Mexican Businessman Pleads Guilty To Orchestrating $20 Million Tax Fraud Against The Government Of Mexico

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that CARLOS DJEMAL NEHMAD pled guilty to wire fraud in connection with a scheme to fraudulently obtain over $20 million in tax refunds from the government of Mexico by creating the appearance of legitimate business activity through the transfer of over $100 million through dozens of shell companies in the United States and Mexico.  DJEMAL’s plea was entered earlier today in Manhattan federal court before U.S. District Judge Alvin K. Hellerstein. 

Acting U.S. Attorney Joon H. Kim said:  “As the defendant admitted today, he led an international scheme that used dozens of shell companies in the United States to defraud the Mexican government of millions of dollars.  We are committed to holding accountable those who use the United States financial system to perpetrate fraud.” 

According to the allegations contained in the Indictment to which DJEMAL pled guilty, statements made during the plea and other court proceedings, and other documents in the public record:

Beginning in June 2011 through May 2016, DJEMAL orchestrated a scheme to defraud the Mexican government of tax revenue relating to Mexico’s value added tax (“VAT”).  The Mexican government imposes VAT on goods sold from one Mexican company to another; however, when certain goods (such as cellular phones) are exported from Mexico, the previously paid VAT is refunded to the exporter. DJEMAL created companies in Mexico and recruited individuals in the United States to create and control dozens of companies in the United States (“Front Companies”) purportedly doing business as importers and exporters of cellular phones in order for DJEMAL to fraudulently obtain VAT refunds from the Mexican government.

In order to carry out the scheme, DJEMAL caused Front Companies in Mexico to purchase outdated cellular phones from other companies seeking to sell outdated inventory. DJEMAL then caused these phones to be exported to Front Companies in the United States owned and operated by others he recruited to the scheme. During the export process, DJEMAL obtained fraudulent invoices and created export documents that falsely inflated the value of the phones being exported, thereby enabling him to fraudulently seek inflated VAT refunds from the Mexican tax authority.

Once the phones were shipped to the United States, they were transferred to one or more Front Companies in the United States only to be shipped back to a different Front Company in Mexico. Through this process, the phones were shipped repeatedly in a circular fashion between Front Companies controlled by DJEMAL and his co-conspirators in Mexico and the United States, enabling DJEMAL to obtain multiple fraudulent VAT refunds for the same phones.

In order to create the appearance of legitimate cell phone sales, each transfer of phones was generally accompanied by a transfer of funds to and from accounts held in the name of the relevant Front Companies. As part of the scheme, each co-conspirator who controlled a Front Company receiving funds as part of the scheme retained approximately 1 percent for his participation in the scheme.

Between approximately June 2011 to approximately May 2016, DJEMAL and his co-conspirators moved more than $100 million dollars through dozens of accounts maintained by Front Companies in this fashion, including through accounts maintained at a financial institution in the Southern District of New York, in order to obtain over $20 million in VAT refunds from the Mexican government.

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DJEMAL, 56, of Mexico City, pled guilty to one count of wire fraud.  DJEMAL faces a maximum sentence of 20 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge. Sentencing is scheduled for January 19, 2018, before Judge Hellerstein. As part of his plea, DJEMAL agreed to forfeit cash, artwork, and his shareholding in Investabank, a Mexican bank in which DJEMAL was part owner. 

Co-defendants Max Fraenkel and Daniel Blitzer previously pled guilty to wire fraud and money laundering and are cooperating with the government.  The cases of co-defendants Braulio Lopez and Roberto Moreno remain ongoing. 

Mr. Kim praised the outstanding work of the Internal Revenue Service, Criminal Investigations, the Department of Homeland Security, Homeland Security Investigations, the Mexican Tax Administration Service, and the Mexican Secretary of Finance and Public Credit for their investigative efforts and ongoing support and assistance with the case.

The prosecution of this case is being overseen by the Office’s Money Laundering and Asset Forfeiture Unit.  Assistant U.S. Attorneys Daniel M. Tracer and Kiersten A. Fletcher are in charge of the case.