By Lucy Komisar
March 10, 2008
It‘s not just about buying or selling sex. It’s also about money laundering. New York Governor Eliot Spitzer’s downfall began with an investigation by the Internal Revenue Service. That‘s because when people move money for illicit purposes, they try to disguise the flows. And US banks are required to report suspicious transfers to the Treasury Department.
The IRS gets involved, because those transfers could be effected to hide income from taxes. So it responded to bank reports of suspicious transfers by Spitzer, who was paying thousands of dollars for call girl services. The money was being sent to QAT consulting, a shell company owned by the Emperor‘s Club V.I.P. prostitution ring.
Then the FBI joined the United States Internal Revenue Service-Criminal Investigative Division, looking into what appeared to be at first possible government corruption but then turned out to be payments to an organization running prostitution. And also laundering money in the United States and Europe.
The money laundering factor
When people or companies deposit big bucks in banks, they have to say where it comes from. That is because federal law says that banks have to do “due diligence” about their customers. “Where did you get this million you are depositing?”
And therefore, law breakers have to launder their profits. That means that they have to move money in a way so that it doesn‘t show up in their accounts with no logical explanation of how they got it.
Remember how Al Capone got busted for tax evasion? Crooks learned then that they had to launder their ill-gotten gains.
That’s why the Emperors used shell companies: QAT Consulting Group, QAT International and Protech Consulting.
Spitzer’s bankers reported suspicious transfers in SARs, suspicious activity reports. But who were the Emperors‘ shell company bankers and what were they reporting?
We‘re talking about a million-dollar business operating in the US, the UK (London) and France (Paris), with transfers going across international borders.
Now, here’s the next step. Organized crime, which if this operation ran in at least three countries, it certainly is, routinely uses the offshore system, bank secrecy havens, to hide and move illicit money.
That‘s because people and companies can set up offshore accounts and shell companies that don‘t include their names but are registered in the names of local lawyers or accountants so they can hide from curious law enforcement agents. And so they can doctor their books to say what they want to say.
And that exists because the US has not used its muscle to shut down the corrupt tax haven system.
So, let‘s wait to hear where the Emperors moved their money. Grand Cayman? Switzerland? The Isle of Man? That‘s the real crime story, much more important than an arrogant guy who visited a hooker. Stay tuned.