

14 government's investigation was reported in the media, it was

15 confirmed to my wife by a representative of the Russian

16 bankers that the purpose of the transfers was to evade taxes

17 and duties in Russia.

18 I assumed that it was unlawful for an employee of

19 Bank of New York to accept money in return for the performance

20 of official bank duties.

21 In return for assistance in connection with the

22 Benex, BECS and Lowland accounts and making sure that they ran

23 smoothly, my wife personally derived a financial benefit by

24 sharing in the commissions we received. At the time that we

25 received the benefit of the commissions paid to Benex, BECS

 

 

 

 

41

 

 

1 and Lowland, my wife was an officer of the Bank of New York,

2 and used her position, along with others at the bank, to

3 facilitate the illegal scheme.

4 In addition, my wife and I requested that DKB forward

5 the commissions we received from this illegal scheme to bank

6 accounts we controlled outside the United States in the names

7 of offshore operations. I did this to help further the

8 scheme.

9 I agreed with my wife that we would sign personal

10 joint United States income tax returns on which we were

11 required to report all income obtained from commissions earned

12 from Benex and BECS. However, we did not report all of the

13 income on our 1996 and 1997 returns. We intentionally failed

14 to report all but a small portion of the income received from

15 DKB, even though we knew we should do so. We did not report

16 that income because we did not want to pay taxes on it.

17 In addition, after my wife and I moved to London, we

18 arranged that payments would be made to another Bank of New

19 York employee in New York in the amount of $500 per month.

20 She received these payments from us in return for serving as a

21 point of contact at the Bank of New York in the event there

22 were problems with transfers and to send me account statements

23 so that I could calculate commissions we were owed.

24 MR. KINGHAM: I should point out, your Honor, that

25 the statement Mr. Berlin has just made relates to Count 1 and

 

 

 

 

42

 

 

1 he will now proceed to describe the facts with respect to

2 Count 2.

3 DEFENDANT BERLIN: As I have already stated, for my

4 own financial gain I agreed to actively assist DKB to operate

5 what was, in effect, a banking business in the United States

6 even though none of these entities had a license from the U.S.

7 government to operate as a bank or to operate a branch or

8 agency in the United States. This included accepting wire

9 transfer deposits, holding said sums in accounts at the Bank

10 of New York, and transferring these sums to the other third

11 parties at the direction of DKB. To my knowledge, DKB never

12 obtained a license or the approval of the Federal Reserve to

13 engage in such activities. I intentionally provided this

14 assistance to DKB knowing that only a licensed bank was

15 entitled to do what DKB was doing.

16 MR. KINGHAM: Your Honor, that concludes Mr. Berlin's

17 description of the facts in response to the court's question.

18 THE COURT: All right.

19 Ms. Edwards, I would like you to tell me what it is

20 you did and what illegal acts you might have performed.

21 DEFENDANT EDWARDS: From late 1995 until 1999, as a

22 vice president of Bank of New York, I agreed with my husband,

23 Peter Berlin, and other people and entities to set up accounts

24 at the Bank of New York for three entities, Benex, BECS and

25 Lowland, for various purposes which were illegal under United

 

 

 

 

43

 

 

1 States law. I did so to facilitate the movement of funds into

2 and out of Russia, and to accomplish a number of objects which

3 I either knew were unlawful or deliberately closed my eyes to

4 what I had reason to know was unlawful activity. I personally

5 undertook various acts in order to further this illegal

6 agreement.

7 In late 1995, I

44

 

 

1 as well as the Queens office, were operated by DKB to

2 facilitate the movement of large amounts of money out of and

3 into Russia.

4 Later on, in 1998, the DKB people told me that they

5 would be acquiring a Russia bank named Flamingo and asked us

6 to set up another United States company and account at the

7 Bank of New York to transfer money using the micro/CASH

8 software. To this end, my husband set up a company called

9 Lowland in Jersey City, and an account for Lowland at the Bank

10 of New York.

11 In exchange for setting up these accounts and helping

12 with the transfer of funds, my husband and I were paid

13 commissions by other members of the conspiracy. These

14 commissions were a percentage of the total amount of money

15 which flowed through the Benex, BECS and Lowland accounts. In

16 these transactions, I acted to benefit myself and my husband,

17 and to develop more Russian business for the Eastern European

18 Division of the Bank of New York.

19 I understood that using the offices in Queens and New

20 Jersey and the bank accounts at Benex, BECS and Lowland at

21 Bank of New York the Russian bankers were conducting banking

22 operations in the United States, and essentially operating

23 like they had a branch or agency in the United States. I knew

24 that they needed a license to operate a bank in the United

25 States, and specifically that a foreign bank had to have

 

 

 

 

45

 

 

1 approval from the Federal Reserve to operate in the United

2 States. I knew that DKB and Flamingo did not have such a

3 license or approvals.

