2.2.10 – The Dow Jones news service reports that a federal appeals court on Monday upheld a contempt order for refusing to comply with a grand-jury subpoena against two companies owned by a Canadian man accused of processing more than $350 million in payments for Internet gambling companies.
In an order Monday, the U.S. Second Circuit Court of Appeals rejected arguments that two companies owned by Douglas Rennick can refuse to comply with a subpoena on grounds that it would violate Rennick's Fifth Amendment right.
Rennick, who lives in Canada, is the sole shareholder, officer and employee of Account Services Corp. and KJB Financial Corp.
"Although the long-established ‘collective entity rule' prevents corporations from availing themselves of the Fifth Amendment privilege, the companies contend that the Supreme Court's decision in Braswell v. United States compels us to carve out an exception for one-person corporations," the three-judge panel found. "We disagree and affirm the district court's contempt order."
A grand-jury subpoena was issued to Account Services Corp. in June 2009. Rennick moved to quash the subpoena in July, which was denied by a U.S. District judge in Manhattan.
He was indicted in a three-count indictment in August on charges of conspiracy to commit bank fraud, conspiracy to engage in money laundering and conspiracy to operate an illegal gambling business. He faces up to 30 years on the bank-fraud conspiracy charge.
The companies refused to comply with the subpoena following the indictment in August and were cited for contempt by another U.S. District judge.
Prosecutors from the U.S. Attorney's office in Manhattan have alleged that Rennick opened bank accounts in the U.S. between 2007 and June 2009 in order to receive funds from offshore Internet gambling companies that offered poker, blackjack, slots, and other casino games.
Rennick then allegedly disbursed funds from the accounts to U.S. residents seeking to cash out their gambling winnings, prosecutors said. He and other co-conspirators allegedly provided false and misleading information to U.S. banks about the purposes of the accounts, prosecutors said.
Prosecutors said Rennick and his co-conspirators processed more than $350 million transferred from a Cyprus bank account to accounts in the U.S. for this purpose. The government is seeking at least $565.9 million in forfeiture in the case, representing the proceeds obtained from the allegedly illegal gambling and bank-fraud conspiracies.