Post by Sapphire Capital on Mar 4, 2009 5:58:44 GMT 4
______________________________________________________________________________
FOR IMMEDIATE RELEASE CRM
FRIDAY, FEBRUARY 27, 2009 (202) 514-2007
WWW.USDOJ.GOV TDD (202) 514-1888
INTERNATIONAL CRIMINAL FIGURE PLEADS GUILTY TO $138 MILLION
FUEL TAX SCHEME AFTER NEARLY 13 YEARS AS A FUGITIVE
WASHINGTON – After nearly 13 years as a fugitive, a former New Jersey resident has
been returned to the United States, and pleaded guilty today to conspiring to committing one of
the nation’s largest known motor fuel excise tax schemes, Acting Assistant Attorney General
Rita M. Glavin of the Criminal Division announced.
Aaron Misulovin a/k/a Albert Friedman, a/k/a Valery Vibornov, pleaded guilty before U.S.
District Judge Joseph E. Irenas in Camden, N.J., to one count of conspiracy, three counts of wire
fraud, three counts of money laundering and three counts of tax evasion. According to the terms
of the plea agreement accepted today by Judge Irenas, Misulovin will be sentenced to five years
in prison, and could face a fine of up to $2.5 million and restitution. Sentencing is scheduled for
June 19, 2009.
On Aug. 3, 1995, an indictment was returned by a federal grand jury in New Jersey,
charging Misulovin and 24 other individuals, 15 of whom were émigrés from Eastern Europe,
with conspiring to defraud the United States and the state of New Jersey of approximately $138
million in motor fuel excise taxes, and to commit the substantive offenses of wire fraud, money
laundering and tax evasion. Misulovin was born in Riga, Latvia, and was naturalized as a U.S.
citizen.
According to the indictment, Misulovin and co-defendants Igor Erlikh and Demetrios
Karamanos, operated Kings Motor Oils (Kings), a wholesale fuel distributorship with offices in
Edison, N.J. From 1989 through 1994, Kings purchased hundreds of millions of gallons of tax-
free home heating oil, but through an elaborate scheme sold it as tax-paid diesel fuel to
PetroPlus, a fuel wholesaler located in Deptford, N.J., which was owned and operated by co-
defendant Daniel Enright. PetroPlus then sold the fuel to unknowing customers as diesel fuel for
highway use, and charged and collected the applicable federal and state taxes. Under U.S. and
New Jersey law, the co-conspirators incurred the tax liability for the sale of the fuel. However,
instead of paying the IRS and state revenue authorities as required, the amount collected for the
taxes were distributed among Enright, Misulovin, Erlikh, Karamanos and other conspirators in
the scheme.
According to court documents, Kings and PetroPlus insulated themselves by inserting a
series of shell companies, nominee companies and other sham entities (known collectively as
“middle companies”) between them in the distribution chain to give the appearance that these
companies actually bought and sold the fuel. In reality, these companies never took title or
possession of the fuel. According to court documents, the sole purpose of these middle
companies was the generation of false and fraudulent invoices and other paperwork to disguise
the true transactions between Kings and PetroPlus. One of the middle companies in each
transaction would be positioned as the “burn” company – the entity that appeared on paper to
bear the tax liability and that would disappear in the event of an investigation. However, the
scheme was designed so that on the face of the paperwork, it always appeared that Kings and
PetroPlus were relieved of any tax liability. In the early-1990s, this scheme was commonly
known as a Adaisy chain@ scheme, and often involved organized crime groups. The “daisy chain”
made it difficult for the IRS and state revenue authorities to identify those responsible to pay the
federal and state taxes, and to trace the movement of the illicit proceeds. The illicit proceeds
were then laundered through various bank accounts throughout the United States and overseas.
Court documents show that the sophistication and scale of this illegal operation required
the participation of a number of Eastern European émigrés responsible for the creation of many
of the middle companies. According to court documents, the conspirators used false
identification to incorporate companies, open bank accounts, and establish storefront offices used
to facilitate the scheme.
On June 19, 1998, following a nine-and-a-half-month jury trial before Judge Irenas in
U.S. District Court for the District of New Jersey, Enright and Karamanos were convicted for
their role in the conspiracy and related charges. Also convicted at trial were co-defendants
Richard Pedroni and Mary Ingram, both wholesale motor fuels distributors in New Jersey. Two
additional defendants were acquitted. Seventeen co-defendants pleaded guilty prior to trial.