4 I nevertheless assisted Benex, BECS and Lowland to

5 facilitate the transfers of money both into and out of Russia,

6 knowing that the banks in Russia responsible for initiating

7 these transfers, first DKB and later Flamingo bank, were not

8 approved by the Federal Reserve to operate a branch or agency

9 in the United States. I also knew that when DKB first began

10 using Benex to transfer money into and out of Russia, it did

11 not have the necessary license from the Russian government to

12 maintain an account in the United States.

13 I knew that Benex, BECS and Lowland were in the

14 business of transmitting money. Although I did not know

15 specifically at the time that money-transmitting business

16 required a separate license, I now understand that others

17 involved in this scheme were aware that a license was also

18 required in order to conduct the money-transmitting business.

19 I knew that Benex, BECS and Lowland never acquired any

20 licenses. At that time I did not become aware of this

21 requirement that a license be obtained to transmit money

22 because I closed my eyes to that fact. I made no effort to

23 inquire about a license or ensure that necessary licenses were

24 obtained. I did not inquire further in order to avoid having

25 the authorities interfere with the operations.

 

 

 

 

46

 

 

1 Based on my knowledge of Russian banks and my work in

2 the Eastern European Division of Bank of New York, I knew that

3 banks in Russia would assist customers in transferring funds

4 out of Russia in violation of currency control regulations so

5 as to deprive the Russian government of taxes or custom

6 duties. On occasion, I personally assisted others to transfer

7 money through the Benex, BECS and Lowland accounts when I knew

8 that the reason, intent and purpose of using these entities

9 was to evade the payment of taxes and duties in Russia.

10 I did not know the extent to which other persons and

11 entities using Benex, BECS and Lowland to accomplish transfers

12 were doing so in order to deprive the Russian government out

13 of taxes or customs duties. However, a number of facts

14 suggested to me and I, in fact, suspected that the accounts of

15 Benex, BECS and Lowland were being used by many people for

16 illicit purposes, and specifically to prevent the Russian

17 government from collecting tax and duties from transactions.

18 These facts included:

19 There was no convincing explanation from DKB as to

20 why it would use Benex, BECS and Lowland to accomplish

21 transfers after DKB obtained its own account at Bank of New

22 York, particularly since, as a client of the Eastern European

23 Division, DKB was charged lower fees for wire transfers than

24 it paid to Benex, BECS and Lowland.

25 We were paid substantial commissions for doing little

 

 

 

 

47

 

 

1 work other than setting up the accounts and assisting with

2 problems as they arose in the Bank of New York in connection

3 with the accounts.

4 I learned during the course of the operation of the

5 accounts from DKB that it had destroyed documents to keep them

6 away from the Russian tax police.

7 In 1998, DKB instructed us to cease using BECS for

8 fear of attracting attention after the FBI began making

9 inquiries.

10 Fifth, I was aware that personnel from DKB were, on

11 occasion, in fear of their customers and afraid to leave the

12 bank because they said customers with machine guns were

13 waiting for them.

14 Based upon all of these facts and others, I assumed

15 that one reason DKB used Benex, BECS and Lowland to transfer

16 money into and out of Russia was probably so that their

17 customers would evade payment of taxes and duties in Russia or

18 to transfer money into overseas accounts that were opened

19 without the proper license from the Central Bank of Russia.

20 However, I closed my eyes and did not do anything to determine

21 if it was the case.

22 After the United States government's investigation

23 was reported in the press in September 1999, it was confirmed

24 to me by a representative of the Russian bankers that the

25 purpose of the transfers was to evade taxes and duties in

 

 

 

 

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1 Russia.

2 As an officer of Bank of New York, I knew that it was

3 unlawful for an employee of Bank of New York to accept money

4 in return for the performance of official bank duties.

5 In return for assistance in connection with the

6 Benex, BECS and Lowland accounts and making sure that they ran

7 smoothly, I personally derived a financial benefit by sharing

8 in the commissions my husband and I received. At the time

9 that I received the benefit of the commissions paid to Benex,

10 BECS and Lowland, I was an officer of the Bank of New York and

11 used my position, along with others at the bank, to facilitate

12 the illegal scheme.

