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UNITED STATES v. COLE

June 7, 1989

UNITED STATES OF AMERICA
v.
HUBERT FRANCIS COLE, a/k/a "Dr. Hugh Cole" a/k/a "Milutin Colovic," VJEKOSLOV SPANJOL, a/k/a "V.J." a/k/a "Slavko," BAHRUDIN BIJEDIC, a/k/a "Burri," LARRY CARD, LBS BANK OF NEW YORK, INC., VINKO MIR


Jan E. DuBois, United States District Judge.


The opinion of the court was delivered by: DUBOIS

JAN E. DUBOIS, UNITED STATES DISTRICT JUDGE

 Presently before the Court are the pretrial motions of defendants Bahrudin Bijedic, Vinko Mir and LBS Bank of New York, Inc. (1) to inspect the grand jury testimony, or, in the alternative, for an in camera inspection of the grand jury testimony by the Court; (2) to dismiss the superseding indictment; and (3) to sever the trial. In addition, the Court has before it the pretrial motions of defendant Bahrudin Bijedic (1) to transfer venue; (2) to recognize the applicability of consular immunity; and (3) to recover items wrongfully seized. Oral argument was held on these motions on May 9, 1989.

 I. FACTS :

 The alleged facts of this case, as set forth in the superseding indictment and the submissions of counsel, may be summarized as follows:

 On or about July 9, 1987, an undercover Customs agent, posing as a financial consultant rendering services to organized crime figures, contacted an individual referred to as "R.G." in the superseding indictment. At this meeting, which took place in Delaware, the agent stated that he wanted to convert a large amount of United States currency in small bills into larger bills for transportation out of the country.

 R.G. put the Customs agent in touch with defendant Larry Card. Card stated that he was an international banker and could help the agent transport the money overseas. Card also put the Customs agent in touch with defendant Hubert Francis Cole. In a series of meetings, Cole outlined a method of laundering large amounts of cash without filing the reports required by the United States government.

 On October 22, 1987, Cole received and transported $ 50,000 in United States currency from Philadelphia to Bermuda without filing a Report of International Transportation of Currency or Monetary Instruments (hereinafter "CMIR Form") or a Currency Transaction Report (hereinafter "CTR") as required by law.

 On November 19, 1987, Cole received and transported $ 100,000 from Philadelphia to Bermuda without filing a CMIR Form or a CTR. On November 21, 1987, Cole met defendant Vjekoslov Spanjol in Bermuda. Cole and Spanjol travelled with the $ 100,000 from Bermuda to London, Great Britain and then to Zagreb, Yugoslavia. While in Yugoslavia, they deposited $ 90,000 in the Privredna Banka in Yugoslavia. On December 14, 1987, Cole sent to Philadelphia a copy of a document authorizing the wire transfer of $ 85,000 from the Privredna Banka in Yugoslavia to a bank in Bermuda.

 On January 19, 1988, the Customs agent met with Cole in Philadelphia to discuss smuggling large sums of cash from the United States using a consular officer of the Yugoslavian government. Over the course of the next three days, Cole received approximately $ 200,000 and transported the cash to Yugoslavia without filing a CMIR Form or a CTR. Cole also received $ 2,000 in cash as an advance commission for the laundering trip.

 On February 18, 1988, the Customs agent introduced Cole to an undercover agent of the Internal Revenue Service, Criminal Investigation Division, as the Custom agent's superior. At that meeting, Cole stated that he could smuggle money out of the United States into Yugoslavia as a diplomatic courier by sealing the money in a diplomatic pouch. Approximately one week later, Cole gave the Customs agent a check drawn on Jugo Banka Agency, Inc., New York, for $ 198,000, which represented a portion of the $ 200,000 smuggled to Yugoslavia on January 22, 1988. The next day, Cole received and transported $ 200,000 in cash from Philadelphia to Yugoslavia without filing a CMIR Form or a CTR. Cole was also paid $ 10,000 in cash as the commission balance from the previous funds that Cole had laundered.

 On March 22, 1988, Cole met with an officer of defendant LBS Bank of New York, Inc. and opened a checking account in the name of Lehman, Kuhn Associates, Ltd. Cole signed the name "Milos Vrenc" on the signature card for the account. On March 24, 1988, the IRS agent and Cole met with an officer of LBS Bank. During that meeting, the IRS agent deposited $ 53,500 in cash in LBS Bank and received a bank check in the amount of $ 50,000.

 On May 11, 1988, Mir met with the IRS agent and discussed the fact that the CTRs filed by LBS Bank on April 13, 1988 contained material omissions and misstatements of fact. Mir reassured the IRS agent that the CTRs would not be changed and that bank regulators would not discover the inaccuracies.

