Viktor Bout Sentenced

One last article on the sentencing of Viktor Bout, the inspiration for the thread "The Real Lord of War."

http://blogs.wsj.com/corruption-currents/2012/04/05/viktor-bout-sentenced-to-25-years/

Note that the article (briefly) discusses shell corporations.  We will be examining this in a later post.

A new thread tommorrow.

NOTE: THE INFORMATION IN THIS BLOG IS NOT LEGAL ADVICE NOR IS IT INTENDED TO BE LEGAL ADVICE.  IF THE READER HAS ANY LEGAL QUESTIONS, PLEASE REFER TO AN ATTORNEY.

Have a great and fraud-free day.

http://www.tauskvega.com

----------à>>>>>>>>>>>>>>>gene tausk

Viktor Bout Sentenced

The Russian government is incensed at the 25 year sentencing of Viktor Bout.  One country's illegal arms dealer is another country's international businessman.

http://www.nytimes.com/2012/04/07/world/europe/russia-denounces-us-sentencing-of-arms-dealer.html

See "The Real Lord of War" thread.

NOTE: THE INFORMATION IN THIS BLOG IS NOT LEGAL ADVICE NOR IS IT INTENDED TO BE LEGAL ADVICE.  IF THE READER HAS ANY LEGAL QUESTIONS, PLEASE REFER TO AN ATTORNEY.

Have a great and fraud-free day.

http://www.tauskvega.com

----------à>>>>>>>>>>>>>>>gene tausk

Viktor Bout Sentenced

Viktor Bout, was sentenced to 25 years in Federal prison for arms dealing.

http://www.cbc.ca/news/world/story/2012/04/05/viktor-bout-arms-trafficker-convicted.html

He was previously featured on the thread "Lord of War."

NOTE: THE INFORMATION IN THIS BLOG IS NOT LEGAL ADVICE NOR IS IT INTENDED TO BE LEGAL ADVICE.  IF THE READER HAS ANY LEGAL QUESTIONS, PLEASE REFER TO AN ATTORNEY.

Have a great and fraud-free day.

http://www.tauskvega.com

----------à>>>>>>>>>>>>>>>gene tausk

The Real Lord of War XV

We have come to the end of our story regarding Viktor But.  He will be forever immortalized as the Enron of arms dealers - a Russian who was able to take advantage of the downfall of the Soviet Union and sell weapons to everyone who was willing to purchase them.  In a real way, he was a true Lord of War - his sales of AK-47's (the most popular automatic weapon ever produced) to as many countries as possible helped not only to start conflicts, but to keep conflicts going long after they should have stopped.

     But, Viktor But could not live the life he wanted to lead (and did live) without money laundering and fraud.  He could not simply sell his arms and take the money - he had to launder it first.  This was an Achilles heel that led law enforcement to him time and again and provided the U.S. Government with the ammunition needed to bring him down.  Illegal activities such as arms dealings cannot live without money laundering.

     This makes Viktor But a case study for laundering and for white collar crime.  Not to be too melodramatic, it is also a case study in how money laundering affects everyone.

    Tomorrow - new topic.

NOTE: THE INFORMATION IN THIS BLOG IS NOT LEGAL ADVICE NOR IS IT INTENDED TO BE LEGAL ADVICE.  IF THE READER HAS ANY LEGAL QUESTIONS, PLEASE REFER TO AN ATTORNEY.

Have a great and fraud-free day.

http://www.tauskvega.com

----------à>>>>>>>>>>>>>>>gene tausk

The Real Lord of War XIV

Well, let's get back to our real Lord of War- Viktor But.  But was charged, in addition to his various arms dealings, with wire fraud and money laundering.  We have already discussed this in depth.  Once again - whenever illegal arms dealings are occurring, it is obvious that money laundering (and, wire fraud - the fraudulent transfer of funds [which will be discussed in a later column] is also occurring).  You cannot have one without the other (at least, not if you want to actually make money at it).

