FBI, IRS allegedly uncover money laundering scheme

The Federal Bureau of Investigation and the U.S Internal Revenue Service-Criminal Investigation unit have allegedly uncovered a long-ongoing money laundering, wire transfer, and tax evasion schemes within the CNMI involving local political figures and the company that owns the CNMI’s exclusive gaming license.

The U.S. government, through the U.S. Attorney’s Office, filed last Dec. 30, 2022, a complaint for forfeiture with the U.S. District Court for the NMI for the over $310,000 the court previously seized from a Bank of Saipan account held in the name of “MCS.”

“MCS” is a consultancy company whose head, A.Y, is believed to have been actively involved in the recently discovered money laundering and wire fraud schemes uncovered by the FBI and IRS-CI within the CNMI involving local political figures and what the complaint states as the company that was awarded the CNMI’s exclusive gaming license, presumably referring to Imperial Pacific International CNMI LLC. The complaint did not directly name IPI but it is the only casino license holder in the CNMI. According to the complaint filed by attorneys Shawn Anderson Jessica F. Wessling, Eric O’Malley, and Mikel Schwab, the United States filed this civil action to forfeit over $310,000 “defendant funds” seized by the District Court from the “MCS” bank accounts because, following an investigation by the FBI and the IRS-CI, it is believed that the proceeds may have come from/or were used in wire fraud and money laundering schemes involving foreign entities and individuals in the CNMI.

“In the first scheme, defendant funds were transferred in a way that was necessary to enable a fraud upon a government regulatory authority, namely the Commonwealth Casino Commission. In the second scheme, defendant funds were part of and necessary to a long-running and expansive effort to improperly influence government officials for the purpose of obtaining preferential treatment. Finally, A.Y. and MCS used defendant funds to claim false expenses, thus fraudulently reducing tax liability to the CNMI, when in fact those amounts were reimbursed to A.Y,” said the complaint.

According to the complaint, beginning in 2013, the owners and operators of the “company,” presumably IPI and its mother company, IPI Holdings, established relationships with CNMI political figures by sponsoring foreign trips via private jet.

The Imperial Palace‧Saipan of Imperial Pacific International (CNMI) LLC, as shown in a drone file footage taken by BJ Eddy. Check out his YouTube channel at https://youtu.be/bhMPCVsaEzM. (BJ EDDY)

Following the trips, the participating political figures joined other members of the CNMI Legislature to pass a bill that enabled an exclusive gaming license on Saipan. The bill was signed into law in March 2014. However, procedural violations that deprived the public of required notice and other defects resulted in two subsequent bills to correct the errors. The final bill was signed into law in July 2014.

“One of the political figures on the foreign trips played an integral role in passage of the casino enabling legislation,” the suit said.

Approximately one month later, a body of appointed CNMI government officials awarded the exclusive license to the company after the only other bidder was disqualified.

However, months prior to receiving the exclusive license, the company was already paying “MCS” and A.Y., who served as a consultant to the company at a rate of $5,000 per month.

Between 2014 and 2019, the company transferred more than $2 million to MCS and A.Y via checks or wire transfers.

Scheme to defraud the CCC

Between 2014 and 2019, A.Y., MCS, the company, and others devised a scheme to defraud the CNMI and CCC, the complaint suggests.

The alleged scheme involved false statements and the concealment of information that A.Y. and MCS had a duty to disclose to the CCC, with intent to defraud. The essence of the scheme was to materially understate the extent of the services that A.Y. and MCS provided to the company. The effects of the scheme to defraud were to frustrate the CCC’s ability to accomplish its mission of overseeing and regulating the company’s operations and to deprive the CCC of fees to which it was entitled.

Scheme to deprive the people of the CNMI of the right to honest services

Between 2014 and 2019, A.Y., MCS, the political figures involved, the company, and others devised a scheme to deprive the people of the CNMI of the right to honest services by providing a stream of benefits to, for, or on behalf CNMI government officials for the purpose of gaining preferential treatment for the company, the complaint said.

“Bank records and CNMI campaign financial statements show that from in or about June 2014 through in or about January 2019, A.Y. and MCS used funds provided by the company and channeled through MCS accounts to contribute more than $46,000 to various individual candidates, campaigns, inauguration committees, and political parties. These amounts include a $10,000 contribution to an inaugural committee in January 2019. The candidates’ CNMI campaign statements of account frequently failed to disclose A.Y. and MCS’s contributions to their campaigns. During that same period, including until in or about November 2019, A.Y. arranged and at least partially paid for several overseas trips for CNMI government officials, frequently met with government officials for golf, meals, drinking, and karaoke. These payments frequently exceeded $100 and occasionally $1,000,” said the complaint.

According to the plaintiff, CNMI law bars CNMI government officials from accepting non-monetary gifts with value greater than $50; therefore, these payments violated the CNMI government ethics code.

Scheme to defraud CNMI government

Lastly, between April 2016 and June 2019, A.Y. and others devised a scheme to defraud the CNMI government of tax revenue by means of false and fraudulent pretenses.

“A.Y. made materially false statements and omissions on MCS’s 2016, 2017, and 2018 tax returns that deprived the CNMI of substantial tax revenue to which it was entitled, and thereby defrauded the government of CNMI,” said the complaint.