Wow. Brent Wilkes co-conspirator John Michael is going after Tommy Kontogiannis hard. And they've got a very interesting way to do it (hat tip to CC for the alert).
As you'll recall, John Michael is the least famous of the thugs indicted in the larger Duke Cunningham scandal--Michael was involved in the mortgage company money laundering side of things. Originally, Michael was indicted seemingly almost as an afterthought (except that he allegedly lied in interviews with investigators). But a superseding indictment almost certainly prepared with the cooperation of Kontogiannis added three charges to his indictment. It's clear there's something funky about Kontogiannis--he has been in trouble with the law before, but every time--and this time--the government seems to let him off easy. The government's attempts to seal trial materials relating to Kontogiannis' plea after the fact seemed to most hurt Michael, since Michael's indictments must be tied to Kontogiannis' cooperation.
In a new filing, Michael's lawyer is basically arguing that Kontogiannis got special treatment from the government. And he's alleging that he got that special treatment, among other reasons, because Kontogiannis and his daughter had ties to the late uncle of one of the AUSAs prosecuting the case, Phillip Halpern.
Kontogiannis' Alleged Special Treatment
Michael's motion describes the large number of crimes that the government has acknowledged Kontogiannis has committed:
As the government is well aware, the crimes for which Kontogiannis has been prosecuted hardly encompass the extraordinary breadth and volume of his criminal activity. For example, the government has alleged that Kontogiannis has engaged in extensive mortgage fraud, money laundering, tax fraud, and tax evasion. Indeed, as of the time that the FBI executed warrants at Kontogiannis’s business offices and home in September 2005, Kontogiannis had not filed a income tax return since 2001. And in 2001, Kontogiannis, who, according to the FBI itself, controls scores of businesses and banks and uses all of them to further his criminal activity, filed a federal income-tax form on which he claimed to have an overall loss of more than $500,000.
Then it suggests that Kontogiannis is cooperating in the prosecution of Michael--but that the government hasn't disclosed details of that cooperation.
In addition, whereas Cunningham’s plea agreement specifies in considerable detail the terms of his cooperation with the government, see Exhibit 10, Kontogiannis’s plea agreement does not address the issue of cooperation notwithstanding the fact that Kontogiannis has been identified as cooperating against Mr. Michael.
And finally, it alleges that the government has permitted Kontogiannis to continue his fraudulent businesses as a payoff for his cooperation against Michael.
It is apparent from discovery, including extensive documentation and grand-jury testimony, that the government is well aware of Kontogiannis not only having engaged in massive mortgage fraud and tax evasion in violation of numerous federal and state statutes, but that he continues to do so.
I doubt the motion to have the charges dismissed (or even SD's US Attorney office recused) will succeed. But I'm guessing the actual purpose of this motion is to make public a great deal of information on Kontogiannis to--at the least--completely discredit him as a witness. If not to bring public pressure to indict Kontogiannis for the other crimes the government admits he has committed.
Halpern's Ties to Kontogiannis and His Daughter
The filing establishes the relationship between Phillip Halpern, one of the AUSAs prosecuting the case, and Kontogiannis. Halpern's uncle, apparently, lived two doors away from Kontogiannis from 1989 to 2003. After the uncle passed away, Kontogiannis' daughter, Annette Apergis, purchased that home from the uncle's widow. The purchase took the entire length of the investigation before it was recorded.
As a nice touch, the motion shows that the daughter made payments for the house out of the same bank account that some of the money involved in the Cunningham bribes came out of.
The timing on this is pretty stunning. Apergis made her down-payment on the house on March 1, 2005. The SDUT article that first busted Duke appeared on June 12, 2005. That same day, Phillip Halpern got interested in the case. Then, Apergis closed on the house on June 20, 2005. But true to Kontogiannis' MO, Apergis did not record the sale of the home right away (which saved her from paying taxes on it). Kontogiannis plead guilty on February 23, 2007. It was not until March 1, 2007 that Apergis recorded the sale of the house--after Kontogiannis got his plea deal.
Here's the most significant bit, both for Michael's bid to have his indictment dismissed, but also to explain what's going on. You see, Kontogiannis bragged of this relationship to Michael during the time period it would be clear that there would be indictments.
