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UNITED STATES DISTRICT COURT
The Grand Jury charges: 1. Except as otherwise noted, at all times relevant to this Indictment:
2. From in or about 1989 up to and including on or about October 15, 1995, in the Southern District of New York and elsewhere, MICHAEL DOMECQ, the defendant, together with co-conspirators Gabriel Sagaz, Thomas Kaminsky, and Alfredo Valdes, not named as defendants herein, and other persons known and unknown, unlawfully, willfully, and knowingly did combine, conspire, confederate, and agree together and with each other to defraud the United States of America, and an agency thereof, to wit, the Internal Revenue Service ("IRS") of the United States Department of Treasury, and to commit offenses against the United States, to wit, violations of Sections 7201, 7206(1), and 7206(2) of Title 26, United States Code. The Objects of the Tax Conspiracy 3. It was a part and an object of the conspiracy that MICHAEL DOMECQ, the defendant, and his co-conspirators, would and did defraud the United States and the IRS by impeding, impairing, defeating, and obstructing the lawful governmental functions of the IRS in the ascertainment, evaluation, assessment, and collection of income taxes due from MICHAEL DOMECQ, other individuals, and various entities by (a) impeding and impairing scrutiny by the IRS of the true nature of payments made by Domecq Importers to certain third parties; and (b) impeding and impairing scrutiny by the IRS of the true nature of payments made by certain third parties to numerous entities controlled by MICHAEL DOMECQ and his co-conspirators. 4. It was a further part and an object of the conspiracy that MICHAEL DOMECQ, the defendant, and his co-conspirators, would and did attempt to evade and defeat a substantial part of the income tax due and owing to the United States by MICHAEL DOMECQ and others, in violation of Title 26, United States Code, Section 7201. 5. It was a further part and an object of the conspiracy that MICHAEL DOMECQ, the defendant, unlawfully, willfully, and knowingly would and did make and subscribe to U.S. Individual Income Tax Returns, Forms 1040, for the tax years 1989, 1990, 1991, 1992, 1993, and 1994, which returns contained and were verified by written declarations that they were made under penalties of perjury, and which income tax returns MICHAEL DOMECQ did not believe to be true and correct as to every material matter, insofar as each return substantially understated the true total income of MICHAEL DOMECQ and his spouse, and also denied that MICHAEL DOMECQ and his spouse had any interest in any foreign bank accounts, in violation of Title 26, United States Code, Section 7206(1). 6. It was a further part and an object of the conspiracy that MICHAEL DOMECQ, the defendant, and his co-conspirators, unlawfully, willfully, and knowingly would and did aid and assist in, procure, counsel, and advise the preparation and presentation under, and in connection with matters arising under the Internal Revenue laws, of Domecq Importers' U.S. Corporation Income Tax Returns, Forms 1120, for tax years 1989 through 1994, that were false and fraudulent as to material matters, in violation of Title 26, United States Code, Section 7206(2). Among the means and methods by which MICHAEL DOMECQ, the defendant, and his co-conspirators, would and did carry out the conspiracy were the following: 7. At some time prior to in or about 1989, MICHAEL DOMECQ, the defendant, met with Alfredo Valdes, Domecq Importers' chief financial officer, and agreed to divert money from Domecq Importers as additional income to themselves which they would conceal from the IRS. Later they enlisted the assistance of one or more entities that did business with Domecq Importers, including wholesalers, distributors, bottlers, vendors of advertising and display materials and services, and vendors of other services (collectively the "Outside Vendors"). 8. In or about 1990, MICHAEL DOMECQ, the defendant, and Valdes invited Gabriel Sagaz and Thomas Kaminsky to join the scheme. Sagaz was Domecq Importers' vice president for marketing, and Kaminsky was Domecq Importers' vice president for sales. Sagaz and Kaminsky agreed to participate. 9. MICHAEL DOMECQ, the defendant, participated in this scheme from in or about 1989 until in or about September 1995. During that period, MICHAEL DOMECQ and the three other senior executives of Domecq Importers who participated in this scheme diverted approximately $14.6 million out of Domecq Importers and into accounts under the conspirators' control. All, or substantially all, of such funds were concealed from the IRS. 10. MICHAEL DOMECQ, the defendant, and his co-conspirators Valdes, Sagaz, and Kaminsky (hereinafter the "Executive Co-Conspirators") employed several methods to divert money out of Domecq Importers, and to conceal the money from the IRS. Among these methods were the following:
