It's a Small World--Impugning a Witness Edition

by emptywheel

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.

Comments

[freepatriot]

you mean that this guy Kontogiannis is involved in some crimes ???

maybe that's why he pleaded guilty to a couple of crimes

and you're telling me that this guy who pleaded guilty was associated with other people who also committed crimes ???

I'm shocked to find out that there is gambling going on at the casino

I'll be back later for my winnings

I don't see how destroying Kontogiannis' credibility does any good for the people who were his partners in crime

if this guy Kontogiannis is such a crook, why were you associated with him and how is it that Kontogiannis pleaded guilty before you told us all of this information

PS: Hi everybody, I'm still here, still mostly lurking. thanks for all the good thoughts and prayers, fp

waves

[Dismayed]

Casablanca reference duly noted.

[emptywheel]

freep

Actually, Michael has a point here. The government has acknowledged that Kontogiannis was involved in extensive mortgage fraud. But the plea only included one count. So there is one giant unanswered question why the government is choosing not to charge the rest of them.

Hope you're hanging in there...

[William Ockham]

freepatriot,

When you have a minute, I'd appreciate you dropping me an email. I have a personal question to ask you. You can reach me at r a z o r o f t r u t h at g m a i l dot c o m.

On a side note, every time you-know-who posts a comment, I use that as a reminder to pray for you and your mom.

[chrisc]

John T. Michael has been working under and at the direction of his uncle for a long time. In 1998, while under investigation for bribing School Supt Celestine Miller and the big rigging scheme to defraud the Queens School District, Kontogiannis and John T. Michael were masterminding a plan to run Miller for Congress. Miller, a lifelong Democrat, switched to GOP. Reportedly Duke Cunningham was at one of the fundraising parties for Miller.

The fundraising was, uh, not too kosher. Miller was investigated for failing to report contributions to her campaign committee.

According to the Federal Election Commission, "Friends of Celestine Miller" reported only $4,000 in campaign contributions. "However, through bank records we tracked campaign donations and expenditures totaling in excess of $150,000," the report says.

snip

Stancik said in his report that Miller used several people who helped in the bid-rigging scheme "to further her political aspirations."

snip

The treasurer of Miller's political committee, John T. Michael, is a nephew of Kontogiannis' wife, Stancik's report said.

snip

The indictment does not charge these transactions were a crime but includes them to demonstrate a relationship among the defendants, authorities said. Investigators are continuing to look into the source of the other money. But, said a law enforcement source, the $150,000 "came in and went out of the campaign in a very mysterious fashion."

(source Nov 3, 2000 Newsday)

I am still baffled as to why Kontogiannis would throw his nephew "under the bus." He must know a lot. Why didn't they both plead guilty under some kind of plea bargain?

I hope he keeps filing stuff. Cause I still have a lot of unanswered questions:

How many other congresscritters did they "buy" with bogus mortgage deals?

Why ween't Kontogiannis' daughters indicted?

Is the IRS going to get back taxes from Kontogiannis and Michael?

Why did the government (local school and US customs) renew the contracts to rent Kontogiannis' building?

Why is life so unfair? I've been good. I work hard. How come Kontogiannis is worth millions and I have to clip coupons to get by?

[joanneleon]

Seems like everything is connected to everything else in this gang of crooks. So, would one have to wear a tinfoil hat if one described the current batch of Republicans as an organized crime family? If conspiracy doesn't describe it, I don't know what does.

Also, Halpern should be careful. Being an assistant US Attorney has become a risky job in recent years.

[bmaz]

Howdy FreePatriot! Troll scarce for awhile, but like summer weeds, has been sprouting up everywhere lately. Nasty things those trolls. I am confused by your argument here. Impeaching the credibility of an adverse witness, especially the snitch the government is relying on, is always a good thing. From a defense standpoint, this is a well taken and executed motion.

EW - Note the difference from Geragos' motions to date?

[chrisc]

Significantly, Kontogiannis received a reduced sentence based on his cooperation with the government, which had resulted in the filing of a letter on Kontogiannis’s behalf by the government pursuant to U.S.S.G. § 5K1.1. The sentencing judge made clear that, but for the government’s letter, he would have sentenced Kontogiannis to jail.

OK, that's 2 letters. One for the visa fraud and another for bribing the school supt. I would love to know who sent that first letter and what it said. The second letter was sent by Cunningham to Queens DA, Richard Brown.

