President Obama Adds International Drug “Kingpin” To OFAC List

BOSTON - Today President Barack Obama identified Mihael Karner as a Specially Designated Narcotics Trafficker, or “drug kingpin,” for purposes of sanctions under the Foreign Narcotics Kingpin Designation Act (the “Kingpin Act”).

This announcement, along with the identification of five other foreign persons and organizations, is only the 15th Presidential determination under the Kingpin Act since June 2000. Karner’s designation is based on evidence that, since 2000, Karner has run a global distribution network for anabolic steroids that has sold millions of steroid dosages worldwide, including to thousands of customers in the United States.

The Kingpin Act is administered by the U.S. Department of Treasury’s Office of Foreign Asset Control (“OFAC”). It is designed to bring financial pressure against high-level foreign drug traffickers, terrorists, and related organizations by blocking their interactions with the U.S. financial system. Other recent Kingpin Act designations have included Mexican cartel members and related corporate entities, and persons and entities related to Syria and Iran. Today’s action against Karner generally bars U.S. persons and companies from conducting financial or commercial transactions with Karner, and freezes any assets Karner may have that are within U.S. jurisdiction.

The six drug kingpin designations announced today were recommended to the President through an interagency consultation process among the Departments of Treasury, State, Defense, Justice, and the Central Intelligence Agency. Although not required by the Kingpin statute, the Department of Homeland Security and the Office of the Director of National Intelligence were also consulted.

Karner, a Slovenian national, and two co-conspirators, Alenka Karner and Matevz Karner, were indicted in March 2010 on charges of conspiracy to launder money, conspiracy to distribute controlled substances, and conspiracy to import controlled substances to the United States. Based on allegations in the unsealed indictment and in extradition paperwork submitted to the Federal Republic of Austria in June 2011, beginning in about 2000, Karner set up a network of hundreds of web sites and numerous corporate shells to facilitate selling anabolic steroids to customers in any country. Karner sourced precursor chemicals for his products from Southeast Asia, among other places, after which the steroids were assembled and packaged in a factory in Eastern Europe. As internet orders were received, Karner shipped the steroids in bulk to “remailers” in the United Kingdom, Italy, Greece and elsewhere, who repackaged the drugs as individual orders and mailed them out. Through this method Karner was able to disguise the true geographical origins of the drugs.

It is alleged that since 2000, through the use of a constantly shifting network of web sites, Karner shipped tens of thousands of anabolic steroid dosages to thousands of customers in the United States, including to customers in Massachusetts. Nationwide, these customers came from all walks of life, including amateur athletes, weight lifters, people recovering from injuries, doctors and others.

Karner allegedly laundered the proceeds of his steroid trafficking using bank accounts in Austria, Bulgaria and elsewhere, and through the use of internet-based payment processors in France, Iceland, Germany and Luxembourg. Karner and his co-conspirators hid the true ownership of his web sites and accounts by setting up corporate shells in Gibraltar, Panama, Liechtenstein, Dominica, Hong Kong, the Seychelles, and elsewhere. Much of the activity was run out of a post office box based in Klagenfurt, Austria, near the Slovenian border. According to the indictment, Karner has received over $50,000,000 in illicit proceeds from his trafficking activities. Karner has also used drug trafficking profits to buy, among other things, a ski lodge in the Austrian Alps, beachfront lots in Croatia, substantial real property in Ljubljana, Slovenia, and a yacht moored on the Croatian coast.

Karner is presently a fugitive. Based on a formal extradition request from the United States, in December 2011 Karner was arrested at his ski lodge in Austria and detained by Austrian authorities. In March 2012, U.S. Marshals were sent to Vienna, Austria, to take custody of Karner and a co-conspirator with whom he had been arrested, but at the last moment an Austrian court stayed extradition. After being allowed to pay 1,250,000 Euros (about $1,630,000) in bail, Karner fled across the border to Slovenia, where he now resides and continues to operate.

Karner has been the subject of prior European investigations, including efforts undertaken by the Italian Carabinieri in 2003 and the Austrian State Police in 2005.

If convicted on the U.S. charges, Karner faces up to 20 years in prison on the charge of conspiring to launder money, to be followed by three years of supervised release and a fine of $500,000 or twice the value of the property involved in the offense. On the charges of conspiracy to distribute and import controlled substances, Karner faces up to 10 years in prison, up to three years of supervised release and a fine of up to $500,000.

United States Attorney Carmen M. Ortiz, John J. Arvanitis, Special Agent in Charge of the Drug Enforcement Administration - Boston Field Office and John Gibbons, U.S. Marshal for the District of Massachusetts made the announcement today. The case is being prosecuted by Assistant U.S. Attorney Andrew E. Lelling of Ortiz’s Economic Crimes Unit.

The details contained in the indictment and extradition paperwork are allegations. The defendant is presumed innocent unless proven guilty beyond a reasonable doubt in a court of law.