11. Through the creation of fraudulent, inflated, and fictitious invoices, and the use of offshore bank accounts, MICHAEL DOMECQ, the defendant, and his co-conspirators impeded and impaired the IRS's scrutiny of (a) the U.S. Individual Income Tax Returns, Forms 1040, filed by MICHAEL DOMECQ, the defendant, and the Executive Co-Conspirators, as well as the U.S. Corporation Income Tax Returns, Forms 1120, filed by Domecq Importers; (b) the true nature of payments made by Domecq Importers to certain third parties; and (c) the true nature of payments made by certain third parties to a variety of entities controlled by MICHAEL DOMECQ, the defendant, and the Executive Co-Conspirators. Moreover, MICHAEL DOMECQ, the defendant, did not report his receipt of any portion of the money diverted out of Domecq Importers on his and his spouse's U.S. Individual Income Tax Returns, Forms 1040, and the Executive Co-Conspirators did not report their receipt of most, if not all, of the money diverted out of Domecq Importers on their U.S. Individual Income Tax Returns. In addition, the tax returns of Domecq Importers improperly deducted as business expenses the amounts of the fraudulent transactions with the Outside Vendors. As a result, these tax returns substantially underreported the taxable income and the correct amount of tax due and owing from the corporation, MICHAEL DOMECQ, the defendant, and the Executive Co-Conspirators. Overt Acts 12. In furtherance of the conspiracy and to effect its illegal objects, MICHAEL DOMECQ, the defendant, and his co-conspirators committed the following overt acts, among others, in the Southern District of New York and elsewhere:
(Title 18, United States Code, Section 371.) The Grand Jury further charges: 13. Paragraphs 1 and 7 through 10 of this Indictment are repeated, reincorporated, and realleged as if fully set forth herein. 14. From on or about May 18, 1994, through and including in or about September 1995, in the Southern District of New York and elsewhere, MICHAEL DOMECQ, the defendant, together with co-conspirators Gabriel Sagaz, Thomas Kaminsky, and Alfredo Valdes, not named as defendants herein, and other persons known and unknown, unlawfully, willfully, and knowingly did combine, conspire, confederate, and agree together and with each other to commit offenses against the United States, to wit, violations of Sections 1341 and 1346 of Title 18, United States Code. The Objects of the Conspiracy 15. It was a part and object of the conspiracy that MICHAEL DOMECQ, the defendant, and his co-conspirators, unlawfully, willfully, and knowingly, having devised and intending to devise a scheme and artifice to defraud and for obtaining money and property from Allied Domecq by means of false and fraudulent pretenses, representations, and promises, for the purpose of executing such scheme and artifice, and attempting to do so, would and did place in post offices and authorized depositories for mail matter, matters and things to be sent and delivered by the Postal Service, and deposit such matters and things to be sent and delivered by private and commercial interstate carriers, and take and receive therefrom such matters and things, and knowingly cause such matters and things to be delivered by mail and such carriers according to the directions thereon, in violation of Title 18, United States Code, Sections 1341 and 1346. Conspiracy to Defraud Allied Domecq Among the means and methods by which MICHAEL DOMECQ, the defendant, and his co-conspirators, would and did carry out the conspiracy were the following: 16. Initially, the diversion of funds from Domecq Importers by MICHAEL DOMECQ, the defendant, and the Executive Co-Conspirators, described in Paragraphs 9 and 10 of Count One of this Indictment, was carried out with the knowledge and approval of one or more senior executives within the worldwide