     But is probably the most well-known arms dealer, but he is not the only one.  He is sort of the Enron of arms dealers - the most famous (thanks to movies like Lord of War and him having been in the right place at the right time) but not the most original.  His arms dealings were so famous, however, and so far off the charts in terms of whom he supplied and the sheer volume of arms that But became the poster boy for arms dealers.

     However, he could not ignore even the most basic rule of arms dealers - he had to make money and the only way to make money from illegal sources was to launder the money so he could eventually use it at some point.  Viktor But may have been the most talented arms dealer in history (unlikely), but even he was at the mercy of accountants and international finance.

Something to think about.

NOTE: THE INFORMATION IN THIS BLOG IS NOT LEGAL ADVICE NOR IS IT INTENDED TO BE LEGAL ADVICE.  IF THE READER HAS ANY LEGAL QUESTIONS, PLEASE REFER TO AN ATTORNEY.

Have a great and fraud-free day.

http://www.tauskvega.com

----------à>>>>>>>>>>>>>>>gene tausk

The Real Lord of War XIII

We were discussing last time regarding the strange notion that many arms dealers are caught and prosecuted not because of their arms dealing which, although illegal under many U.S. laws and international laws, can be difficult to prosecute because of political machinations and the intricacies of international law.  However, money laundering, because it is a direct violation of U.S. criminal law, tax law and immigration law (to name a few) is often much easier to prosecute and convict.

     As a result, therefore, arms dealers are placed in the ultimate "Catch 22" situation (look it up).  Illegal arms dealers cannot make their money legally and, therefore, cannot have their monies be traced.  Illegal arms dealers, like Viktor But and the fictional Yuri Orlov, must resort to money laundering which places them in a dangerous position.  It is one of the ironies of their profession that the arms in which they traffic are less dangerous to the arms dealers than the monies they earn from such arms dealing.

   Strange world, indeed.

NOTE: THE INFORMATION IN THIS BLOG IS NOT LEGAL ADVICE NOR IS IT INTENDED TO BE LEGAL ADVICE.  IF THE READER HAS ANY LEGAL QUESTIONS, PLEASE REFER TO AN ATTORNEY.

Have a great and fraud-free day.

http://www.tauskvega.com

----------à>>>>>>>>>>>>>>>gene tausk

The Real Lord of War XII

As we already know, the final stage of money laundering is the integration phase, when the monies are introduced into the financial system having been "cleaned" and therefore above scrutiny (or allegedly above such scrutiny).

     For arms dealers, like any money launderers, this is the most important phase.  Let's look again at the movie "Lord of War" where the fictionalize character of Viktor But (Yuri Orlov) enjoys a high lifestyle of deluxe penthouses, private jets and limosines.   The only way he can maintain this lifestyle is through the constant sales of arms and flow of money.  Unlike regular businessmen, however, Orlov has to go through the additional stages of money laundering to get the funds he needs.  Ultimately, this is how he is caught.

     This is one of the strange episodes when working with arms dealers.  Often, the dealers are caught not because of their arms dealings, but because of sloppy money laundering which leads to federal and international prosecution.  Yet another reason that money laundering can be as great as a threat as the arms dealing itself.

NOTE: THE INFORMATION IN THIS BLOG IS NOT LEGAL ADVICE NOR IS IT INTENDED TO BE LEGAL ADVICE.  IF THE READER HAS ANY LEGAL QUESTIONS, PLEASE REFER TO AN ATTORNEY.

Have a great and fraud-free day.

http://www.tauskvega.com

----------à>>>>>>>>>>>>>>>gene tausk

The Real Lord of War XI

We were talking about arms dealers being paid in diamonds and other precious stones to avoid the problem of having to deal with getting "paid" and having to report the income (which, of course, would immediately reveal the issue of arms dealing in the first place).  This leads, of course, to the obvious issue of just how problematic money laundering operations can be on a larger scale, namely that the illegal trafficking of arms (or other illicit materials) can lead to the sale of illegal diamonds.