 On April 9, 1988, Cole and Spanjol received and transported $ 300,000 in cash from Philadelphia to Yugoslavia without filing a CMIR Form or a CTR. On April 11, 1988, Spanjol deposited $ 299,500 in cash in a bank in Yugoslavia. On April 13, 1988, Spanjol caused $ 299,000 of funds held in an account at Ljubljanska Banka, the Yugoslavian parent company of LBS Bank, to be transferred by wire to Cole's account with LBS Bank. On April 28, 1988, Cole met with the Customs agent in Philadelphia and gave the agent a check drawn on the LBS Bank for $ 300,000.

 During the trip to Yugoslavia on April 9, 1988, Cole and Spanjol transported two Sea Pak 25 Closed Circuit Rebreather Scuba Units. The rebreathers are classified as special warfare equipment and require a special export license which Cole and Spanjol did not acquire. The rebreathers were delivered to Cole and Spanjol through an agent located in West Germany.

 On August 11, 1988, Cole, Spanjol and the Customs agent met with defendant Bahrudin Bijedic, the Consul-General of Yugoslavia, in Chicago, Illinois. On that date, Cole brought a trunk containing $ 500,000 in cash to the Consulate General of Yugoslavia where seals with the printing of the Consulate General of Yugoslavia were affixed to it; the cash had been supplied to Cole by the Customs agent. Bijedic then drove Cole, Spanjol, the Customs agent and the trunk containing the cash to O'Hare International Airport in Chicago. En route, Cole gave the Customs agent a copy of a letter bearing Bijedic's signature that purported to notify the United States Department of State that Spanjol and Cole were assigned to the diplomatic service of Yugoslavia as couriers. In the letter, Cole was identified as "Milutin Colovic." Cole and Spanjol then transported the $ 500,000 from Chicago to Yugoslavia without filing a CMIR Form or a CTR.

 On October 18, 1988, Cole, Spanjol, Bijedic and the Customs agent met in Chicago. They discussed Bijedic's continued assistance in exporting millions of dollars in United States currency without filing the reports required by law.

 On December 1, 1988, Cole and Spanjol met with the Customs agent at Philadelphia International Airport for the purpose of transporting $ 2,000,000 to Yugoslavia without filing the necessary reports. Bijedic travelled to Palwaukee Airport near Chicago on that same date to meet with Cole, Spanjol and the Customs agent to assist them in transporting the money to Yugoslavia.

 On that same day, a federal grand jury returned a twenty-one count indictment against Cole, Spanjol, Card, Bijedic, Mir and LBS Bank. On December 6, 1988, Magistrate Richard A. Powers III ordered that Cole and Spanjol be detained pending trial pursuant to 18 U.S.C. § 3142. Those detention Orders were affirmed by this Court on December 23, 1988 and by the Third Circuit on January 10, 1989.

 On April 6, 1989, a federal grand jury returned a twenty-two count superseding indictment against Cole, Spanjol, Card, Bijedic, Mir and LBS Bank. Count I of the superseding indictment charges all the defendants with conspiracy to defraud the United States in violation of 18 U.S.C. § 371. In addition, Cole is charged with six counts and Spanjol is charged with two counts of failing to file United States Customs currency reports in violation of 31 U.S.C. §§ 5316(a)(1)(A) and 5322(b). Cole is charged with five counts, Spanjol is charged with three counts, and Bijedic is charged with one count of laundering proceeds of an unlawful activity in violation of 18 U.S.C. § 1956. Cole is charged with six counts and Spanjol is charged with two counts of failing to file Internal Revenue Service currency transaction reports in violation of 31 U.S.C. §§ 5313 and 5322(b). Cole is charged with three counts and Spanjol is charged with one count of interstate travel in aid of racketeering in violation of 18 U.S.C. § 1952. Cole and Spanjol are charged with one count of violating the Arms Export Control Act, 22 U.S.C. § 2778.

 On April 18, 1989, Cole entered a plea of guilty to the charges in the superseding indictment. The remaining defendants have not been arraigned on the superseding indictment.

 II. Motions to Inspect Grand Jury Testimony :

 Two motions are before the Court which seek an inspection of the grand jury testimony by the defendants, or in the alternative, an in camera inspection of the grand jury testimony by the Court. One motion was filed jointly by Mir and LBS Bank, and the other was filed by Bijedic. Both motions allege that the Government failed to present substantial and material exculpatory evidence to the grand jury.

 The Third Circuit has not decided whether a prosecutor has a duty to present exculpatory evidence to a grand jury. U.S. v. Ismaili, 828 F.2d 153, 165 (3d Cir. 1987), cert. denied, 485 U.S. 935, 108 S. Ct. 1110, 99 L. Ed. 2d 271 (1988). However, the Third Circuit recognized that a majority of courts considering the issue have decided that such a duty does not exist. Id., 828 F.2d at 165 n.13.