Domecq organization, including members of the Board of Directors of Domecq Importers. However, from on or about May 18, 1994, when Allied-Lyons acquired Domecq Importers, the diversion of funds by MICHAEL DOMECQ and his co-conspirators, as described in Paragraphs 9 and 10 above, was done without the knowledge and consent of the public shareholders of Allied Domecq or the majority of the Board of Directors of Allied Domecq, although the diversion of funds was known and approved by at least one member of that Board. The total amount of funds fraudulently diverted by MICHAEL DOMECQ and his co-conspirators after on or about May 18, 1994, in the course of the scheme charged in Count One of the Indictment, was approximately $3.1 million. 17. The mails or a commercial interstate carrier were used in several ways to further the above-described scheme. For example, the mails were used in connection with the diversion of funds from Domecq Importers in that fraudulent purchase orders issued by Domecq Importers to the Outside Vendors and fraudulent invoices issued by the Outside Vendors to Domecq Importers were sent through the mails. Moreover, Domecq Importers regularly mailed checks to the Outside Vendors in payment of the fraudulent invoices. In addition, a commercial interstate carrier was used to convey checks made payable to one of the fictitious third-party entities from the Outside Vendors either to MICHAEL DOMECQ, the defendant, or one of the Executive Co-Conspirators, and to convey checks either from MICHAEL DOMECQ or one of the Executive Co-Conspirators, to the First National Bank of Aruba.Overt Acts 18. In furtherance of the conspiracy and to effect its illegal objects, MICHAEL DOMECQ, the defendant, and his co-conspirators committed the following overt acts, among others, in the Southern District of New York and elsewhere:
COUNT THREE The Grand Jury further charges: Mail Fraud Against Allied Domecq 19. Paragraphs 1, 7 through 10, and 16 and 17, of this Indictment are repeated, reincorporated, and realleged as if fully set forth herein. 20. From on or about May 18, 1994, through and including in or about September 1995, in the Southern District of New York and elsewhere, MICHAEL DOMECQ, the defendant, together with co-conspirators Gabriel Sagaz, Thomas Kaminsky, and Alfredo Valdes, not named as defendants herein, and other persons known and unknown, unlawfully, willfully, and knowingly, having devised and intending to devise a scheme and artifice to defraud and for obtaining money and property from Allied Domecq by means of false and fraudulent pretenses, representations, and promises, for the purpose of executing such scheme and artifice, and attempting to do so, did place or cause to be placed in post offices and authorized depositories for mail matter, matters and things to be sent and delivered by the Postal Service, and deposit or cause to be deposited such matters and things to be sent and delivered by private and commercial interstate carriers, and take and receive therefrom such matters and things, and knowingly cause such matters and things to be delivered by mail and such carriers according to the directions thereon, to wit, MICHAEL DOMECQ, the defendant, and his co-conspirators, by causing the use of the mails and commercial interstate carriers fraudulently diverted approximately $3.1 million from Allied Domecq into personal accounts controlled by the defendant and his co-conspirators. (Title 18, United States Code, Sections 1341 and 1346 and 2.) COUNT FOUR The Grand Jury further charges: Money Laundering Conspiracy 21. Paragraphs 1, 7 through 10, and 16 and 17, of this Indictment are repeated, reincorporated, and realleged as if fully set forth herein. 22. From on or about May 18, 1994, until in or about September 1995, in the Southern District of New York and elsewhere, MICHAEL DOMECQ, the defendant, together with co-conspirators Gabriel Sagaz, Thomas Kaminsky, and Alfredo Valdes, not named as defendants herein, and other persons known and unknown, unlawfully, willfully, and knowingly did combine, conspire, confederate, and agree together and with each other to commit an offense against the United States, to wit, to violate Section 1956 of Title 18, United States Code. 23. It was a part and object of the conspiracy that MICHAEL DOMECQ, the defendant, and his co-conspirators, in an offense involving and affecting interstate and