This case involves two defendants who participated in four jewelry sales transactions (three for gold and one for diamonds) which involved cash the defendants believed to be proceeds of narcotics trafficking.
Roman and Eduard Nektalov, father and son, owned a jewelry store called “Roman Jewelers” in New York’s Diamond District. Due to a suspicion that the defendants supported drug trafficking through their business, law enforcement authorities, in particular undercover federal agent Miguel Herrera, and cooperating witness Edward Delgado, started a sting operation. Delgado worked next door to Roman Jewelers as an owner of a gold refinery for 18 years. Four transactions were organized using cash represented to be proceeds of narcotics trafficking. During the trial, Delgado went on to testify that he conducted multiple transactions for gold from the Nektalovs in 1998-2000 with money from “narcotics traffickers.”
The defendants were arrested during the fourth transaction. They were indicted on one count conspiracy to commit money laundering in violation of 18 U.S.C § 371 and four substantive counts of conducting, or attempting to conduct, financial transactions involving cash represented by law enforcement officers to be the proceeds of narcotics trafficking in violation of 18 U.S.C. §§ 1956(a)(3)(A), (B), (C), and (2).
In addition to an aggregate sum of money, law enforcement authorities seized 739 diamonds.
During the trial, Roman Nektalov had the 739 diamonds seized appraised to be worth USD 315,000. The government had them appraised to be worth around USD 2 million.
The diamonds had ownership claimed from diamond companies EJD and Sergey Diamonds. The government verdict denied EJD and Sergey Diamonds forfeiture of the diamonds, finding their consignment arguments lacked credibility.
18 U.S.C. § 982
The investigation was based on a suspicion that Roman and Eduard Nektalov supported drug trafficking through their business. Associate to Roman Jewelers, Edward Delgado (a cooperating witness) introduced Miguel Herrera (an undercover FBI agent) to Roman and Edward Nektalov to conduct business.
The Sting Operation occurred shortly after the third sale in October 2002. On the day of the fourth sale, undercover agent Herrera, met with associate Delgado and the defendants in a private room in Roman Jewelers. Herrera brought USD 55,000 in a backpack, and personally selected diamonds with Delgado to exchange for USD 500,000. Herrera told the defendants he would go retrieve the remaining balance, leaving the backpack of cash in possession of the defendants. Federal agents stormed Roman Jewelers, and immediately proceeded to arrest Eduard and Roman Nektalov, alongside Delgado (to maintain his cover) and seized the diamonds involved in the sale.
The meetings that led to the four transactions were recorded on tape, which was later used as evidence at trial.
United States District Court for the Southern District of New York
The government presented “voluminous” evidence of Delgado’s and Herrera’s meetings with the defendants. These meetings which were secretly recorded led to four transactions of jewelry using proceeds of drug trafficking. The first three were for gold, and the last one was for diamonds. The government argued the defendants were aware of the nature of the cash as Miguel Herrera had explained to the defendants the prior movement of the money and its involvement with drugs in Columbia. To prove his intentions the government placed on record Roman’s statements to Delgado involving Herrera: “Young man, very smart. . . . He put the money in the diamond. It’s better way.”
The jury found Roman guilty of one count of money laundering in violations of 18 U.S.C. §§1956(a)(3)(A),(B), regarding the transaction that involved diamonds, and not guilty on all other counts. While the sentencing guidelines ranged from 41-51 months imprisonment, the court decided on a 10 months split sentence (five months imprisonment and five months home confinement) This was to be followed by a two year term of supervised release. Nektalov was released on bail pending appeal.
United States Court of Appeals for the Second Circuit
Roman Nektalov appealed against the conviction to the United States Court of Appeals of the Second Circuit. The appelant based its appeal on the doctrine of conscious avoidance. This doctrine was used by prosecution against Roman Nektalov, challenging the extent to which he could claim ignorance to the diamonds he proposed to trade with an undercover agent. Nektalov’s first argument was that the conscious avoidance doctrine could not apply to a criminal activity arising out of a government sting operation. His second argument was that if the doctrine was applicable to some sting cases it was unwarranted in his case because of a lack of “factual predicate.”
The Nekhtalov defense team’s basis for appeal was that “conscious avoidance can only be applied when knowledge is required.” Roman did not deny the transactions took place with Herrera, instead arguing the premise was on the knowledge and belief of Roman Jewelers knowing “these monies” (money) were from drug traffickers. He argued that he did not know the money was from drug traffickers, and he did not believe it to be drug trafficking money. Romans legal counsel argued his “difficulty with the English language” and that he therefore could not understand the full “innuendos” of illicit activity implied with terms used like “Colombians, stuff, shit”.
The Court found it inaccurate that conscious avoidance can only be applied when knowledge is required, stating that the “doctrine of conscious avoidance applie[d] in the context of a sting operation with as much force to one’s efforts to avoid certain belief as to one’s efforts to avoid knowledge.” The United States Court of Appeals for the Second Circuit, likewise, agreed with Nektalov on the premise that 18 U.S.C. § 1956 (a)(3) requires “belief, rather than knowledge.” The court found that while Roman did not know for certain that the funds were the proceeds of an “unlawful activity” (i.e., drug trafficking), he pursued transactions anyway believing the money to be proceeds of a crime.
For these reasons, the Court affirmed the “judgment of the district court in all respects.”
The defendant was killed one month before the trial.
18 U.S.C. § 371
Conspiracy to commit money laundering
18 U.S.C. §§ 1956(a)(3)(A), (B), (C), and (2)
Laundering of monetary instruments
The defendant was indicted on four substantive counts of conducting, or attempting to conduct, financial transactions involving cash represented by law enforcement officers to be the proceeds of narcotics trafficking.
The jury of the district court returned a guilty verdict on one count of money laundering in violation of 18 U.S.C. §§ 1956(a)(3)(A), (B), and (2).
The defendant was sentenced to a ten month "split sentence", meaning that he was sentenced to a prison term of 5 months and an additional 5 months of home confinement, to be followed by a two year term of supervised release.
United States Court of Appeals for the Second Circuit
United States of America v. Roman Nektalov, No. S2 03 Cr. 828 (PKL) (S.D.N.Y. Jul. 21, 2006)
United States of America v. Roman Nektalov, No. 05-2780-cr (2d Cir. Aug. 25, 2006)
This case demonstrates the importance of special investigative techniques in line with Art. 20 of the Organized Crime Convention. The charges stemmed from a government sting operation conducted by an undercover government agent with the aid of a cooperating witness involving the laundering of funds represented to be the proceeds of international narcotics trafficking.
The case further sheds light on the modern application of the conscious avoidance/willful blindness doctrine. This doctrine expands the definition of knowledge to include closing one’s eyes to the high probability that a fact exists. This doctrine is well established in American criminal law.
The Court established that this doctrine can also be used in connection with government sting operations. Therefore, the interplay of special investigative techniques and the doctrine can be an important tool in prosecuting organized crime.