13 In addition, my husband and I requested that the

14 Russian banks send the commissions we received from this

15 illegal scheme to bank accounts we controlled outside the

16 United States in the names of offshore corporations. I did

17 this to help further the scheme.

18 I agreed with my husband that we would sign personal

19 joint United States income tax returns on which we were

20 required to report all income obtained from commissions earned

21 from Benex and BECS. However, we did not report all of the

22 income on our 1996 and 1997 returns. We intentionally failed

23 to report all but a small portion of the income received from

24 DKB, even though we knew we should do so. We did not report

25 that income because we did not want to pay taxes on it.

 

 

 

 

49

 

 

1 In addition, after I was assigned to the London

2 office of Bank of New York in 1996, my husband and I arranged

3 that payments would be made to another Bank of New York

4 employee in New York, Svetlana Kudryatsev, in the amount of

5 $500 per month. She received these payments from us in return

6 for serving as a point of contact at the Bank of New York in

7 the event there were problems with transfers and to send my

8 husband account statements so that he could calculates

9 commissions we were owed.

10 Finally, as part of my duties at Bank of New York, I

11 would assist customers of the bank to obtain visas to enter

12 the United States for business trips. On occasion, and

13 consistent with the practice of the Eastern European Division

14 of the Bank of New York, I prepared false documents for

15 Russian bankers who were customers of Bank of New York and

16 which documents went to various United States embassies.

17 Those documents stated that the applicants for the visa

18 intended to come to this country for legitimate business

19 purposes, when I knew that they wanted to come for other

20 reasons.

21 MR. KINGHAM: Your Honor, that concludes Ms. Edwards

22 statement with respect to Count 1. We now move to Count 2.

23 DEFENDANT EDWARDS: As I have already stated, for my

24 own financial gain and to increase the business of the Eastern

25 European Division of Bank of New York, I actively assisted DKB

 

 

 

 

50

 

 

1 and Flamingo Bank to operate what was, in effect, a banking

2 business in the United States even though none of these

3 entities had a banking license or approval from the Federal

4 Reserve to operate as a bank or to operate as a branch or

5 agency in the United States. The activities of DKB and

6 Flamingo included accepting wire transfer deposits, holding

7 said sums in accounts at the Bank of New York and transferring

8 these sums to other third parties at the direction of DKB and

9 the Flamingo Bank. To my knowledge, neither the DKB nor

10 Flamingo ever obtained a banking license or the approval of

11 the Federal Reserve to engage in such activities.

12 I intentionally provided this assistance to DKB and

13 Flamingo knowing only a branch or agency approved by the

14 Federal Reserve Bank was entitled to do what DBD and Flamingo

15 Bank was doing.

16 MR. KINGHAM: That concludes Ms. Edwards statement in

17 response to the court's question.

18 THE COURT: Thank you.

19 Mr. Stein, would you give me a summary of the

20 government's evidence against these defendants.

21 MR. STEIN: Yes, your Honor.

22 Your Honor, the summary of the information that you

23 previously provided essentially summarizes the evidence that

24 the government would be able to prove.

25 Specifically, the evidence which shows that Mr.

 

 

 

 

51

 

 

1 Berlin and Ms. Edward did engage in a conspiracy with others

2 to accomplish the various illegal objectives described by the

3 court in Count 1 and it would also show that they helped

4 Russian banks set up illegal banking operations here in the

5 United States without the approval of the Federal Reserve.

6 The government would prove those charges through a

7 variety of different kinds of evidence.

8 The evidence includes, among other things, bank

9 records from the Bank of New York concerning the transactions

10 through the Benex, BECS, Lowland and related accounts; records

11 obtained from the Queens office and the Jersey City office;

12 testimony from witnesses knowledgeable about the operations of

13 those offices; evidence gathered concerning the nature of the

14 transactions that went through those accounts and the reasons

15 why the transactions were made, including evidence concerning

16 the transaction referred to in paragraph 20 of the information

17 which relates to the payment of $300,000 in ransom money to

18 the BECS account in June of 1998 in connection with the

19 kidnapping of a Russian businessman.

