Florida Attorney Charged With Laundering Purported Stock Fraud Proceeds

BROOKLYN, NY - Michael J. Scaglione, Esq., 41, an attorney in Coral Gables, Florida, was arrested this morning on charges that he laundered over $750,000, which he believed were proceeds from a penny stock fraud scheme. The money was, in fact, provided to Scaglione by an undercover law enforcement agent who posed as a criminal stock promoter as part of a sting operation. Scaglione, who is a partner at Scaglione Law Firm, P.A., in Coral Gables, Florida, was arrested after he took possession of an additional $500,000 in cash that he agreed to launder.

The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; George Venizelos, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Toni Weirauch, Special Agent in Charge, United States Internal Revenue Service, Criminal Investigation, New York (IRS).

According to the complaint unsealed this morning in the Eastern District of New York, Scaglione exploited his position as an attorney to launder money through an escrow account for an undercover law enforcement agent (“undercover agent”) who posed as a corrupt stock promoter. In his dealings with Scaglione, the undercover agent represented himself to be a middleman working with corrupt stock brokers who artificially inflated prices for worthless stock in exchange for high commissions. Scaglione agreed to launder what he believed were proceeds of this stock fraud through his attorney escrow account in order to hide that money from the United States Securities and Exchange Commission and the IRS. Scaglione then funneled over $750,000, including $88,000 in cash given to him in a Federal Express box in the lobby of a Miami Beach hotel, through the escrow account into the undercover agent’s bank account in Long Island, New York. Scaglione carefully structured the movement of these funds to avoid triggering financial reporting requirements. In exchange, Scaglione collected over $25,000 in fees. In recorded conversations, Scaglione assured the undercover agent that their conversations were “completely privileged” and that his money was “safe” with Scaglione. When the undercover agent explained to Scaglione that he did not “want to go to jail,” Scaglione stated to the undercover agent that the escrow account was “tight as can be.” Directly prior to his arrest this morning, at a hotel in Miami Beach, Florida, Scaglione accepted an additional $500,000 in cash from the undercover agent, which Scaglione believed to be proceeds from the penny stock fraud.

“As alleged in the complaint, Scaglione hid behind his license to practice law as he threw himself into the purported scheme to launder money. In so doing he crossed the line from attorney to defendant,” stated United States Attorney Lynch. “I would like to thank our partners at the FBI and the IRS for their swift action and effective work on this important investigation.”

FBI Assistant Director in Charge Venizelos stated, “As alleged, the defendant breached the code of ethics for his profession and flagrantly broke the law, in laundering what he believed to be the proceeds of criminal activity. Contrary to the counsel he gave, the attorney-client privilege is not a veil of secrecy to hide criminal conduct.”

IRS Special Agent in Charge Weirauch stated, “Criminal attempts to conceal reportable financial transactions from government agencies, including the Internal Revenue Service and the Securities and Exchange Commission, may appear to be victimless crimes to some. However, they erode our nation’s financial systems and ultimately harm the American public. In particular, the laundering of proceeds from illegitimate activities that are nevertheless taxable threatens our voluntary tax compliance system; failure to investigate and prosecute these types of crimes would erode public confidence.”

The defendant is scheduled to appear tomorrow before United States Magistrate Judge Alicia M. Otazo-Reyes at the United States Courthouse in Miami, Florida, for removal proceedings to the Eastern District of New York.

The charges in the complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty.

The government’s case is being prosecuted by Assistant United States Attorney Jacquelyn M. Kasulis..

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency task force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes.

The Defendant

Name: MICHAEL J. SCAGLIONE
Age: 41
Miami Springs, Florida