      Not to cite another film here, since we are already referencing "Lord of War," but the film "Blood Diamond" comes to mind as we discuss this issue.  In "Blood Diamond," the illegal trafficking of diamonds from Sierra Leone during that country's horrific civil war helped to keep the rival militias and armies well armed so they could continue their conflict well after most other conflicts would have died out from lack of money.  But, because of arms dealers who were more than happy to be paid in diamonds and could not care less from where the diamonds came from, a mutually assisted continual circle of death came about as the arms dealers and illegal diamonds merchants fed off each other.

     Money laundering, therefore, and illegal arms dealing go hand-in-hand, like most criminal enterprises.

NOTE: THE INFORMATION IN THIS BLOG IS NOT LEGAL ADVICE NOR IS IT INTENDED TO BE LEGAL ADVICE.  IF THE READER HAS ANY LEGAL QUESTIONS, PLEASE REFER TO AN ATTORNEY.

Have a great and fraud-free day.

http://www.tauskvega.com

----------à>>>>>>>>>>>>>>>gene tausk

The Real Lord of War X

So, we have been learning about why it is necessary for arms dealers to launder money.  We know that many arms dealers (although But may not have been one among them) who would do the first step of laundering (placement) by purchasing diamonds or other minerals/gems to avoid placing his monies in the world's banking system (which would have been a dead giveaway that something was up).

     The second stage that would have been used by But or another arms dealer is the layering process. Since the arms dealer is getting paid in gems, he would have to sell the gems to get the actual money to integrate it (third step) into the world's financial system.  This is not very difficult.  Arms dealers would have a veritable army (no pun intended) of dealers that would be able to sell the gems for them, record the transactions, and begin the process of taking the proceeds from the sales and "layering" the proceeds into bank accounts, stocks, bonds, safe deposit boxes, CD's, and other financial tools and packages.

     What is important for the arms dealers is that the sale of the gems must be recorded and legitimized because this is the crucial step of getting their monies (earnings from the sales of arms) into the world's financial system so that they can have access to the money later.  Of course, this would involve the payment of taxes and other royalties, but it is a small price to pay to legitimize their illegal activities.

NOTE: THE INFORMATION IN THIS BLOG IS NOT LEGAL ADVICE NOR IS IT INTENDED TO BE LEGAL ADVICE.  IF THE READER HAS ANY LEGAL QUESTIONS, PLEASE REFER TO AN ATTORNEY.

Have a great and fraud-free day.

http://www.tauskvega.com

----------à>>>>>>>>>>>>>>>gene tausk

The Real Lord of War IX

One of my alert readers pointed out that I am not keeping track of the Roman numerals I use to subdivide my chapters in this blog.  Looking back, I see he is right.  So, in the future, I will use the good old-fashioned Arabic numerals in the future.  Serves me right for trying to use a numeric system that has been out of date for hundreds of years.

     We talked about Viktor But getting paid in diamonds or some other form of gem or precious stone as payment for his arms shipments.  This enables him to get paid in a form of "currency" that is untraceable.

     This next example does not involve But since there is no evidence that he did this.  However, the idea of trading arms for oil has been done in the past and will likely be done int he future.  Like getting paid in diamonds, it has the advantage of not being traced and being something which can be easily dumped on the world market in return for currency.  Unfortunately, the diversion of oil also has the side effect of driving up prices of oil as insurance companies and governments are forced to pay for waste.

    Once again, this is another example of how money laundering affects the world at large.  The side effects of money laundering are felt far beyond local markets.

NOTE: THE INFORMATION IN THIS BLOG IS NOT LEGAL ADVICE NOR IS IT INTENDED TO BE LEGAL ADVICE.  IF THE READER HAS ANY LEGAL QUESTIONS, PLEASE REFER TO AN ATTORNEY.

Have a great and fraud-free day.

http://www.tauskvega.com

----------à>>>>>>>>>>>>>>>gene tausk

The Real Lord of War VIII

OK - let's get back to Viktor and his ill-gotten arms deals.

