PITTSBURGH No charges have been filed in a lengthy investigation into whether or not certain financial establishments processed potentially illegal check payments for Chicago scrap companies but the investigation continues, AMM has confirmed.
According to an affidavit to establish probable cause for a search warrant obtained by the Internal Revenue Service (IRS) earlier this year, the agency began an investigation on potential fraud in 2012.
In the affidavit, the IRS alleged that Chicago-based New Damen-Grand Currency Exchange cashed checks for scrap companies, including Carroll Alloys Inc., Penny Wise Metals Inc., Serlin Iron & Metal Co. Inc., Tower Alloys Metals Inc., Tri-State Metal Co. and Universal Scrap Metals, in such a way as to avoid reporting requirements, a practice known as structuring out.
According to the IRS, it is illegal to structure or assist in structuring any transaction with one or more financial institutions for the purpose of evading reporting requirements.
Financial institutions are required to issue a Currency Transaction Report (CTR) for all cash transactions in excess of $10,000. CTRs, which according to the affidavit can be used to uncover a variety of illegal activities, including drug trafficking, money laundering and tax evasion, are filed with the U.S. Treasury Departments Financial Crimes Enforcement Network (FinCEN) on forms that require, among other things, the identity of the individual who conducted the transaction and the individual or organization on whose behalf the transaction was conducted.
In the affidavit, the IRS alleged that third-party checks to numerous individuals were cashed by company employees.
Little is known of the case following the application for search warrants earlier this year, and a spokesman for the U.S. Attorneys office in Chicago told AMM that there have been no criminal charges filed against any defendants in connection with the searches.
It is still unclear if recent activity by federal authorities at some scrap companies in Chicago (amm.com, Aug. 23
) is related in any manner to the IRS investigation into alleged structuring.
Randall Samborn, assistant U.S. Attorney and public information office for the U.S. Attorneys office in Chicago, said the department would offer no comment on any investigation and reiterated that no charges have been filed in the structuring investigation or in relation to the more recent visits to some scrap companies. He did not comment on whether the two were related.
It is not uncommon that in some instances search warrant affidavits become public or matters are reported as being the subject of investigations, but we do not provide public comment on investigations because of rules that govern our conduct and such matters as preserving grand jury secrecy, he said.
A spokesman for FinCEN said it couldnt confirm or deny any investigation.
During a Jan. 31 raid on the currency exchange, IRS agents reportedly seized computer equipment, business records pertaining specifically to Carroll Alloys, Penny Wise Metals, Serlin Iron & Metal, Tower Alloys Metals, Tri-State Metal and Universal Scrap Metals as well as other scrap metal companies that frequented New Damen.
The IRS alleged that the currency exchange also filed misleading and false CTRs on behalf of scrap metal company customers. In the affidavit, the IRS said it suspected Tower Alloys and Tri-State Metal of writing checks to third parties but personally cashing them at New Damen and keeping the money. Penny Wise Metals was suspected of arranging for a customer to use the same check cashing service.
The affidavit referenced an alleged prior seizure of funds in a TriState bank account. In all, 444 cash withdrawals totaling $4,156,231 were made from the account by negotiating individual TriState checks made payable to third-party individuals, with each check for under $10,000 and cashed at New Damen, the IRS alleged.
In the same affidavit, the IRS alleged that between January 2008 and May 2012 Tri-State withdrew $2,735,144 from a bank account at a different institution and cashed the associated checks at New Damen.
TriState owner Fred Weiss, who allegedly conducted some of the transactions, died in August.
Tower Alloys was alleged to have engaged in similar activity. The IRS alleged that certain Tower Alloy bank records showed that $5,936,833 was taken as cash withdrawals on third-party checks between 2008 and 2012.
Stuart Mueller, owner of Tower Alloys as well as Carroll Alloys, said he had no comment on the matter. Mark Kalter, president of Serlin Iron, and Barry Riback, president of Universal Scrap, also declined to comment.
Steven Pollack, owner of Penny Wise Metals, told AMM he had done nothing wrong. I was contacted by the IRS five years ago about the same thing. I was vindicated. I havent done business with that currency exchange for four or five years, and I dont go to any currency exchanges anymore, he said.
New Damen-Grand Currency Exchange owner Anthony Fornelli confirmed the IRS search. I dont know what theyre searching for or what they found. That was in January, he told AMM, adding that the IRS has not contacted him since then.
Asked if he cashed checks for scrap companies in the area, Fornelli said: I think thats common knowledge.
The affidavit also alleged that two companies called DC TriCore and Hoosier Metals were engaged in similar activity, but AMM was unable to locate either company for comment.
Corinna Petry, Chicago, and Sean Davidson, New York, contributed to this story.