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FCPA Blog Daily News

« Fallout from SKKMigas bribe case may spread | Main | Job: Principal Counsel (Shanghai) »
Wednesday
Aug282013

Say what? Las Vegas Sands ‘returns’ $47 million to U.S. 

Zhenli Ye Gon had become by early 2007 ‘the largest all-cash, up-front gambler the Venetian-Palazzo had ever had.’As part of a plea deal this week, the Las Vegas Sands paid $47.4 million to the U.S. Treasury and won't be prosecuted for money laundering. As the DOJ put it, the Las Vegas Sands ‘agreed to return’ the money to the U.S. government.

The money had been deposited in the Sands-operated Venetian-Palazzo casino by Zhenli Ye Gon, 50, a Shanghai-born high-stakes gambler who became a Mexican citizen in 2002.

By early 2007, Ye Gon was ‘the largest all-cash, up-front gambler the Venetian-Palazzo had ever had,’ the DOJ said.

In March 2007, Mexican police raided Ye Gon’s house in Mexico City. They seized $207 million in cash -- still the biggest-ever seizure of currency by law enforcement officials anywhere.

Until then, no one at the Venetian-Palazzo or the Las Vegas Sands Corp had identified Ye Gon’s financial transactions as ‘suspicious.’

Suspicious Activity Reports, or SARCs, are required by U.S. law when . . .

a customer is involved in a transaction the casino knows, suspects, or has reason to suspect ‘had no business or apparent lawful purpose or was not the sort in which the particular customer would normally be expected to engage, and the casino knew of no reasonable explanation for the transaction after examining the available facts.

The first time the Venetian-Palazzo filed a SARC against Ye Gon was April 2007, after the raid on his house in Mexico.

Some red flags the casino and its operator should have seen before then, the feds said, were:

  • Ye Gon transferred money to the Las Vegas Sands Corp. and subsidiary companies from two different banks and seven different Mexican money exchange houses known as casas de cambios.
  • The wire transfer originators included several companies and individuals the Las Vegas Sands Corp. could not link to Ye Gon. Ye Gon also transferred some funds from Mexican casas de cambios to a Las Vegas Sands Corp. subsidiary in Hong Kong for transfer to Las Vegas.
  • Ye Gon’s wire transfers often lacked sufficient information to identify him as the beneficiary.
  • With an OK from the Las Vegas Sands, Ye Gon transfered funds several times to an account that did not identify its association with the Venetian, specifically an aviation account used to pay pilots operating the company’s aircraft.

In the deferred prosecution agreement signed Tuesday, the Las Vegas Sands said it didn't know about Ye Gon’s alleged criminal activities before March 2007. But ‘in hindsight,’ it said, ‘the Venetian-Palazzo failed to fully appreciate the suspicious nature of the information or lack thereof pertaining to Ye Gon.’

To settle the case, which a DOJ press release said was ‘conducted by the Drug Enforcement Agency,’ the Las Vegas Sands ‘agreed to return’ the $47.4 million to the U.S. Treasury.

                                                          *     *     *

This isn't an FCPA case. But with a story line too fantastic for Miami Vice, it deserves retelling. And like the best crime thrillers, it raises some hard questions about the criminal justice system.

Who is Zhenli Ye Gon?Part of the $207 million in cash seized at Ye Gon's house in Mexico City.

Before police found his astounding pile of cash, he was best known in Mexico as a successful businessman. The Mexican government licensed his company, Unimed Pharm Chem México, to import tons of pseudoephedrine and ephedrine products. Those were ingredients needed to make over-the-counter cold medications such as Sudafed. They could also be used to make meth.

Ye Gon has been in U.S. custody since 2007. After the raid on his Mexico City house in March that year, U.S. agents arrested him in a Wheaton, Maryland restaurant.

They charged him with one count of ‘conspiracy to aid and abet the manufacture of 500 grams or more of methamphetamine, knowing or intending that it would be imported into the United States.’

In 2009, the drug-conspiracy charge was dismissed with prejudice. U.S. prosecutors couldn't get evidence they needed from Mexico, such as test results of the drugs in question.

Ye Gon always denied the charge. His lawyers said 10 metric tons of finished pseudoephedrine products had been legally imported and stored in his Mexico warehouse for years, proving the drugs were never used or intended for any criminal activity. And their client, the lawyers said, was openly building a state-of-the-art pharma plant in Mexico for the production of legal medicines.

Although his prosecution ended with a dismissal in 2009, he's still in U.S. custody. The feds say they're trying to extradite him to Mexico, where he's still facing drug-related criminal charges. The case there, however, also appears to be in trouble.

Three men arrested after the raid on Ye Gon's house, including two of his brothers, have been cleared. No one else has been convicted of any crimes in Mexico in connection with the $207 million in his home or the drugs in his warehouse.

His explanation for the $207 million? Operatives from one of Mexico's political parties asked him to keep the cash in his house for them. They threatened to kill him and his family if he refused, he said.

Ye Gon is trying to win release from U.S. custody. He filed a habeas corpus petition that's still pending.

                                                       *     *     *

Whatever Ye Gon was doing with the millions in cash and the tons of drug-making ingredients, his case raises some hard questions.

How did the feds end up with Ye Gon's money? The DOJ said Tuesday the Las Vegas Sands ‘agreed to return’ the money to the U.S. government. ‘Agreed to return’ apparently means the money wasn't forfeited or seized under any federal statute or legal authority. 

More than four years after his conspiracy case was dismissed with prejudice -- meaning the DOJ can't refile it -- why is Ye Gon still in U.S. custody?

Why didn't the U.S. charge him with money laundering for the Venetian-Palazzo deposits?

How long should the feds hold someone for possible extradition to a foreign country?

And if Mexico really wanted the guy back to prosecute him for the 2007 drug-related charges, wouldn't it have assembled the paperwork for his extradition by now?

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Richard L. Cassin is the Publisher and Editor of the FCPA Blog. He can be contacted here.