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U.S. v. NORBERTO

June 15, 2005.

UNITED STATES OF AMERICA,
v.
MICHAEL NORBERTO, ROBIN HANSSON, and CHRISTINE FORSYTHE, Defendants.



The opinion of the court was delivered by: ARTHUR SPATT, District Judge

MEMORANDUM OF DECISION AND ORDER

This case involves allegations that the defendants Michael Norberto ("Norberto"), Christine Forsythe ("Forsythe"), and Robin Hansson ("Hansson"), collectively (the "Defendants"), operated an illegal gambling enterprise in the United States that sold shares in a lottery conducted by the Government of Spain to customers around the world. On January 21, 2005, Hansson pleaded guilty to the second count in the indictment which charged the Defendants with a money laundering conspiracy in violation of 18 U.S.C. §§ 1956(a)(1)(A)(i) and 1956(a)(2)(A).

Presently before the Court are motions by Norberto and Forsythe pursuant to Rule 12(b) of the Federal Rules of Criminal Procedure seeking an order dismissing the Indictment in its entirety.

  I. BACKGROUND

  For purposes of this motion, unless otherwise stated, the allegations in the Indictment are deemed to be true. See United States v. Velastegui, 199 F.3d 590, 592 n. 2 (2d Cir. 1999). The Court will now review the allegations in the indictment.

  In or about and between 1991 and September 2002, the Defendants allegedly operated an illegal gambling enterprise in the United States that sold shares in a lottery conducted by the Government of Spain to customers around the world. The Indictment alleges that this operation was facilitated through a "complex web of companies controlled by the defendants and their coconspirators" and that these corporate entities were utilized to conceal the existence of the criminal enterprise and launder the proceeds.

  A. The Parties and Relevant Entities

  With regard to the Defendants and the relevant companies, it is alleged that Norberto owned Package Fulfillment Center, Inc. ("PFC") and Tech Mailing Services, Inc. ("Tech Mailing"), both located in Bohemia, New York. Hansson was the President and Chief Executive Officer of Profile Direct, Inc. ("Profile Direct"), a New York corporation, and Value Stores, Inc. ("Value Stores"), a Delaware corporation. Both Profile Direct and Value Stores were located in Bohemia, New York. Forsythe was the President and Chief Executive Officer of CF International Marketing, Inc. ("CFI"), a New York corporation. The Indictment also alleges that the Defendants utilized various entities in Curacao, Canada, and Australia to process payments by the customers of the operation.

  B. The Lottery

  Each December, the Government of Spain conducted an annual lottery drawing called "El Navidad." The top prize in the drawing is called "El Gordo," meaning the "Fat One." Tickets were sold to the public through official lottery offices in Spain. Each ticket entitled the holder to a chance of winning a share of the El Navidad prizes. Although the rules and regulations of El Navidad prohibited individuals from taking tickets outside the country, it is undisputed that this lottery is played by people throughout Europe and around the world. As noted in The Irish Times:

  Almost three-quarters of the tickets [from the 2004 lottery] went to outsiders, and this year for the first time Sort, [a small Pyrennean village whose name means" lucky" in Catalan], went onto the internet. Hopeful punters from the United States, Japan, Germany, France or Italy as well as many other parts of Spain, purchased their tickets on line spreading the millions around the globe. . . . (12/23/04 Ir. Times 9, 2004 WL 104002722, "Lucky little village Sort lives up to its name in big lottery.").

  C. The Test Mailings and the Alleged Scheme

  In or about 1991 and 1992, co-conspirators John Does #1, #2, and #3, along with others, conducted "test mailings" in Europe consisting of solicitations ("Lottery Solicitations") to purchase chances, shares, and interests in the El Navidad Lottery, which was referred to in promotional materials as the "El Gordo Lottery" ("El Gordo Interests"). These test mailings were allegedly conducted to determine the profitability of soliciting the purchase of El Gordo Interests outside of Spain.

  Following the test mailings, John Doe #1, John Doe #2, and John Doe #3, together with others, set up two organizations to conduct mass mailings of Lottery Solicitations for the purchase of El Gordo interests. One of these organizations was based in the United States (the "U.S. Operation") and offered El Gordo interests under promotional names, including Worldwide Lottery Commission (the "WLC Promotion"). The second organization was based in Canada (the "Canadian Operation") and offered El Gordo interests under promotional names including Transworld Lottery Commission (the "TLC Promotion.").

  The Indictment alleges that between August 1993 and May 1999, the U.S. Operation was directed and supervised by Norberto and Hansson. Beginning in or about 1999, the U.S. Operation was also directed and supervised by Forsythe. According to the Indictment, these individuals, through Profile Direct, Value Stores and CFI, caused the Lottery Solicitations to be sent worldwide to individuals, exclusive of United States residents, allegedly in violation of laws prohibiting the importation and transportation of lottery tickets and other shares and interests in lotteries.

  The Indictment further alleges that in order to avoid detection and minimize the impact of potential law enforcement seizures of Lottery Solicitations and related mailings to and from their customers, including customer payments and mailings acknowledging receipt of payment (collectively, "Lottery Mailings"), and to facilitate participation in the gambling operation, the Defendants and others allegedly: (1) used multiple vendors in the United States to print the Lottery Mailings and to forward them to different foreign locations for distribution; (2) contracted with multiple commercial mail receiving agencies in the United States and abroad, including Mail Boxes, Etc., and Packaging Plus, to secure locations and addresses for the receipt of responses and remittances to the Lottery Solicitations; and (3) included in the Lottery Solicitations facsimile numbers associated with Value Stores located in Bohemia, New York and entities in Australia and Canada to which credit card payments could be submitted for participation in the gambling operation.

  To further conceal the fact that they were operating an illegal gambling enterprise in the United States, the Indictment alleges that the Defendants falsely represented that they and the companies they directed, namely Profile Direct, Value Stores, and CFI, were acting as "agents" on behalf of an off-shore marketing company named International Marketing Center, Inc. ("IMC"), located in Curacao. It is further alleged that the Defendants disguised the proceeds of their enterprise as royalty payments, consulting fees, and commissions paid to them from IMC.

  The Defendants also used Pacific Network Services, Ltd. ("PNS"), a Canadian entity, to process checks and money orders submitted for purchase of El Gordo Interests. They also contracted with two Australian companies, namely USA Credit Card Services, Inc. ("USA Credit") and Terry Morris International, Inc. ("Morris International'), to collect the credit card authorizations received from the U.S. Operation by facsimile and mail.

  The Indictment alleges that in or about and between November 1994 and December 1999, the U.S. Operation collected over $16 million from customer responses mailed as part of the WLC Promotion.

  D. The Wire Transfers

  The Indictment further alleges that between November 1994 and December 1999, PNS collected more than $4.7 million from the U.S. Operation. Hansson and Forsythe caused wire transfers from the PNS Account in Canada to the ...


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