Federal Defense Attorney John Teakell

The Department of Justice announced this week that a fugitive who has been missing for more than 13 years entered a guilty plea in relation to federal charges of conspiring to commit motor fuel excise tax fraud.  Aaron Misulovin, a former New Jersey resident and a.k.a. Albert Friedman or Valery Vibornov, entered his plea before U.S. District Judge Joseph E. Camden in New Jersey.

Official charges against Misulovin include one count of conspiracy, three counts of wire fraud, three counts of money laundering and three counts of tax evasion.  Misulovin’s plea agreement requires him to serve five years in prison and pay up to $2.5 million in fines and restitution.  His sentencing is currently scheduled for June 19, 2009.

 Case Background

Misulovin was indicted by a federal grand jury on August 3, 1995 in New Jersey; he and 24 other individuals, including 15 Eastern Europe immigrants, were charged with conspiring to defraud the United States and the state of New Jersey of $138 million in motor fuel excise taxes which were owed but never paid. 

Misulovin, born in Riga, Latvia and later naturalized as a U.S. citizen, operated Kings Motor Oils (Kings) along with co-defendants Igor Erlikh and Demetrios Karamanos.  Kings was a wholesale fuel distributorship with offices maintained in Edison, N.J.  The indictment alleges that Kings purchased large quantities of tax-free home heating oil, and subsequently sold it as tax-paid diesel fuel to PetroPlus from 1989 to 1994.

 The Scheme

PetroPlus was a fuel wholesaler in Deptford, N.J., and was owned and operated by another co-defendant, Daniel Enright.  Enright then allegedly sold the fuel as diesel fuel to customers, charging applicable federal and state taxes.

 New Jersey and federal law determined that the co-defendants incurred tax liability on the sale of this fuel, but the applicable tax funds were distributed among individuals in the group versus paying them to the IRS.

 Court documents state that Kings and PetroPlus created “middle companies” between them in this distribution chain, although these entities never took possession of the fuel in question.  Federal charges stemmed due to fraudulent paperwork created to disguise the actual fuel transactions and lack thereof with the middle companies.  This paperwork created the illusion that Kings and PetroPlus were free of any tax liability, and the middle companies were created to disappear in the event of an investigation.

 Federal money laundering charges also ensued because $596 million of the illicitly obtained proceeds from the scheme were filtered through multiple U.S. and overseas bank accounts.  False identifications were also used to create the middle companies, open bank accounts and establish storefront offices to mask the fraudulent activity.

 The Return of Misulovin

In 1995, Misulovin and Erlikh fled the United States, but Erlikh was returned by Ukranian authorites; he is now serving a sentence of nine years in prison and has been ordered to pay $1 million in restitution.  Misulovin was arrested by Israeli police in 2004 in relation to international money laundering investigations involving an underground Israeli bank.  He then entered into an agreement with the U.S. to voluntarily participate in the International Prisoner Transfer Program.

 

The Council of Europe Convention on the Transfer of Sentenced Persons (the COE Convention) is participated in by both Israel and the U.S.  This allowed Misulovin to be transferred to the U.S., where he will also serve the rest of his sentenced time from the Israeli charges.

 

About the Author

 

Jamie Simpson is a legal researcher and journalist based in Indianapolis, Indiana with more than ten years of legal writing experience.  She earned her B.S. in Animal Science from Purdue University, and more recently a Master of Public Affairs-Certificate in Public Management from Indiana University.  As a prospective law student and current author, Jamie regularly reports on recent court rulings and legal challenges of public interest through various publications online.

This entry was posted on Wednesday, March 11th, 2009 at 2:40 pm and is filed under Fraud. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.