Money Laundering: The process of concealing the existence, source, or application of income, or the disguising of its source to give it the appearance of legitimacy.
My criminal law professor would hold his hands together and sensationally announce, ‘today, let’s talk about murder.’Well, although this case does involve a murder, today, let’s talk about the use of federal undercover agents in a financial crime investigation – money laundering, here; but the same federal investigation techniques can and are applied to all sorts of financial crimes: tax evasion, structuring, and fraud.
Case history: Who is Raymond Shrimp Boy Chow? What is The Tong?
Ghee Kung Tong is a 150 year-old, multifaceted organization that functions as a kind of Chinese Freemason Society. Founded during the Gold Rush to assist newly arrived Chinese immigrants to America, the Ghee Kung Tong currently serves as a fraternal association that provides mutual aid for its members and/or handles administrative and judicial matters for the community, including the settling of disputes.
In 2014, a federal undercover operation brought the illegal activities of some high-ranking members of the Ghee Kung Tong to the public’s attention, particularly those of Raymond “Shrimp Boy” Chow Kwok-cheunh. Chow, leader of the organization since 2006, had apparently been running a subgroup (“tong”) of the Ghee Kung Tong organization for organized crime.
A federal undercover agent spent five years gathering information for an enormous racketeering case against Chow (who had already spent 10 years in prison for gang activity – a 20 years sentence reduced to 10 years because he testified against his former associates), California State Senator Leland Yee, and 24 others. After pleading guilty to charges of money laundering, public corruption, and bribery, Yee was suspended as senator and on February 24, 2016 was sentenced to five years in federal prison. In early January 2016, Chow was found guilty of all 162 counts against him, including the conspiracy and the murder of his predecessor and husband and wife marijuana growers, and money laundering. He faces a life sentence in federal prison.
Chow’s defense team focused its energies trying to discredit the undercover agent and the tactics utilized by the federal government, which they claim spent millions luring Chow into criminal activity.
Controversy surrounding the use of federal undercover agents
Undercover work is now conducted by nearly every federal agency – including the IRS. Every year at the annual tax conferences, tax and financial crimes defense attorneys are reminded that the IRS considers their agents the best financial crimes investigators in the world. It seems IRS-CI agents are often requested for use in multi-agency investigations. And, I have to say these agents are not only skilled at the investigations level, but they make for compelling witnesses against the targeted taxpayer.
The Internal Revenue Manual outlines IRS investigation processes and techniques in Part 9: Criminal Investigations. The IRS rules clarify that:
- Undercover operations and agents may lawfully be used to detect and investigate “tax fraud, political corruption, organized crime, money laundering, narcotics trafficking, questionable return preparers, and other priority areas related to tax crimes.”
- Undercover agents may pose as attorneys, physicians, clergymen, or members of the news media (although no attorney-client relationship or other privileged relationship may be established with a third party for investigative purposes).
- Undercover agents may engage in many activities, including felonies and other serious crimes (except for certain false representations and illegal gambling).
The increasing use of undercover agents has led to more prosecutions, but has also raised concerns of entrapment as claimed by the defense in the Shrimp Boy case. The current state of an entrapment defense law has tilted in favor of law enforcement in that their inducement may be negated by the targets predisposition to commit the crime.
Other problems raised by critics include insufficient oversight of undercover agents. The effectiveness of undercover agents cannot be evaluated since these operations are not publicly disclosed.
In preparing this post I spoke with the former head of IRS – CI who stated, our agents are trained to obtain the response they are seeking from a target. Yikes !
Important to note: The brilliant Tony Serra did his best to expose the tactics of the government during the trial.