 The district courts in this circuit have rejected such a blanket rule. Generally, courts in this circuit have held that when a prosecutor is aware of substantial exculpatory evidence, the evidence should be disclosed to the grand jury if it could reasonably cause the grand jury not to indict. United States v. Litman, 547 F. Supp. 645, 649 (W.D. Pa. 1982). See also, United States v. Fisher, 692 F. Supp. 495, 504 (E.D. Pa. 1988); Kudisch v. Overbeck, 618 F. Supp. 196 (D.N.J. 1985). To prevail on their motions to have the Court inspect the grand jury testimony, the defendants must show that the prosecutor's failure to introduce the evidence was deliberate. Litman, 547 F. Supp. at 650.

 The defendants have a heavy burden of proof. Such a standard of proof is necessary to prevent the grand jury proceedings from becoming a "minitrial" on the merits and forcing the trial judge to review the grand jury minutes every time the defendant alleges that exculpatory evidence was not presented to the grand jury. See id., 547 F. Supp. at 649. The rationale for the rule is clear-"Even if an indictment is filed, the defendants could only be found guilty after a guilty plea is accepted or after the completion of a criminal trial in which guilt was established beyond a reasonable doubt." Id.

 The allegations made by Bijedic do not require this Court to conduct an examination of the grand jury testimony. Bijedic alleges that the Government withheld evidence that the seals on the trunk containing $ 500,000 in cash, which was transported from Chicago to Yugoslavia on August 11, 1988, were not official Yugoslavian seals but were seals purchased by Cole from a stationary store. In addition, Bijedic alleges that the Government knew that his signature on the alleged courier letter was a forgery.

 The facts offered in support of Bijedic's allegations are insufficient to cause the Court to conduct an in camera inspection. Bijedic has failed to show that the Government knew of any exculpatory evidence. Specifically, there is no evidence that the Government knew the seals were not authentic when it presented the case before the grand jury. The evidence regarding the seals suggests, at most, that the Government conducted a negligent investigation by failing to discover what an authentic Yugoslavian diplomatic seal looked like.

 Assuming, arguendo, that the diplomatic seals were not authentic and that Bijedic's signature was forged, and that the Government had knowledge of both of these facts, an inspection of the grand jury testimony is still not warranted. To prevail on his motion, Bijedic must show that the exculpatory evidence could reasonably have led the grand jury not to indict if the evidence was presented. This he failed to do because the charges against him are not limited to the diplomatic seals or the courier letter. After examining the superseding indictment, the Court determines that the presentation of the alleged exculpatory evidence would not reasonably have led the grand jury not to indict.

 The allegations made by Mir and LBS Bank do not require this Court to conduct an examination of the grand jury minutes. Mir and LBS Bank contend that some of the tapes made by the Government exculpate them. They conclude that the fact of the indictment by the grand jury establishes that the Government failed to present the tapes with the exculpatory evidence to the grand jury. Mir and LBS Bank point to the tapes made by the Government on May 11, 1988 and June 1, 1988.

 After having reviewed the transcripts of the tapes made on those two days, the Court concludes that the grand jury would have indicted Mir and LBS Bank whether or not those tapes were played. While some statements made on those days are favorable to Mir and LBS Bank, the statements do not exonerate Mir and LBS Bank of all participation in the alleged conspiracy.

 The allegations of Mir and LBS Bank are strikingly similar to those presented to Judge Brotman in United States v. Kraselnick, 702 F. Supp. 480 (D.N.J. 1988). In Kraselnick, the defendants, a bank and several officers of the bank, were indicted for failing to file CTRs in connection with several cash transactions in violation of, inter alia, 18 U.S.C. § 371. The defendants moved to dismiss the indictment. They contended that the Government failed to present "overwhelming proof" that the defendants did not have the requisite specific intent to commit the crimes charged in the indictment. Id., 702 F. Supp. at 486. The motion to dismiss the indictment was denied, without any inspection of the grand jury testimony by the court, on the ground that the allegations were insufficient. Id.

 Bijedic, Mir and LBS Bank have failed to allege facts sufficient to warrant an in camera inspection of the grand jury minutes by the Court. A fortiori, they have failed to allege facts sufficient to require the Court to order an inspection of the testimony by the defendants. Accordingly, their motions for inspection of grand jury testimony will be denied. *fn1"

 III. Motions to Dismiss the Superseding Indictment :

 Two motions are before the Court which seek to have the superseding indictment dismissed. One motion was filed by Mir and LBS Bank, and the other was filed by Bijedic. Those motions will be denied.

 Second, Mir and LBS Bank seek to have the superseding indictment dismissed for failure to charge Mir and LBS Bank with a crime. The superseding indictment charges that Mir and LBS Bank knowingly filed CTRs for the transactions of March 24, 1988 and April 1, 1988 which contained material omissions and ...


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