But a couple of weeks earlier, on October 19, the D.A.'s office had received a puzzling letter from Cunningham—whose San Diego congressional district is 2,800 miles away—claiming that Miller was being railroaded.

"There may be a political agenda waged against Superintendent Miller by a company not capable of completing the [computer] contract," Cunningham wrote. As a result of that concern, the lawmaker said he had asked Henry Hyde, then the chairman of the House Judiciary Committee, to open an investigation. Attached to the letter was a note from the committee's general counsel confirming that the office was "in the process of gathering information."

Duke's letter came around the same time that school investigator Ed Stancik received a "hot tip" that Kontogiannis (subject of Stancik's investigation) had recently bought a yacht from Duke Cunningham at a "very inflated price."

Eager to expand the probe, the lead investigator prepared a subpoena for the bank records of the Kontogiannis corporation that had purchased the yacht and asked his supervisor to approve it.

It didn't happen.

Sources familiar with the decision differ on who made the call. According to two former investigators, Regina Loughran, a top deputy to Stancik and the author of the report on the Miller investigation, rejected the request, allegedly saying, "Leave it alone. It's a hot potato."

But another source insisted that it was not Loughran but another unnamed higher-up who ruled out the subpoena. "The decision was to leave it to [D.A.] Brown's office, and that was it," said this source. (A Brown spokesman said the tip was not pursued.)

Wonder who sent a letter this time.
And would it be great to see a database of letters from other congressfolk, asking for leniency from the courts or threatening investigation if the prosecutions move forward.

[Mrs Panstreppon]

If Kontogiannis doesn't come up with at least one governor, six congressmen and two dozen other high level officials, I'm assuming the fix is in.

Among other things, Michael's attorney wants us to know that Kontogiannis is an extremely wealthy man. Exhibit 74-2 is a partial financial statement for Olympicorp International LLC and its affiliates. According to the 9/30/04 summary, the Kontogiannis family owned net assets of $588 million, excluding assets held overseas.

What I find incredible is that, given his wealth, Kontogiannis still engaged in credit card identity theft. I think Michael's attorney was sending a message here about just how crooked Kontogiannis is and the extent of his criminality.

Funny aside: Kontogiannis's daughter, Annette Apergis, owns a tiny bank in Sanderson, Texas (pop. less than 1,000), the Sanderson State Bank. John Michael is listed as a director. No surprise that the bank's loan portfolio has doubled since Apergis came in 2002 or 2003 although it is still relatively small. For some unspecified reason, this tiny local bank now does its lending out of two offices in Houston. Hmm...

Take a look at the Sanderson State Bank's Statment of Condition. The individual assets only add up to $25 million, not the $39 million listed. Is someone at the bank sending out an SOS that something is amiss at Sanderson State Bank? Something like $14 million in assets?

[Terible Timmy]

Have you all lost your minds? Maybe the reason why this is coming out now is because the government has just released some of the "evidence" in the case and Michael's legal team is still scratching their heads wondering where and what it is that they have against Michael... Seems Kontogiannis may have been the smart one to substitute his daughters for Michael... Does that theory make any sense? After all his daughters owned the mortgage company, according to the filing, got the bribe money directly and then used it for their own purposes... Seems like there is more to this story... I think William is on the right track... I hope Michael keeps the presure up, it makes for great reading... What a book his story will make...

[Terible Timmy]

Hey Chrisc,
I think you are on the money... One correction, I thought "John Michael" was our boy here... turns out, its not him but rather ANOTHER John Michael... Maybe Kontoggiannis made another ID theft in creating that bank board of directors...

[Terible Timmy]

opps sory I meany Mrs. Panstreppon..... not chrisc...

[Nelly Bly]

Terible Timmy, I assume you are the TERRIBLE TIM who commented in a TPM MR post about Kontogiannis. Right off the bat, you were sure that John Michael did not own a piece of Sanderson State Bank. Now you know it is a different John Michael. How did you verify that information?

[Terible Timmy]

By sources close to the Bank... Also, The OTS keeps a track on all board members and there "other" jobs if not working within the Bank in question. In this instance, turns out that when you call Sanderson directly and ask for "John Michael"... No one knows of him as he is not on any directory. So lets assume that he does not work in the bank, and lets go the other route. The John Michael in question is actually a John MichaelS... with an "s" and he works as a "Commercial Investment Banker" in Great Neck, NY. I can only deduce that these are two different people and I plan on contacting the bank again and verifying... I will keep you posted if you like...

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[te huur turnhout]

It is a surprising story to me. However I coud not find appropriate comment to post for this report.