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
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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.
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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
25
2
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
3
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?
4
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
5
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
6
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.
7
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
9
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.
10
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
11
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.
12
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
13
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
14
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
15
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.
16
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.
,
17
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?
18
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.
19
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.
20
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.
21
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
22
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
23
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,
24
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
48
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
54
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.
55
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
58
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 Be |