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
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.
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.
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
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
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
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 ...