In late December 2006 or early January 2007, Kontogiannis boasted to Mr. Michael that he (Kontogiannis) had a “a common bond” with one of the prosecutors, Assistant United
States Attorney (“AUSA”) Phillip Halpern. Kontogiannis explained that AUSA Halpern used to live in New York and that Kontogiannis had been a neighbor and “good friend” of AUSA Halpern’s uncle “for years.” According to Kontogiannis, his daughter, Annette Apergis, had done a “big favor” for AUSA Halpern’s uncle, and that that would help Kontogiannis “get things done.”
Of course, this bragging could go both ways. Kontogiannis was almost certainly in negotiations for a plea deal by the time he told Michael about this tie. So Kontogiannis may have told Michael for any number of reasons--either to help Michael attack the charges (as he is now doing). Or to distract attention from other facts of Kontogiannis' plea deal.
Kontogiannis' MO--and It's Potential Impact
As I suggested, I think the real purpose of the filling is to make available--to us--additional details about Kontogiannis' crimes. The filing describes Kontogiannis' typical mortgage fraud, ascribing that knowledge to the government's own investigation. But remember--Michael worked with Kontogiannis in his mortgage business, so much of this description probably reflects Michael's own knowledge. This, then, is a legally proper means to have Michael expose the extent of Kontogiannis' crimes.
Kontogiannis would have a loan application prepared in the name of a putative home purchaser, sometimes with the knowledge of the person (who might be paid a fee) and sometimes without the person’s knowledge, for a property that Kontogiannis either had developed or had planned to develop. Fraudulent paperwork would be prepared related to, for example, income, assets, or appraisal. (Kontogiannis presumably would pay a kickback to the individual preparing these documents.) Applications would then otherwise be submitted for approval to various financial institutions in accordance with normal industry practices.2 At closing, all title documentation (such as the mortgage and note, the uniform settlement statement (HUD-1 form), title-insurance paperwork, and affidavits pertaining to the purchaser’s identity and intent of occupancy) would be fraudulently executed by a loan officer controlled by Kontogiannis. The settlement agent, using money that had been forwarded by the lender and placed in escrow, would issue checks to cover mortgage taxes, transfer taxes, recording fees, title insurance, and lender fees, as well as the net proceeds (the balance of the loan money), all of which (with the exception, sometimes, of lender fees) would go to Kontogiannis-controlled entities, including companies ostensibly owned by one of Kontogiannis’s daughters and controlled by Kontogiannis. The mortgage and note, however, would never be recorded, the taxes never paid, and title insurance never purchased. Instead, the funds that had been disbursed for these purposes would eventually be steered to another company ostensibly owned by one of Kontogiannis’s daughters but controlled by Kontogiannis.
The filing goes on to describe the potential scope of this fraud:
- Kontogiannis may have written $50,000,000 in bad mortgages for which there is no collateral and no recourse through insurance
- Kontogiannis should owe $900,000 in taxes
Kontogiannis' Real Story
I suspect it'll be hard to prove the entire prosecution team acted improperly here. Of note, the government clearly disclosed the financial records tied to the sale of the house.
But perhaps, in addition to making Kontogiannis an otherwise worthless witness against Michael (and Foggo and Wilkes--Kontogiannis' cooperation also netted Foggo and Wilkes additional charges tied to their scheme to set up an air service to be used on extraordinary renditions), Michael's legal team is trying to smoke out the other reasons why Kontogiannis was not indicted. After all, if the government has any hope of making Kontogiannis a usable witness, they're going to have to provide some real explanation for why Kontogiannis wasn't charged for his extensive fraud.
Update: Oh, this is enticing. What I quoted above was just one paragraph of Michael's affidavit describing his conversation with Kontogiannis about his ties to Halpern's uncle. Here's the second paragraph:
The information set forth in paragraph 2 above is not the entire contents of the conversation I had with Kontogiannis that day. I have only set forth those portions of the conversations relevant to the motions being filed by my attorneys today.
Shorter Michael: I've got a couple of more surprises in store, if this prosecution goes forward. But I'm not going to tell you about them.