20 The evidence would also include documents and

21 materials obtained through a search warrant executed by

22 British law enforcement authorities on Mr. Berlin's and

23 Ms. Edwards' residence in London in August of 1999.

24 In addition, the evidence would include account

25 records for defendants' offshore accounts in the Isle of Man

 

 

 

 

52

 

 

1 and in London showing their receipt of the commissions that

2 they earned through this scheme which totaled approximately

3 $1.8 million, the tax returns filed by the defendants here in

4 the United States in 1996 and 1997 which failed to report that

5 income or the foreign bank accounts that they controlled

6 during those years, and finally statements of the defendants

7 themselves as well.

8 That's a summary of the types of evidence the

9 government has.

10 THE COURT: All right.

11 Now I am directing this to counsel for the

12 defendants.

13 Do you agree with the government's summary of what

14 the defendants did?

15 MR. KINGHAM: Yes, your Honor.

16 MR. ROSENTHAL: Yes, your Honor.

17 THE COURT: All right.

18 Would the defendants please stand.

19 Mr. Berlin, how do you plead to Count 1 of the

20 information?

21 DEFENDANT BERLIN: Guilty.

22 THE COURT: And how do you plead to Count 2?

23 DEFENDANT BERLIN: Guilty.

24 THE COURT: Ms. Edwards, how do you plead to Count 1

25 of the information?

 

 

 

 

53

 

 

1 DEFENDANT EDWARDS: Guilty, your Honor.

2 THE COURT: And Count 2?

3 DEFENDANT EDWARDS: Guilty.

4 THE COURT: Before I accept your plea, are there any

5 further inquiries the government wishes me to make?

6 MR. STEIN: The government does not believe that any

7 further inquiry is necessary, your Honor.

8 THE COURT: Do counsel for the defendants or the

9 government know of any reason why these pleas should not be

10 accepted by the court?

11 MR. STEIN: The government does not, your Honor.

12 MR. KINGHAM: No, your Honor.

13 MR. ROSENTHAL: No, your Honor.

14 THE COURT: All right. I find that both of you are

15 competent to plead, that you know your rights and your pleas

16 are voluntary and I accept your guilty pleas.

17 We will proceed to the corporate allocution now.

18 I think that the defendants can be seated.

19 Mr. Berlin, we will now proceed with the corporate

20 pleas on behalf of Benex, BECS and Lowland.

21 You have stated you are the president of all these

22 three corporations. I understand that these corporations are

23 not controlled by a board of directors, is that correct?

24 DEFENDANT BERLIN: That's correct, your Honor.

25 THE COURT: And do you represent that you have the

 

 

 

 

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1 authority as the president to enter a plea of guilty on behalf

2 of each?

3 DEFENDANT BERLIN: Yes, your Honor.

4 THE COURT: I have been advised that Benex and BECS

5 intend to enter a plea of guilty to Counts 1 and 3 of the

6 superseding information and that Lowland wishes to enter a

7 plea to Counts 1 and 4. Is that correct?

8 DEFENDANT BERLIN: Yes, your Honor.

9 THE COURT: Have you had a full opportunity to

10 discuss with your attorney the consequences to the

11 corporations of entering guilty pleas to these charges?

12 DEFENDANT BERLIN: Yes, your Honor.

13 THE COURT: Are you satisfied with your attorney's

14 advice with respect to the corporate defendants?

15 DEFENDANT BERLIN: Yes, your Honor.

16 THE COURT: Earlier I described to you various rights

17 that a criminal defendant has under our Constitution,

18 including the right to plead not guilty, the right to have a

19 speedy and public trial, the presumption of innocence, the

20 requirements that the government prove guilt beyond a

21 reasonable doubt, the right to be representation by counsel

22 and the availability of free counsel if the defendant cannot

23 afford counsel, the right to confront and cross-examine

24 witnesses, the right to subpoena witness and the right against

25 self-incrimination.

 

 

 

 

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1 Do you recall my mentioning all of those rights to

2 you in connection with your individual plea?

3 DEFENDANT BERLIN: Yes, your Honor.

4 THE COURT: Do you understand that the corporate

5 defendants enjoy the same rights as individuals and that by

6 pleading guilty today the corporations will be waiving those

7 rights and there will be no trial? Do you fully understand

8 that you have a right acting on behalf of the corporations to

9 plead not guilty and go to trial?

10 DEFENDANT BERLIN: Yes, your Honor.

11 THE COURT: Knowing the rights the corporations have

12 and the rights that they would be giving up, do you still want

13 to plead guilty on behalf of the corporations?

14 DEFENDANT BERLIN: Yes, your Honor.

15 THE COURT: Has your attorney explained to you that

16 if I accept your plea, the sentencing guidelines we discussed

17 earlier in connection with your own individual plea also apply

18 to the corporations?

