By John P. Capitalist
Hi Frank;
You’ve republished two of my blog articles comparing Raniere/Nxivm to Scientology/Hubbard recently.
Feel free to publish the below if you wish. If you do, please link prominently to my blog, http://www.reasoned.life, which has historically been about Scientology but is broadening to include thoughtful research on other cults and high-control groups.
Note that while I have to spend a lot of time assessing the impact and odds of success of litigation in my investment management career, I am not a lawyer. I would thus defer to anyone who is who offers a well-reasoned counterargument to any of what follows.
It just occurred to me what they might be able to charge Raniere with in a superseding indictment. Raniere’s financial disclosure filed when he first appeared in court claims that he’s indigent, with zero income and zero need to have filed taxes in decades. He makes the bizarre claim that “when he needs a shirt, somehow it just appears.” I would guess that the declaration of indigence is a sworn statement subject to the penalties for perjury, but I have not checked this.
As an aside, the assertion that stuff Raniere needs magically appears is an attempt to push responsibility for financial misdeeds onto his underlings, but I have to believe that a legal concept of “willful blindness” can come into play. Wikipedia discusses here: https://en.wikipedia.org/wiki/Willful_blindness
My bet is that they go after him for either perjury or for income tax evasion, or both. If he lived in facilities owned by some shell corporation that they can prove that he ultimately controlled, they can go after both Raniere personally and for any entities that were involved in improperly providing him financial benefit without reporting it. That would ultimately lead to those organizations, likely including the main ESP and Nxivm entities, being shut down and assets seized for tax evasion. Today, it’s much easier to pierce corporate veils in networks of shell companies than ever before, so even if some LLC that owns his love nest condo was directly involved, it is easy for the Feds to traverse the network of ownership to higher-level entities and take action against all of it.
While I am sure that Raniere thinks he has been extremely careful about putting various entities in others’ names, I suspect that the feds now have enough e-mail correspondence and text messages to show that actual control lay with Raniere and not Nancy Salzman and others. He may have also slipped in setting up some of the minor shell corporations that owned various pieces of real estate that he used. Additionally, testimony from Nxians who have left in the wake of the abuse revelations could credibly establish that he was the sole beneficiary of properties listed as “retreat center,” “student housing” or whatever on the books.
As part of a tax fraud charge, if Raniere took the Bronfman’s money in the commodities trade and simply made it disappear while only claiming to have invested it, that’s certainly income, and on a scale that would make the IRS very interested in getting their hands on him. They are up for a recovery of perhaps $20 million of the $65 million, if he just pocketed it without actually investing it in the market. That’s worth going after, particularly if the FBI has managed to put together enough of a financial trail to understand where Raniere’s money now lives.
I would think it possible, though less likely, that they go after Raniere for money laundering at this time. Takes a while longer to prove that a cash stream is illicit — they may be able to seize bank deposits in cash on presumption of a crime under civil forfeiture laws, but it’s harder to prove that the cash moved in from Mexico is tied to criminal activity in Mexico. The only reason for moving payments from ESP Mexico and Nxivm Mexico to the US in cash is to avoid US taxes. That reinforces my point above about the likelihood of charges for tax evasion.
Could they add additional charges similar to the ones now on the table for sex trafficking and human slavery? Yes, they certainly could, but I don’t think that’s a focus. Let’s say that they find another 50 examples of people brought in from Mexico for sex. There’s still a good chance that, according to federal sentencing guidelines, that much of the sentence for the incremental convictions would run concurrently. If the EDNY wants to shut Raniere down permanently, they would probably want to find different classes of crimes where sentences would run consecutively. Massive tax evasion on top of sex slavery ought to be enough to keep Raniere in jail for 30 years.
I suggest the likelihood of additional sex/slavery charges is lower than the odds of charging Raniere with other crimes because of the tendency of prosecutors to bring a manageable number of similar charges against a defendant, with the intent of maximizing deterrent effect by ensuring that each charge sticks in court. They don’t want to create the image that they throw 50 charges against a defendant and deal down to convictions on 3-4 of them because they don’t want other defendants to think that Uncle Sam is a pushover in deals. And they don’t want to confuse a jury or arouse a jury’s sympathies on allegations of over-charging.
As an example, I’m intimately familiar with the case of hedge fund manager Raj Rajaratnam, who was convicted on only 8 counts of insider trading. When I started on Wall Street in the mid-1990s, Rajaratnam already had a reputation among those who knew him as pervasively dirty. He didn’t just occasionally get inside information, he worked diligently to seek it out and use it on a large scale. The FBI investigation turned up hundreds, if not thousands, of trades where there was some suspicion of impropriety. But they only prosecuted 8 because that was enough to send Rajaratnam to jail for what could have been an effective death sentence (his health is poor and 11 years in prison has an excellent chance of killing him).
It’s possible that the Feds will pursue money laundering charges against mid-level or some high-level Nexians to get them to flip on Raniere. But it’s entirely possible that they’d use money laundering to get Nancy Salzman and other top lieutenants, since they could conceivably raise the argument that they were under Raniere’s mental sway and they aren’t engaged in tax evasion since they received none of the benefits of the money that they allegedly moved. In that case, money laundering charges would be harder to claim duress for. Every time you return to the US, the immigration form they hand out on the planes tells you that you need to declare cash over $10,000. So you know you’re breaking the law. And if you do it multiple times, there’s an open and shut case of money laundering. The “mental sway” argument could come into play during sentencing, but it won’t mitigate conduct that’s blatantly and obviously wrong based on information available to the defen