     By the way, before we move ahead, I have received some email from readers who ask about my spelling of Viktor But's surname.  As I mentioned in a previous post, it is pronounced "boot" as in the shoe.  The standard English transliteration of his surname from the Cyrillic is usually "Bout."  However, for the sake of convenience, I prefer "But" although the 'u' is to be pronounced as a long 'u' and not a short one.  There is seldom any agreement (except among academics) for transliteration from Cyrillic characters to Latin characters, and this is just another example.  So, for the purposes of this blog, we will continue to call him Viktor But.

     Viktor, in his arms dealing, has to be careful about how and where he places his money.  There is no possibility that governments will overlook millions of dollars (if not billions) being placed directly in bank accounts.  This will attract too much attention.  And so, Viktor But, like so many before him, has to launder his money.

     The first step to laundering is to PLACE the money.  Although it is not known for certain (at least, not by me), the explanations given in the movie "Lord of War" where the fictitious character of Yuri Orlov is paid in "blood diamonds" probably has some accuracy to it.  Remember, one of the easiest ways to place money when laundering it is to buy high value goods such as artwork, planes, real property, gold or diamonds.  These instruments can be exchanged for cash and resold and the proceeds placed in the world's banking system.  If Viktor is being paid in diamonds to begin with (at least for some of his transactions), this removes one of the steps to placement.

More tomorrow.

NOTE: THE INFORMATION IN THIS BLOG IS NOT LEGAL ADVICE NOR IS IT INTENDED TO BE LEGAL ADVICE.  IF THE READER HAS ANY LEGAL QUESTIONS, PLEASE REFER TO AN ATTORNEY.

Have a great and fraud-free day.

http://www.tauskvega.com

----------à>>>>>>>>>>>>>>>gene tausk

The Real Lord of War VIII

Welcome to 2012!  I hope everyone had a great New Year and all my readers (and everyone for that matter) have my wishes for a great and prosperous New Year!

     Well, let's get back to Viktor Bug - arms dealer extraordinaire.

     But is suspected of selling arms to Liberia during the civil war in that country.  The Liberian civil war, fought in the 1980's and 90's was a particularly nasty war in which hundreds of thousands of civilians were killed or wounded (ironic since the country was founded as a haven for freed American slaves and the capital, Monrovia, is named after former President James Monroe).

     But was allegedly getting paid by multiple factions for his supply of weapons.  He would get paid in American dollars or, sometimes, diamonds or other gems.  When But would get paid in American dollars, it would make sense that But would have to go through the normal processes of money laundering.  Remember from our previous discussions on money laundering, there are three stages to a successful laundering operation: (1) placement; (2) layering; (3) integration. The money has to be placed (such as in financial institutions or to buy high value goods with the cash.  Then, the money has to be layered (financial operations to separate the money from the source) and finally, integration (where the money is fully integrated with the economic system.

NOTE: THE INFORMATION IN THIS BLOG IS NOT LEGAL ADVICE NOR IS IT INTENDED TO BE LEGAL ADVICE.  IF THE READER HAS ANY LEGAL QUESTIONS, PLEASE REFER TO AN ATTORNEY.

Have a great and fraud-free day.

http://www.tauskvega.com

----------à>>>>>>>>>>>>>>>gene tausk

The Real Lord of War VII

As we move into discussing money laundering, we must why it is necessary for an arms dealer to launder his money in the first place.

     Remember what we discussed earlier - the arms trade is a heavily regulated and controlled industry.  Many laws, both internal (per country) and international exist to control the flow of weapons.  This makes sense, of course.  The international trade in weapons can destabilize entire governments and countries.  Government try (or at least pretend to) control this arms flow for these reasons. Also, there are national security considerations.  The United States would not really want Iran to get its advanced weaponry which obviously could be used against it in a possible future conflict.

     Therefore, if an arms dealer wants to transfer and sell arms illegally, he cannot of course "report" his income to tax authorities and it is impossible to make large bank deposits without raising some alarms.  Hence, arms dealers also have to resort to money laundering and shady deals to try and avoid detection.  Arms dealing goes hand-in-hand with fraud and white collar crime.