19 DEFENDANT BERLIN: Yes, your Honor.

20 THE COURT: Do you understand a sentencing range will

21 be calculated in accordance with the sentencing guidelines and

22 that I retain the discretion under certain circumstances to

23 impose a sentence within that range or a lesser or greater

24 sentence up to the maximum permitted by law. If I impose a

25 lesser sentence, the government has the right to appeal. If I

 

 

 

 

56

 

 

1 impose a sentence greater than the guideline range, you have

2 the right to appeal.

3 You understand that?

4 DEFENDANT BERLIN: Yes.

5 THE COURT: Let us turn to the charges against the

6 three corporate defendants in the superseding information.

7 Count 1 charges that all three corporations, Benex,

8 BECS and Lowland, participated together with others including

9 you and your wife, in a conspiracy to violate the law in

10 violation of Title 18, United States Code, Section 371. The

11 conspiracy charge is precisely the same charge that you

12 individually pleaded guilty to a few minutes ago and involves

13 precisely the same facts that I recited previously.

14 Do you remember the summary I gave a few minutes ago

15 of the allegations in Count 1?

16 DEFENDANT BERLIN: Yes, I do.

17 THE COURT: Counts 3 and 4 charge the corporation

18 with violating Title 18, United States Code, Section 1960 and

19 2.

20 Section 1960 makes it a crime to operate a

21 money-transmitting business without a license, and Section 2

22 makes it a crime to assist another person in violating that

23 statute.

24 An illegal money-transmitting business is defined as

25 a money-transmitting business which affects interstate and

 

 

 

 

57

 

 

1 foreign commerce and is intentionally operated without an

2 appropriate money-transmitting license in the state where such

3 operation is punishable as a crime.

4 Counts 3 charges that Benex, BECS and Lowland

5 operated a money-transmitting business without a license in

6 New York and this activity is a crime in New York.

7 Count 4 charges that defendant Lowland unlawfully,

8 willfully and knowing operated a money-transmitting business

9 without a license in New York and New Jersey, and this

10 activity is a crime in both states.

11 Counts 3 and 4 incorporate by reference the facts

12 alleged in Count 1, the conspiracy count.

13 Now, Counts 3 and 4, the following are the elements:

14 In order to prove this crime, the government must

15 prove four elements beyond a reasonable doubt:

16 The government must prove:

17 One, that the defendant conducted, controlled,

18 managed or owned a money-transmitting business.

19 Two, that the business affected interstate or foreign

20 commerce.

21 Three, that the business was operated without a

22 license in an state where unlicensed operation is punishable

23 as either a felony or a misdemeanor.

24 And four, that the defendant knew the business was an

25 illegal money-transmitting business, in other words, knew that

 

 

 

 

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1 a license was required and knew the business did not have a

2 license.

3 Do you understand that for each corporate defendant

4 the offense charged in Count 1 of the information carries a

5 maximum fine of the greatest of $500,000, or twice the

6 pecuniary gain derived from the offense or twice the gross

7 pecuniary loss to a person other than the defendant as a

8 result of the offense, a maximum term of probation of five

9 years and a mandatory $400 special assessment? You could also

10 be ordered to pay restitution.

11 In addition, Benex, BECS and Lowland are also subject

12 to forfeiture of the property involved in the offenses,

13 including the contents of bank accounts in their names at the

14 Bank of New York in the sum of $1.8 million representing

15 commissions earned by them in connection with their

16 money-transmitting activities. Do you understand that the

17 offense charged in Count 3 of the information carries a

18 maximum fine of the greatest of $500,000 or twice the

19 pecuniary gain derived from the offense or twice the pecuniary

20 loss to a person other than the defendant as a result of the

21 offense, as maximum term of probation of five years and a

22 mandatory $400 special assessment. In addition, Benex and

23 BECS are subject to forfeiture of the property named in the

24 information and could also be ordered to pay restitution.

25 Now, I want you to understand that the offense

 

 

 

 

59

 

 

1 charged in Count 4 of the information carries a maximum fine

2 of $500,000, twice the gross pecuniary gain derived from the

3 offense or twice the pecuniary loss to a person other than the

4 defendant as a result of the offense, a maximum term of

5 probation of five years and a mandatory $400 special

6 assessment. In addition, Lowland is subject to forfeiture of

7 the property described in the information and could also be

8 ordered to pay restitution.