foreign commerce, knowing that the property involved in certain financial transactions represented the proceeds of some form of unlawful activity, unlawfully, willfully, and knowingly would and did conduct and attempt to conduct such financial transactions which in fact involved the proceeds of specified unlawful activity, to wit, the mail fraud scheme to defraud Allied Domecq, as described in Count Two of this Indictment, with intent to engage in conduct constituting violations of Sections 7201, 7206(1), and 7206(2) of the Internal Revenue Code of 1986, in violation of Section 1956(a)(1)(A)(ii) of Title 18, United States Code, 24. It was a further part and an object of the conspiracy that MICHAEL DOMECQ, the defendant, and his co-conspirators, in an offense involving and affecting interstate and foreign commerce, knowing that the property involved in certain financial transactions represented the proceeds of some form of unlawful activity, unlawfully, willfully, and knowingly would and did conduct and attempt to conduct such financial transactions which in fact involved the proceeds of specified unlawful activity, to wit, the mail fraud scheme to defraud Allied Domecq, as described in Count Two of this Indictment, knowing that the transactions were designed in whole and in part to conceal and disguise the nature, location, source, ownership, and control of the proceeds of specified unlawful activity, in violation of Section 1956(a)(1)(B)(i) of Title 18, United States Code. Means and Methods of the Money Laundering Conspiracy a. MICHAEL DOMECQ, the defendant, received a portion of the approximately $3.1 million in diverted corporate funds and "commissions" from the Outside Vendors in the form of checks and wire transfers made payable to fictitious third-party entities controlled by MICHAEL DOMECQ and the Executive Co-Conspirators. The payments by the Outside Vendors were made to accounts in the name of the Winston Group, Grupo VeraCruz ("VeraCruz"), Premier Maldonado ("Maldonado") and Baja Sur. The "commission" payments from the Bottlers were made to accounts in the name of Fortraco International ("Fortraco"). Each of these fictitious third-party entities maintained an offshore bank account. The Winston Group maintained account number 752500 at the First National Bank of Aruba (the "Winston Group Account"). VeraCruz and its successor Maldonado maintained account number 797021 at the First National Bank of Aruba (the "VeraCruz Account"). Baja Sur maintained account number 797022 at the First National Bank of Aruba (the "Baja Sur Account"). Fortraco maintained account number 371050 at the First National Bank of Aruba (the "Fortraco Account"). 25. In the course of the conspiracy to defraud Allied Domecq outlined in Count Two of this Indictment, the Outside Vendors mailed or sent by commercial interstate carrier many of their checks either to MICHAEL DOMECQ, the defendant, or to another of the Executive Co-Conspirators, who in turn sent the checks by mail or by commercial interstate carrier to the First National Bank of Aruba. There, bank officers who were designated agents of the fictitious third-party entities endorsed the checks and deposited them into the relevant accounts. At various times, one of the Executive Co-Conspirators withdrew monies from these accounts for his own use and for distribution to MICHAEL DOMECQ and among the Executive Co-Conspirators. To this end, the monies were usually transferred into other offshore accounts controlled by MICHAEL DOMECQ or by the Executive Co-Conspirators. Overt Acts 26. In furtherance of the conspiracy and to effect the illegal objects thereof, MICHAEL DOMECQ, the defendant, and his co-conspirators, committed the following overt acts, among others, in the Southern District of New York and elsewhere:
