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Manhattan U.S. Attorney Charges Colorado Man as Accomplice of Hassan Nemazee in Bank Fraud Ponzi Scheme
PREET BHARARA, the United States Attorney for the
Southern District of New York, and JOSEPH M. DEMAREST, JR., the
Assistant Director-in-Charge of the New York Office of the
Federal Bureau of Investigation ("FBI"), announced the arrest
today of SHAHIN KASHANCHI in connection with a scheme to defraud
Citibank, N.A. ("Citibank") and HSBC Bank USA, N.A. ("HSBC").
According to the Complaint filed in Manhattan federal court and
other documents:
KASHANCHI is the brother-in-law of HASSAN NEMAZEE, who
was arrested on August 25, 2009, and subsequently indicted for
defrauding Citibank, HSBC, and Bank of America, N.A., of more
than $290 million in loan proceeds. NEMAZEE's scheme depended on
his use of fraudulent documents, including phony account
statements and phony correspondence bearing forged signatures.
These fraudulent documents were designed, in substance and in
part, to convince the various banks to whom he submitted the
documents that NEMAZEE had assets totaling hundreds of millions
of dollars and that he had placed many millions of dollars of
United States Treasury securities in certain specified accounts
as collateral for the loans from the various banks.
In fact, neither those collateral accounts nor the
hundreds of millions of dollars in claimed assets existed. As
alleged in the Nemazee Indictment, NEMAZEE made partial
repayments on his borrowings from Bank of America with proceeds
of his fraud on Citibank, made partial repayment on his borrowing from Citibank with proceeds of his fraud on Bank of America, and
repaid Citibank $74.9 million with proceeds of his fraud on HSBC.
Many of the fraudulent documents submitted by NEMAZEE
to Citibank and HSBC were created by SHAHIN KASHANCHI, in
consultation with NEMAZEE. Indeed, based on e-mail traffic
between KASHANCHI and NEMAZEE summarized in the Complaint,
KASHANCHI was regularly producing what KASHANCHI referred to as
the "normal quarterly statements" for one of the non-existent
collateral accounts, among other things. KASHANCHI would simply
create phony account statements designed to look like real
account statements, but bearing account numbers for accounts that
did not exist and reflecting balances that purported to establish
NEMAZEE's great wealth.
For example, on April 15, 2009, KASHANCHI sent by email
to NEMAZEE a fake account statement for a non-existent
account, reflecting that the account held $621,914,043 worth of
United States Treasury securities and cash in the amount of
$3,976,543. NEMAZEE in turn submitted this account statement to
Citibank.
Similarly, in connection with NEMAZEE's efforts to
obtain money from HSBC, on July 21, 2009, KASHANCHI sent NEMAZEE
an e-mail in which KASHANCHI stated that he was sending "the new
HN [Hassan Nemazee] Collateral + HSBC account." Attached to that
e-mail was a fake account statement for an account which NEMAZEE
had represented to HSBC held over $125 million in United States
Treasury securities that had been pledged as collateral for the
line of credit from HSBC. The phony account statement bore the
indication "Hassan Nemazee Collateral + HSBC," and KASHANCHI's
file-name for the phony account statement was "Hassan's Statement
Collateral + HSBC 200908."
KASCHANCHI also assisted NEMAZEE in NEMAZEE's
submission of fraudulent correspondence to banks. For example,
on August 11, 2009, representatives of Citibank told NEMAZEE that
he needed to produce written verification of his collateral for
the Citibank loans, which collateral was purportedly being held
in an account at Pershing LLC. The Citibank represntatives
specified that the verification would have to be "an original
letter on Pershing stationary [sic] signed by an authorized
representative of Pershing." On August 13, NEMAZEE and KASCHANCHI exchanged e-mails arranging to talk the next day. On
August 14, KASCHANCHI sent NEMAZEE an e-mail in which KASHANCHI
stated in part: "Here is a try. Looks good from my end. . . .
Compare it to an original if you have it." Attached to that email
was a piece of fake Pershing letterhead stationery, listing as Pershing's address and telephone number an address and
telephone number associated with a Manhattan-based "virtual
office" that NEMAZEE himself had established and bearing the name
of an actual Pershing LLC employee. As a result, in the event
anyone made an effort to contact that Pershing representative,
they would in fact be contacting a telephone number assigned to
NEMAZEE himself, and not any financial institution. Later that
same day, KASCHANCHI sent NEMAZEE two different versions of the
same phony stationery.
On August 19, 2009, a representative of Citibank
received a letter, on the phony letterhead stationery,
purportedly signed by the Pershing LLC employee and verifying
that NEMAZEE's collateral account had "U.S. Treasury Securities
totaling $85,853,751.00 as of 8/17/09 that are held in custody by
Pershing LLC as collateral for the benefit of Citibank." In
reality, there was no such account, there was no such collateral,
and the signature was a forgery.
KASAHANCHI, 46, currently resides in Telluride,
Colorado. He is charged with two counts of bank fraud, each of
which carries a maximum prison term of 30 years and a maximum
fine of $1,000,000 or twice the gain or loss resulting from the
crime.
KASHANCHI is expected to be presented later today in
federal court in Grand Junction, Colorado, before United States
Magistrate Judge GUDRUN RICE.
Mr. BHARARA praised the investigative work of the FBI.
Mr. BHARARA said that the investigation is continuing.
Assistant United States Attorneys JOHN M. HILLEBRECHT
and DANIEL W. LEVY are in charge of the prosecution.
The charge and allegations contained in the Complaint
are merely accusations, and the defendant is presumed innocent
unless and until proven guilty.
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