9 Mr. Berlin, has anyone threatened you or anyone else

10 affiliated with the corporations or forced you in any way to

11 enter a guilty plea on behalf of the corporations?

12 DEFENDANT BERLIN: No, your Honor.

13 THE COURT: Is there a plea agreement between the

14 corporations and the government?

15 MR. STEIN: Yes, your Honor. If I may approach. I

16 have three agreements, each dated February 16, 2000, between

17 the government and Benex, BECS and Lowland respectively.

18 We would also ask that these not be marked as an

19 exhibit and be returned to the government at the conclusion of

20 the proceedings.

21 Your Honor, also, just so the record is clear, we

22 would ask the court to specifically inquire of Mr. Berlin

23 whether he did, in fact, understand your description of the

24 penalties that Benex and BECS and Lowland face on these

25 charges.

 

 

 

 

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1 THE COURT: Mr. Berlin, did you understand my

2 description of the penalties that the corporations face?

3 DEFENDANT BERLIN: Yes, I did.

4 MR. STEIN: Thank you, your Honor.

5 THE COURT: I have been given three documents, one

6 relating to each of the three corporate defendants.

7 Mr. Berlin, did you sign each of these agreements on

8 behalf of the corporate defendants, and did you read them and

9 discuss them with your lawyer?

10 (Pause)

11 DEFENDANT BERLIN: Yes, your Honor, I signed them and

12 discussed them.

13 THE COURT: And you discussed them with your lawyer?

14 DEFENDANT BERLIN: Yes.

15 THE COURT: Do counsel for the corporate defendants

16 and counsel for the government agree that these documents

17 contained the substance of the plea agreement that exist with

18 each of the corporate defendants?

19 MR. STEIN: Yes, your Honor.

20 MR. KINGHAM: Yes, your Honor.

21 MR. ROSENTHAL: Yes, your Honor.

22 THE COURT: Has anyone made any promise to you other

23 than any promises contained in the plea agreements that

24 induced you to plead guilty on behalf of these corporate

25 defendants?

 

 

 

 

61

 

 

1 Mr. Berlin?

2 DEFENDANT BERLIN: No, your Honor.

3 THE COURT: Has anyone made any prediction or

4 prophesy or promise to you as to what sentence will be imposed

5 on any of the corporate defendants?

6 DEFENDANT BERLIN: No, your Honor.

7 THE COURT: Mr. Berlin, earlier in connection with

8 your individual plea you described how Benex, BECS and Lowland

9 were used to transmit money.

10 Is there anything you wish to add concerning the

11 actions of these corporations that you described?

12 DEFENDANT BERLIN: Yes, your Honor.

13 THE COURT: What is it that you want to add?

14 DEFENDANT BERLIN: I am the president of Benex, BECS

15 and Lowland. I knew that these corporations were in the

16 business of transmitting money. I also knew that none of

17 those corporations had a license from the State of New York or

18 that Lowland did not have a license from the State of New

19 Jersey to operate a money-transmitting business.

20 At the time I did not know there was a specific

21 requirement that these corporations be licensed. However, I

22 did not want the authorities to interfere with the operations

23 of the corporations and I did not inquire about any licensing

24 requirement. However, I have been advised that one of the

25 co-conspirators applied on behalf of the company called

 

 

 

 

62

 

 

1 Torfinex for a license from the New York State Banking

2 Commission. The application was rejected and the company was

3 ordered not to engage in that business until it could qualify

4 for as license. That co-conspirator was a signatory on the

5 Benex micro/CASH account at the Bank of New York and he

6 operated the money-transmitting business on behalf of Benex,

7 as well as BECS, at the Queens office. In addition, I have

8 also learned that DKB was aware of and supported Torfinex'

9 application for a money-transmitting license.

10 Benex, BECS and Lowland have been advised in

11 connection with this plea of guilty that as a matter of law,

12 the fact that this co-conspirator was a signatory on the Benex

13 account and that DKB and its principals controlled Benex, BECS

14 and Lowland is sufficient to attribute to the corporations

15 knowledge that a license was required to conduct a

16 money-transmitting business. However, no such license was

17 ever obtained.

18 I understand that as a matter of law the corporate

19 defendants were knowingly operating a money transfer business

20 without a license in violation of U.S. Law.

21 THE COURT: All right.

22 Does the government feel any further inquiry is

23 indicated?

