New Jersey purveyors of knock-off perfumes allegedly laundered millions in street cash for narcotics traffickers from Mexico and elsewhere through major financial institutions, passing as much as $24 million in drug money in thousands of transactions through Bank of America, court papers say.
Federal prosecutors moved to confiscate more than $3 million in remaining funds from owners and employees of Excell Brands this month. The Princeton, N.J company sells imitations of designer fragrances.
Attorneys for four of the suspects said their clients denied the charges and claimed the government’s case contained substantial weaknesses.
The federal action comes a year after the company settled with the “Jersey Shore” television personality Nicole Polizzi, best known as Snooki, in a trademark lawsuit over the use of her name in promoting a fragrance.
The case calls attention to the frequency with which potentially tainted funds can pass through giant retail and investment banking institutions despite a Justice Department-led crackdown on money laundering in recent years and a renewed focus on compliance within the financial services industry.
A separate drug forfeiture case in Massachusetts in 2013 revealed that a Colombian cartel had used Citibank, Wachovia, Deutsche Bank and Bank of America to move millions in cash from American street corners back to Bogotá. However, US authorities in that case have sought to settle with Colombian currency brokers who denied the allegations, and no charges were filed against any bank.
Justice Department prosecutors in New Jersey on June 11 sought the forfeiture of $3.4 million at Bank of America as well as at JP Morgan Chase, UBS Bank, Wells Fargo, Morgan Stanley, Valley National Bank and other lenders, which they said held the laundered proceeds from illegal drug sales.
The action followed the arrests in January of six of the owners and employees of Excell. They have been released on bond ranging from $500,000 to $1 million.
Federal telephone intercepts recorded known drug traffickers and money launderers passing the contact details for Excell as a partner in moving cash off the streets, according to a complaint.
During surveillance, federal agents said they observed shipments of cash by duffle bag and plastic sack at the company’s offices and overheard nervous telephone calls in thinly veiled code referring to cash shipments as “baseballs” and “teddy bears.”
Between October 2012 and January of this year, $24.4 million — largely but not entirely the alleged proceeds of drug trafficking — passed through an Excell account at Bank of America, with nearly 1,200 cash deposits totaling $6.1 million, all of which were under the legal reporting threshold of $10,000, prosecutors said.
The so-called “structuring” or “smurfing” of transactions to avoid federal reporting requirements and detection by federal authorities is a crime.
Prosecutors said that the suspicious deposits were made by people and businesses unconnected to the perfume industry or Excell Brands. The deposits were made at out-of-state branch locations where Excell had no offices, prosecutors said.
Diane Hamerling, the company’s assistant comptroller and the wife of its president, Wayne Hamerling, allegedly used mothballs, dryer sheets and vacuum-sealed bags to carry and deposit more than $300,000 in cash at Valley National Bank in December 2013, they said.
The odor of cocaine and heroin can be masked by packing them in this way.
Thomas R. Calcagni, an attorney for Wayne Hamerling and a former New Jersey federal prosecutor, said the money laundering allegations against his client were entirely untrue. Every payment to the company, Calcagni said, was for the purchase and delivery of perfumes.
“The flawed and hastily-conceived allegations against the Hamerlings are based on a fundamental misunderstanding of the nature of the fragrance business,” he wrote in an email.
“Specifically, in both international and domestic markets, a significant portion of the fragrance business is ordinarily transacted in cash, and there is nothing unlawful about that.”
Lee D. Vartan, who represents Luis Rodriguez, an Excell salesman accused of being the company’s contact for traffickers, said his client also denied the charges.
“I think there is plenty of room for defense here,” said Vartan.
As with other drug forfeiture cases, the transactions raised the possibility that banks had failed to detect suspicious activities and had themselves fallen afoul of money laundering laws.
In 2012, HSBC admitted that it had failed to monitor the passage of $200 trillion in transactions, part of a sprawling investigation into the bank’s activities around the world, and paid a $1.92 billion fine.
Matthew Reilly, a spokesman for the New Jersey federal prosecutor’s office, did not address questions on the scope of any related investigations.
“No charges have been filed against any financial institutions,” he said in an email.
Representatives for Bank of America and Morgan Stanley did not immediately respond to requests for comment while JP Morgan Chase and Wells Fargo declined to comment.
Karina Byrne, a spokeswoman for UBS, said her bank was vigilant in monitoring transactions and training employees.
“UBS is committed to the prevention of money laundering and has no interest whatsoever in funds deriving from illicit sources,” she wrote in an email.
Valley National Bank said it was committed to anti-money laundering compliance but referred questions on any criminal matter to federal authorities.
James Dowling, a former White House advisor on drug policy and money laundering, told 100Reporters that the circumstances of the Excell case, as described by a reporter, would not on their face demonstrate wrongdoing by a particular bank.
The banks may have properly alerted authorities or been instructed by investigators not to close the accounts while the investigation was in progress, he said.
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