NOTE: THE INFORMATION IN THIS BLOG IS NOT LEGAL ADVICE NOR IS IT INTENDED TO BE LEGAL ADVICE.  IF THE READER HAS ANY LEGAL QUESTIONS, PLEASE REFER TO AN ATTORNEY.

Have a great and fraud-free day.

http://www.tauskvega.com

----------à>>>>>>>>>>>>>>>gene tausk

The Real Lord of War VI

How did Viktor But deal in such large amounts of arms and equipment?  How was he able to sell them all around the world?

     The "secret," such as it is, is that But had access not only to arms and equipment, but also to large scale transportation such as military aircraft and large scale civilian aircraft as well.  Remember - But was able to take advantage of the chaos in the post-Soviet Union to acquire the arms in the first place.  He also was able to use Soviet planes and tankers to transport the weapons anywhere in the world.   This gave him an invaluable tactical advantage in that not only could he supply the arms, he could also transport them to anywhere in the world.

     It is estimated that But supplied the arms and equipment to such random countries as Congo, Angola, Liberia and Afghanistan.

    As promised, we will begin discussing But's ability to get paid for these illegal arms dealings.

NOTE: THE INFORMATION IN THIS BLOG IS NOT LEGAL ADVICE NOR IS IT INTENDED TO BE LEGAL ADVICE.  IF THE READER HAS ANY LEGAL QUESTIONS, PLEASE REFER TO AN ATTORNEY.

Have a great and fraud-free day.

http://www.tauskvega.com

----------à>>>>>>>>>>>>>>>gene tausk

The Real Lord of War V

Before we begin to discuss the money laundering operations and fraud operations of Viktor But, one more aspect of arms trading must be discussed.

     It is clear to even the most casual observer that arms trafficking and the purchase and sale of arms and weapons of war are regulated by international laws and treaties, as well as the laws of various nations.  For example, in the United States, the interstate sale of arms, ammunition and lethal weapons are generally controlled by, among other laws, the Commerce Clause of the U.S. Constitution and various laws under the United States Code.  Violations of these laws can result in extreme criminal penalties, both under Federal law and the laws of the various states.  It is not possible to simply "buy and sell" arms and weaponry without involving multiple Federal laws in these matters.  State laws are involved as well, but these vary from state-to-state.

     When the purchasing and selling of arms and other types of weapons in the international arena, multiple laws of nation states and international agreements are involved.  For example, it is not possible to sell American weapons to many nations in the world, especially those nations which have been designated as terrorist or "rogue" nations.  This situation also applies in the reverse.

     So, when a person like Viktor But is selling arms and equipment all over the world and not following "the law," he is violating many different types of laws from various nations and international organizations and treaties.  This not only creates a legal nightmare, but also exposed Viktor to many different criminal liabilities.

NOTE: THE INFORMATION IN THIS BLOG IS NOT LEGAL ADVICE NOR IS IT INTENDED TO BE LEGAL ADVICE.  IF THE READER HAS ANY LEGAL QUESTIONS, PLEASE REFER TO AN ATTORNEY.

Have a great and fraud-free day.

http://www.tauskvega.com

----------à>>>>>>>>>>>>>>>gene tausk

The Real Lord of War IV

I mentioned at the beginning of this blog thread that we would be discussing how Viktor But's armsrunning activities involved fraud.  Fraud is, of course, the subject matter of this blog so at some point we need to discuss it.  However, once again, the sheer scale and scope of But's arms dealing needs to be explored first.

     The time when But was working was both fortuitous (for him) and unlucky (for the rest of the world).  As stated, But was able to take advantage of the fall of the Former Soviet Union to purchase and sell weapons all over the world.  This would not have been possible during the time of the Soviet Union when all arms sales were subject to State control (in this case, the Communist Party of the Soviet Union).  It would also have not been possible during a time when the rule of law was more strictly enforced (although the Russian Federation has a long way to go, the rule of law is better now then it was 20 years ago).  But was able to find the right time to make his illicit sales.