24 MR. STEIN: No, your Honor.

25 MS. LANDIS: Your Honor, I apologize for asking the

 

 

 

 

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1 court to repeat itself if you asked this question already, I

2 just wasn't listening for a moment, but I don't recall Mr.

3 Berlin earlier when you were trying to ascertain if the plea

4 was voluntary answering that no force or threats had been

5 made.

6 THE COURT: I have a recollection that it was. I

7 asked him whether anyone -- Mr. Berlin, has anyone threatened

8 you or anyone else affiliated with the corporation or forced

9 you in any way to plead guilty on behalf of the corporation?

10 DEFENDANT BERLIN: No, your Honor.

11 THE COURT: Does that satisfy your inquiry?

12 MR. LANDSMAN: Yes. I apologize.

13 THE COURT: All right.

14 I did ask you whether anyone made any prophecy or

15 promise to you as to what sentence will be imposed on the

16 corporate defendants?

17 DEFENDANT BERLIN: No, your Honor.

18 THE COURT: No one made any such promise or

19 statement?

20 DEFENDANT BERLIN: No, your Honor.

21 THE COURT: Mr. Berlin, would you stand.

22 How does Benex plead to the conspiracy charged in

23 Count 1 of the superseding information?

24 DEFENDANT BERLIN: Guilty.

25 THE COURT: And how does Benex plead to the illegal

 

 

 

 

64

 

 

1 money-transmitting charge in Count 3 of the superseding

2 information?

3 DEFENDANT BERLIN: Guilty.

4 THE COURT: How does BECS plead to the conspiracy

5 charged in Count 1 of the superseding information?

6 DEFENDANT BERLIN: Guilty.

7 THE COURT: And how does BECS plead to the illegal

8 money-transmitting charge in Count 3 of the superseding

9 information?

10 DEFENDANT BERLIN: Guilty.

11 THE COURT: How does Lowland plead to the conspiracy

12 charged in Count 1 of the superseding information?

13 DEFENDANT BERLIN: Guilty.

14 THE COURT: And how does Lowland plead to the illegal

15 money-transmitting charge in Count 4 of the superseding

16 information?

17 DEFENDANT BERLIN: Guilty.

18 THE COURT: All right.

19 Is there any further inquiry the government feels

20 should be made?

21 MR. STEIN: No, your Honor.

22 THE COURT: All right.

23 Do counsel for the corporate defendant or counsel for

24 the government know of any reason why these guilty pleas

25 should not be accepted?

 

 

 

 

65

 

 

1 MR. STEIN: No, your Honor.

2 MR. KINGHAM: No, your Honor.

3 MR. ROSENTHAL: I do not.

4 THE COURT: All right. I find that you are competent

5 to plead on behalf of Benex, BECS and Lowland, that you know

6 your rights and your plea is voluntary. Therefore, I accept

7 your guilty plea on behalf of these corporations.

8 All right. What about a sentencing date now?

9 MR. STEIN: Your Honor, we would recommend that

10 sentencing either be adjourned without date or if your Honor

11 prefers a controlled date be set for sentencing.

12 THE COURT: Why don't we give you a control date of

13 three months and we will see how that works.

14 THE CLERK: A control date for sentencing will be

15 scheduled for May 3 at 10:30 a.m.

16 THE COURT: I think we have to discuss the bail

17 conditions for the defendants.

18 What is the situation there?

19 MR. KINGHAM: Your Honor, we have discussed with

20 counsel for the government the issue of bail and I think I

21 should address certain predicate facts so the court

22 understands the basis for our application and agreement with

23 the government.

24 The defendants live and have lived in London since

25 1996 when Ms. Edwards received a promotion at the Bank of New

 

 

 

 

66

 

 

1 York and was transferred to London.

2 Beginning in the middle of August 1999, when the

3 press made public the existence of the FBI's investigation

4 into matters at the Bank of New York and almost simultaneously

5 the British authorities, pursuant to a warrant, seized, in

6 effect, most of the personal and business papers of the

7 defendants from their apartment in London, from that time on

8 the defendants have known that they were the targets or at

9 least among the targets of the investigation that was being

10 conducted here in New York.

11 I should point out that they were not charged at that

12 time. They were not arrested, they were free to go anywhere

13 in the world. They would on occasion travel to continental

14 Europe on business, but always returning to their home in

15 London.

16 Beginning in September 1999, they began voluntarily

17 to cooperate with the U.S. authorities. I should point out in

18 that connection, again, they were never arrested, they were

19 free to go anywhere in the world they wanted to. Nonetheless,

20 they remained essentially at their home in London.