COUNT FIVE The Grand Jury further charges: Money Laundering 27. Paragraphs 1, 7 through 10, 16, 17, 25, and 26 of this Indictment are repeated, reincorporated, and realleged as if fully set forth herein. 28. From on or about May 18, 1994, until in or about September 1995, in the Southern District of New York and elsewhere, MICHAEL DOMECQ, the defendant, together with co-conspirators Gabriel Sagaz, Thomas Kaminsky, and Alfredo Valdes, not named as defendants herein, and other persons known and unknown, in an offense involving and affecting interstate and foreign commerce, knowing that the property involved in certain financial transactions represented the proceeds of some form of unlawful activity, unlawfully, willfully, and knowingly did conduct, attempt to conduct, and cause others to conduct such financial transactions which in fact involved the proceeds of specified unlawful activity, to wit, the mail fraud scheme to defraud Allied Domecq, as described in Count Two of this Indictment, with intent to engage in conduct constituting violations of Sections 7201, 7206(1), and 7206(2) of the Internal Revenue Code of 1986. (Title 18, United States Code, Sections 1956(a)(1)(A)(ii) and 2). COUNT SIX The Grand Jury further charges: Money Laundering 29. Paragraphs 1, 7 through 10, 16, 17, 25, and 26 of this Indictment are repeated, reincorporated, and realleged as if fully set forth herein. 30. From on or about May 18, 1994, until in or about September 1995, in the Southern District of New York and elsewhere, MICHAEL DOMECQ, the defendant, together with co-conspirators Gabriel Sagaz, Thomas Kaminsky, and Alfredo Valdes, not named as defendants herein, and other persons known and unknown, in an offense involving and affecting interstate and foreign commerce, knowing that the property involved in certain financial transactions represented the proceeds of some form of unlawful activity, unlawfully, willfully, and knowingly did conduct, attempt to conduct, and cause others to conduct such financial transactions which in fact involved the proceeds of specified unlawful activity, to wit, the mail fraud scheme to defraud Allied Domecq, as described in Count Two of this Indictment, knowing that the transactions were designed in whole and in part to conceal and disguise the nature, location, source, ownership, and control of the proceeds of specified unlawful activity. (Title 18, United States Code, Sections 1956(a)(1)(B)(i) and 2). The Grand Jury further charges: 31. Paragraphs 1 and 7 through 10 of this Indictment are repeated, reincorporated, and realleged as if fully set forth herein. 32. From in or about January 1, 1994 through on or about October 15, 1995, in the Southern District of New York and elsewhere, MICHAEL DOMECQ, the defendant, did unlawfully, willfully, and knowingly attempt to evade and defeat a large part of the income tax due and owing by him and his spouse to the United States of America for the calendar year 1994, by various means, including among others, preparing and causing to be prepared, signing and causing to be signed, a false and fraudulent joint U.S. Individual Income Tax Return, Form 1040, for the calendar year 1994, which was filed with the Internal Revenue Service, on which return MICHAEL DOMECQ failed to report as income his share of the proceeds of the scheme described in Count One of this Indictment, whereas, as MICHAEL DOMECQ then and there well knew and believed, the true and correct joint taxable income for that calendar year was substantially in excess of the specific sum reported, upon which additional taxable income there was due and owing to the United States of America substantial additional income tax. (Title 26, United States Code, Section 7201.) The Grand Jury further charges: 33. Paragraphs 1 and 7 through 10 of this Indictment are repeated, reincorporated, and realleged as if fully set forth in this Count. 34. From on or about January 1, 1993, through on or about September 8, 1994, in the Southern District of New York and elsewhere, MICHAEL DOMECQ, the defendant, did unlawfully, willfully, and knowingly attempt to evade and defeat a large part of the income tax due and owing by MICHAEL DOMECQ and his spouse to the United States of America for the calendar year 1993, by various means, including, among others, preparing and causing to be prepared, signing and causing to be signed, a false and fraudulent joint U.S. Individual Income Tax Return, Form 1040, which was filed with the Internal Revenue Service, on which return MICHAEL DOMECQ failed to report as income his share of the proceeds of the scheme described in Count One of this Indictment, whereas, as MICHAEL DOMECQ then and there well knew and believed, the true and correct joint taxable income for that calendar year was substantially in excess of the specific sum reported, upon which additional taxable income there was due and owing to the United States of America substantial additional income tax.
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