Enright was sentenced to 16 years in prison and ordered to pay restitution of $1 million.
At the trial of Misulovin’s co-defendants in 1997 and 1998, testimony revealed that that
Misulovin and Erlikh recruited many of their friends and associates to set up the middle
companies. One government witness, who had been charged as a co-conspirator and pleaded
guilty, testified that he considered Misulovin his, “boss in crime.” In addition, the witness
revealed that Misulovin and others instructed this witness and members of his crew to form
many of the middle companies using false identification. The false identification documents and
corporate records of these middle companies were securely stored in a “safe house” in Brooklyn,
N.Y., which Misulovin visited. Witness testimony further showed that when government agents
grew suspicious about a particular middle company, Misulovin ordered that all relevant
documents be destroyed. Evidence was also presented that Misulovin and Erlikh traveled to
Europe during the course of the scheme to open bank accounts to be used in laundering the
illegal proceeds. The evidence admitted at trial proved that, throughout the course of the
scheme, Misulovin and his co-conspirators caused $596,255,927 to be wired through the middle
companies. The scheme resulted in the United States being defrauded of $132,376,800. In
addition, the state of New Jersey was defrauded of $11,892,297.
Misulovin and Erlikh evaded arrest on the charges by fleeing the United States in 1995.
They were both considered fugitives by U.S. law enforcement, and became the subjects of an
international search through notices posted by Interpol. In 1999, Erlikh was returned to the
United States by Ukrainian authorities. Erlikh pleaded guilty, and was sentenced to nine years in
prison and ordered to pay $1 million in restitution.
In April 2004, Israeli police arrested Misulovin, in connection with their investigation of
a major international money laundering operation involving an underground bank in Israel. At
the time of Misulovin’s arrest, the Israeli police froze three accounts tied to Misulovin, and
seized forged and fraudulent travel documents used by Misulovin to conceal his identity. The
Israeli police also seized an illegal Glock-17 firearm and ammunition from Misulovin.
U.S. and Israeli law enforcement authorities cooperated extensively throughout the
duration of the Israeli investigation and prosecution of Misulovin. During this investigation, it
was revealed that a portion of the funds Misulovin had laundered through the underground bank
in Israel had been originally generated by his “daisy-chain” scheme in the United States.
Ultimately, in July 2007, Misulovin pleaded guilty before the Tel Aviv-Jaffa Magistrate=s Court
to the Israeli charges involving the use of false and forged documents, illegal possession of a
firearm and money laundering. Misulovin was sentenced by the Israeli court to serve two years
in prison, which he began to serve in Israel in March 2008.
Misulovin entered into a plea agreement with the United States in January 2008. As part
of the agreement, Misulovin agreed to waive the pending extradition, and volunteered to
participate in the International Prisoner Transfer Program. The program was formally
established in 1977 when Congress passed enabling legislation and the United States entered into
its first transfer treaty with Mexico. In 1985, the United States also acceded to the multilateral
transfer convention, the Council of Europe Convention on the Transfer of Sentenced Persons (the
COE Convention). Israel is also a signatory to the COE Convention. This allowed the United
States and Israel to return Misulovin, who was sentenced and imprisoned in Israel, to the United
States to serve the time remaining on his Israeli sentence. Misulovin’s case is the first time that a
U.S. citizen was transferred from Israel under the COE Convention.
The case was investigated by the FBI’s Newark Division; the Internal Revenue Service-
Criminal Investigation Division; the U.S. Department of Transportation’s Office of Inspector
General; and the New Jersey Division of Taxation.
The prosecution of the case has been led by Deputy Chief Thomas P. Ott of the Criminal
Division’s Organized Crime and Racketeering Section. The prosecution has received assistance
from other federal and foreign authorities, including: the Tax Division’s Northern Criminal
Enforcement Section; the U.S. Attorney’s Office for the District of New Jersey; the Criminal
Division’s Office of Enforcement Operations, International Prisoner Transfer Unit; the Criminal
Division’s Office of International Affairs; the Bureau of Prisons; the Israel Ministry of Justice;
and the Israel Police, Unit for Serious and International Crime.