21 They remained there as well after they were indicted

22 in the original charges in this case toward the end of

23 September of 1999, and since that time they have faithfully

24 remained in London or in England, always appearing voluntarily

25 for interviews as required with the U.S. authorities, and

 

 

 

 

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1 although, again, their movements were not restricted, they

2 didn't go anywhere, they stayed in London.

3 They came here yesterday. They did not require the

4 United States government to commence extradition proceedings

5 against them in the United Kingdom, they did not subject

6 themselves and were not subject to any arrest in England and

7 they came here voluntarily to plead guilty before this court

8 and to continue their cooperation.

9 With those factors in mind, we have discussed with

10 and agreed with the United States Attorney upon the following

11 bail package, if you will, for each of the individual

12 defendants:

13 First, as to bail, the defendants waive the pretrial

14 services report.

15 Second, each defendant will execute a $500,000

16 personal recognizance bond secured by the house and property

17 that they own in Narrowsburg, New York, that property to be

18 posted as security within three weeks from today.

19 Each of the defendants has already surrendered his

20 and her respective passports to the U.S. authorities, and we

21 have agreed that although normally bail limits would be the

22 Southern and Eastern Districts of New York, that in this case

23 the travel limits be expanded to include the states of New

24 York, New Jersey and Connecticut.

25 THE COURT: Why is that, counsel?

 

 

 

 

68

 

 

1 MR. KINGHAM: That is so that the defendants would be

2 free to live in any of those contiguous states to the Southern

3 District of New York.

4 I should point out, of course, that their location

5 and movements will at all times be strictly monitored by the

6 FBI, with whom they continue to cooperate.

7 THE COURT: Has there been any assessment of the

8 value of the house in Narrowsburg?

9 MR. KINGHAM: I believe that there has, your Honor,

10 and I have to consults with Mr. Rosenthal to know what it is.

11 (Pause)

12 Approximately $300,000, your Honor. It's a house and

13 a contiguous lot.

14 I should point out that the value of this house is

15 beyond the value, the monetary value, because it is the house

16 in which Ms. Edwards' parents reside, although it is owned by

17 them.

18 THE COURT: That doesn't count.

19 MR. KINGHAM: I understand that, but it provides an

20 incentive not to flee with the parents in it.

21 THE COURT: I am just inquiring as to the security

22 for this bond.

23 Is there anything else, counsel?

24 MR. KINGHAM: No, your Honor. I believe the

25 government has agreed to this.

 

 

 

 

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1 THE COURT: Mr. Stein, is there anything you want to

2 add?

3 MR. STEIN: No. That's correct, your Honor, that we

4 have agreed to the bail package that Mr. Kingham articulated.

5 THE COURT: I presume that your office is working

6 very closely with the FBI on this?

7 MR. STEIN: Yes.

8 THE COURT: And you are assured that the FBI will be

9 aware of the whereabouts of these two defendants at all times?

10 MR. STEIN: Your Honor, we fully support the bail

11 package, including the travel limitations to the three states

12 and expect that the FBI will be aware of the defendants'

13 whereabouts.

14 THE COURT: Has it been determined where specifically

15 they will be living for the present?

16 MR. STEIN: One second, your Honor.

17 (Pause)

18 The current living situation has not been finally

19 determined, and if the court would like further --

20 THE COURT: No. I am just inquiring whether that

21 will be in New York City or New York state.

22 MR. STEIN: One of the reasons, your Honor, is that

23 because it is unsettled and to add some flexibility we would

24 like the travel limits expanded to include all three states

25 and also so as not to --

 

 

 

 

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1 THE COURT: And you are satisfied with the security

2 for this bond?

3 MR. STEIN: Yes, your Honor.

4 THE COURT: All right.

5 Is there anything else, counsel?

6 MR. KINGHAM: No. Thank you, your Honor.

7 THE COURT: All right. Then I agree that that will

8 be the bail that will be set.

9 They have to execute the bail bond. That has not

10 been done yet?

11 MS. LANDIS: Your Honor, we can do that immediately

12 after the proceedings with your Honor's courtroom deputy.

13 THE COURT: We have the forms and that can be done.

14 MR. LANDSMAN: Thank you.

15 THE COURT: Thank you very much.

16 MR. STEIN: Thank you, your Honor.

17 MR. KINGHAM: Thank you, your Honor.

18

19 - - -

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24

25