     It was unlucky for the rest of the world in that But was able to sell his weapons to numerous conflicts around the world.  The world has never had a shortage of conflicts, but during the nineties, all hell was breaking loose in places such as Africa (the horrific civil war in Liberia, "blood diamond" mining in Sierra Leone, the genocide in Rwanda, the various attempts to seize power and minerals in Congo (Zaire)).  For an arms merchant like But, this was a market ready for the taking.

NOTE: THE INFORMATION IN THIS BLOG IS NOT LEGAL ADVICE NOR IS IT INTENDED TO BE LEGAL ADVICE.  IF THE READER HAS ANY LEGAL QUESTIONS, PLEASE REFER TO AN ATTORNEY.

Have a great and fraud-free day.

http://www.tauskvega.com

----------à>>>>>>>>>>>>>>>gene tausk

The Real Lord of War

For those of us who lived through the Cold War (man, am I getting old...), the end of the Soviet Union and the dissolution of the Warsaw Pact and the Eastern European satellite states (Poland, Romania, Bulgaria etc.), was the defining moment of my generation.  We all grew up in the shadow of the nuclear threat and the idea of Mutual Assured Destruction (appropriately named MAD).  We generally believed that the Russians were cold-hearted people that would gladly press the nuclear button on the drop of a dime (nothing can be further from the truth - Russians are among the warmest and friendliest people I have known in my life).  It was taken as a fact of life that, one way or another, the Soviet Union and Eastern Europe was here to stay and it would stay for a long, long time.

     Then, in one instant, it was over.  Events beginning in 1989 led to the overthrow of the oppressive governments of Eastern Europe and, to everyone's surprise (and don't let anyone tell you differently), the peaceful dissolution of the Soviet Union.  On January 1, 1991, the hammer-and-sickle flag flew over the Kremlin in Moscow.  On December 31, 1991, it was lowered for the last time and replaced with the tricolor flag of the Russian Federation.  This event was repeated in 14 capitals in now independent states.

     This unprecedented transfer of power created a power and legal vacuum that was ready to be exploited.  And, this was the opportunity of a lifetime for Viktor But.

NOTE: THE INFORMATION IN THIS BLOG IS NOT LEGAL ADVICE NOR IS IT INTENDED TO BE LEGAL ADVICE.  IF THE READER HAS ANY LEGAL QUESTIONS, PLEASE REFER TO AN ATTORNEY.

Have a great and fraud-free day.

http://www.tauskvega.com

----------à>>>>>>>>>>>>>>>gene tausk

The Real Lord of War

One of my favorite movies is "Lord of War," starring Nicolas Cage and Bridgette Moynihan.  It is a semifictionalized account of a Russian/Ukrainian arms dealer who makes a fortune selling arms to various 3rd world dictators and hot conflicts all over the world.  It is a great film and one that is highly recommended.

     But, it is not fiction.  "Lord of War" is based on the real-life story of Viktor But (pronounced "boot"), born in the Former Soviet Union who rose through the ranks of the Soviet army and GRU (military intelligence/special forces) and, according to some stories, the KGB as well.  Viktor But was for many years the most infamous arms dealer on the planet.  He indeed provided arms to both sides in a conflict and, according to some estimates, is responsible for killing more human beings on this planet since Chinggis Khan (But did not kill them directly, of course, but the arms he sold made him indirectly responsible for these deaths).

     Viktor But is now serving hard time in a Federal detention center and will not be getting out anytime soon. But, his story is worth telling, not only for the arms dealing but also for the fraud and white collar crime that was needed to fund his operations.  We will briefly discuss But's arms career, but spend more time (of course) talking about the fraud that But used to "earn" and launder his money.

NOTE: THE INFORMATION IN THIS BLOG IS NOT LEGAL ADVICE NOR IS IT INTENDED TO BE LEGAL ADVICE.  IF THE READER HAS ANY LEGAL QUESTIONS, PLEASE REFER TO AN ATTORNEY.

Have a great and fraud-free day.

http://www.tauskvega.com

----------à>>>>>>>>>>>>>>>gene tausk