###
09-179
FOR IMMEDIATE RELEASE CRM
FRIDAY, FEBRUARY 27, 2009 (202) 514-2007
WWW.USDOJ.GOV TDD (202) 514-1888
INTERNATIONAL CRIMINAL FIGURE PLEADS GUILTY TO $138 MILLION
FUEL TAX SCHEME AFTER NEARLY 13 YEARS AS A FUGITIVE
WASHINGTON – After nearly 13 years as a fugitive, a former New Jersey resident has
been returned to the United States, and pleaded guilty today to conspiring to committing one of
the nation’s largest known motor fuel excise tax schemes, Acting Assistant Attorney General
Rita M. Glavin of the Criminal Division announced.
Aaron Misulovin a/k/a Albert Friedman, a/k/a Valery Vibornov, pleaded guilty before U.S.
District Judge Joseph E. Irenas in Camden, N.J., to one count of conspiracy, three counts of wire
fraud, three counts of money laundering and three counts of tax evasion. According to the terms
of the plea agreement accepted today by Judge Irenas, Misulovin will be sentenced to five years
in prison, and could face a fine of up to $2.5 million and restitution. Sentencing is scheduled for
June 19, 2009.
On Aug. 3, 1995, an indictment was returned by a federal grand jury in New Jersey,
charging Misulovin and 24 other individuals, 15 of whom were émigrés from Eastern Europe,
with conspiring to defraud the United States and the state of New Jersey of approximately $138
million in motor fuel excise taxes, and to commit the substantive offenses of wire fraud, money
laundering and tax evasion. Misulovin was born in Riga, Latvia, and was naturalized as a U.S.
citizen.
According to the indictment, Misulovin and co-defendants Igor Erlikh and Demetrios
Karamanos, operated Kings Motor Oils (Kings), a wholesale fuel distributorship with offices in
Edison, N.J. From 1989 through 1994, Kings purchased hundreds of millions of gallons of tax-
free home heating oil, but through an elaborate scheme sold it as tax-paid diesel fuel to
PetroPlus, a fuel wholesaler located in Deptford, N.J., which was owned and operated by co-
defendant Daniel Enright. PetroPlus then sold the fuel to unknowing customers as diesel fuel for
highway use, and charged and collected the applicable federal and state taxes. Under U.S. and
New Jersey law, the co-conspirators incurred the tax liability for the sale of the fuel. However,
instead of paying the IRS and state revenue authorities as required, the amount collected for the
taxes were distributed among Enright, Misulovin, Erlikh, Karamanos and other conspirators in
the scheme.
According to court documents, Kings and PetroPlus insulated themselves by inserting a
series of shell companies, nominee companies and other sham entities (known collectively as
“middle companies”) between them in the distribution chain to give the appearance that these
companies actually bought and sold the fuel. In reality, these companies never took title or
possession of the fuel. According to court documents, the sole purpose of these middle
companies was the generation of false and fraudulent invoices and other paperwork to disguise
the true transactions between Kings and PetroPlus. One of the middle companies in each
transaction would be positioned as the “burn” company – the entity that appeared on paper to
bear the tax liability and that would disappear in the event of an investigation. However, the
scheme was designed so that on the face of the paperwork, it always appeared that Kings and
PetroPlus were relieved of any tax liability. In the early-1990s, this scheme was commonly
known as a Adaisy chain@ scheme, and often involved organized crime groups. The “daisy chain”
made it difficult for the IRS and state revenue authorities to identify those responsible to pay the
federal and state taxes, and to trace the movement of the illicit proceeds. The illicit proceeds
were then laundered through various bank accounts throughout the United States and overseas.
Court documents show that the sophistication and scale of this illegal operation required
the participation of a number of Eastern European émigrés responsible for the creation of many
of the middle companies. According to court documents, the conspirators used false
identification to incorporate companies, open bank accounts, and establish storefront offices used
to facilitate the scheme.
On June 19, 1998, following a nine-and-a-half-month jury trial before Judge Irenas in
U.S. District Court for the District of New Jersey, Enright and Karamanos were convicted for
their role in the conspiracy and related charges. Also convicted at trial were co-defendants
Richard Pedroni and Mary Ingram, both wholesale motor fuels distributors in New Jersey. Two
additional defendants were acquitted. Seventeen co-defendants pleaded guilty prior to trial.
Enright was sentenced to 16 years in prison and ordered to pay restitution of $1 million.
At the trial of Misulovin’s co-defendants in 1997 and 1998, testimony revealed that that
Misulovin and Erlikh recruited many of their friends and associates to set up the middle
companies. One government witness, who had been charged as a co-conspirator and pleaded
guilty, testified that he considered Misulovin his, “boss in crime.” In addition, the witness
revealed that Misulovin and others instructed this witness and members of his crew to form
many of the middle companies using false identification. The false identification documents and
corporate records of these middle companies were securely stored in a “safe house” in Brooklyn,
N.Y., which Misulovin visited. Witness testimony further showed that when government agents
grew suspicious about a particular middle company, Misulovin ordered that all relevant
documents be destroyed. Evidence was also presented that Misulovin and Erlikh traveled to
Europe during the course of the scheme to open bank accounts to be used in laundering the
illegal proceeds. The evidence admitted at trial proved that, throughout the course of the
scheme, Misulovin and his co-conspirators caused $596,255,927 to be wired through the middle
companies. The scheme resulted in the United States being defrauded of $132,376,800. In
addition, the state of New Jersey was defrauded of $11,892,297.
Misulovin and Erlikh evaded arrest on the charges by fleeing the United States in 1995.
They were both considered fugitives by U.S. law enforcement, and became the subjects of an
international search through notices posted by Interpol. In 1999, Erlikh was returned to the
United States by Ukrainian authorities. Erlikh pleaded guilty, and was sentenced to nine years in
prison and ordered to pay $1 million in restitution.
In April 2004, Israeli police arrested Misulovin, in connection with their investigation of
a major international money laundering operation involving an underground bank in Israel. At
the time of Misulovin’s arrest, the Israeli police froze three accounts tied to Misulovin, and
seized forged and fraudulent travel documents used by Misulovin to conceal his identity. The
Israeli police also seized an illegal Glock-17 firearm and ammunition from Misulovin.
U.S. and Israeli law enforcement authorities cooperated extensively throughout the
duration of the Israeli investigation and prosecution of Misulovin. During this investigation, it
was revealed that a portion of the funds Misulovin had laundered through the underground bank
in Israel had been originally generated by his “daisy-chain” scheme in the United States.
Ultimately, in July 2007, Misulovin pleaded guilty before the Tel Aviv-Jaffa Magistrate=s Court
to the Israeli charges involving the use of false and forged documents, illegal possession of a
firearm and money laundering. Misulovin was sentenced by the Israeli court to serve two years
in prison, which he began to serve in Israel in March 2008.
Misulovin entered into a plea agreement with the United States in January 2008. As part
of the agreement, Misulovin agreed to waive the pending extradition, and volunteered to
participate in the International Prisoner Transfer Program. The program was formally
established in 1977 when Congress passed enabling legislation and the United States entered into
its first transfer treaty with Mexico. In 1985, the United States also acceded to the multilateral
transfer convention, the Council of Europe Convention on the Transfer of Sentenced Persons (the
COE Convention). Israel is also a signatory to the COE Convention. This allowed the United
States and Israel to return Misulovin, who was sentenced and imprisoned in Israel, to the United
States to serve the time remaining on his Israeli sentence. Misulovin’s case is the first time that a
U.S. citizen was transferred from Israel under the COE Convention.
The case was investigated by the FBI’s Newark Division; the Internal Revenue Service-
Criminal Investigation Division; the U.S. Department of Transportation’s Office of Inspector
General; and the New Jersey Division of Taxation.
The prosecution of the case has been led by Deputy Chief Thomas P. Ott of the Criminal
Division’s Organized Crime and Racketeering Section. The prosecution has received assistance
from other federal and foreign authorities, including: the Tax Division’s Northern Criminal
Enforcement Section; the U.S. Attorney’s Office for the District of New Jersey; the Criminal
Division’s Office of Enforcement Operations, International Prisoner Transfer Unit; the Criminal
Division’s Office of International Affairs; the Bureau of Prisons; the Israel Ministry of Justice;
and the Israel Police, Unit for Serious and International Crime.
###
09-179