UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - -x UNITED STATES OF AMERICA, : INDICTMENT -v.- : 10 Cr. ( ) SHAHIN KASHANCHI, : Defendant. : - - - - - - - - - - - - - - - - - -x COUNT ONE (Bank Fraud) The Grand Jury charges: THE DEFENDANT AND HIS ACCOMPLICE, HASSAN NEMAZEE 1. At all times relevant to this Indictment, Hassan Nemazee ( Nemazee ) was, among other things, the chairman and chief executive officer of Nemazee Capital Corporation ( Nemazee Capital ). Nemazee Capital was an entity through which Nemazee invested in both public and private companies principally on his own behalf. Nemazee Capital maintained its principal executive office in Manhattan, from which Nemazee primarily conducted his business. 2. At all times relevant to this Indictment, SHAHIN KASHANCHI, the defendant, resided in or around Telluride, Colorado. KASHANCHI was the proprietor of Blue Gecko, Inc. ( Blue Gecko ), which is engaged in the business of installing home electronic equipment.
THE RELEVANT FINANCIAL INSTITUTIONS 3. Bank of America Corporation is a corporation organized under the laws of the State of Delaware with its headquarters in Charlotte, North Carolina. Bank of America Corporation provides a broad range of banking and non-banking financial services and products both within and outside of the United States. Among the subsidiaries of Bank of America Corporation is Bank of America, N.A. ( BofA ), the deposits of which were, at all times relevant to this Indictment, insured by the Federal Deposit Insurance Corporation ( FDIC ). BofA is the successor in interest, by merger, to various banks, including NationsBank of Texas, N.A. ( NationsBank of TX ), the deposits of which were at all times relevant to this Indictment insured by the FDIC. 4. Citigroup Inc. is a corporation organized under the laws of the State of Delaware with its headquarters in New York, New York. Like Bank of America Corporation, Citigroup Inc. provides a broad range of banking and non-banking financial services and products both within and outside of the United States. Among the subsidiaries of Citigroup Inc. is Citibank, N.A. ( Citibank ), the deposits of which were at all times relevant to this Indictment insured by the FDIC. 2
5. HSBC Holdings plc is a public limited company incorporated under the laws of the United Kingdom with its headquarters in London, England. Like Bank of America Corporation and Citigroup Inc., HSBC Holdings plc provides a broad range of banking and non-banking financial services and products both within and outside of the United States. Among the subsidiaries of HSBC Holdings plc is HSBC Bank USA, N.A. ( HSBC ), the deposits of which were, at all times relevant to this Indictment, insured by the FDIC. 6. Until approximately March 2009, Westminster Securities Corporation ( Westminster ) was a registered brokerdealer with its principal place of business in New York, New York. NEMAZEE, WITH KASHANCHI S ASSISTANCE, DEFRAUDS BofA OF MORE THAN $142 MILLION 7. Starting in or about 1997 and continuing until in or about July 2009, Nemazee borrowed money from BofA. Among other borrowings by Nemazee from BofA were the following: a. In or about May 1998, Nemazee entered into a written arrangement to borrow up to $3.5 million from NationsBank of TX secured by Nemazee s interest in an apartment on Park Avenue in Manhattan (the Park Avenue Apartment ). 3
b. In or about June 2001, Nemazee entered into a written arrangement with BofA to borrow approximately $1.4 million secured by Nemazee s interest in a home located in Katonah, New York (the Katonah Property ). c. In or about September 2006, Nemazee entered into a written arrangement with BofA whereby, in exchange for pledging certain collateral to BofA, Nemazee had the right to borrow up to $100 million from BofA, part of which loans were secured (the First Secured BofA Loan ). In connection with the First Secured BofA Loan, Nemazee falsely represented, in substance and in part, that he owned a specified account (the First BofA Pledged Account ) at Westminster. Nemazee further falsely represented, in substance and in part, that the BofA Pledged Account contained over $139 million of United States Treasury securities. d. In or about June 2007, Nemazee entered into a written arrangement with BofA to borrow approximately $1.032 million to purchase a fractional interest in a Cessna airplane. e. In or about 2008, Nemazee entered into a written arrangement with BofA to borrow over approximately $4.5 million in order to purchase two luxury apartments located on Warren Street in Manhattan. 4
f. In or about October 2008, Nemazee entered into a written arrangement with BofA whereby, in exchange for pledging certain collateral to BofA, Nemazee had the right to borrow up to $100 million from BofA (the Second Secured BofA Loan ). In connection with the Second Secured BofA Loan, Nemazee falsely represented, in substance and in part, that he held a specified account (the Second BofA Pledged Account ) at Westminster. Nemazee further falsely represented, in substance and in part, that the Second BofA Pledged Account contained over $88 million of United States Treasury securities. 8. In relation to all or substantially all of Nemazee s borrowings from BofA, SHAHIN KASHANCHI, the defendant, manufactured at Nemazee s request account statements that were purportedly issued by Westminster and purportedly evidenced Nemazee s ownership, in the NationsBank of TX Pledged Account, the First BofA Pledged Account, and the Second BofA Pledged Account, of millions of dollars of United States Treasury and other securities. 9. As of approximately September 2009, Nemazee owed BofA, including its subsidiaries, approximately $142 million. 5
10. In truth and in fact, the NationsBank of TX Pledged Account, the First BofA Pledged Account, and the Second BofA Pledged Account did not exist and Nemazee did not own the millions of dollars of United States Treasury and other securities that Nemazee had either represented that he owned or pledged as collateral to NationsBank of TX and/or BofA, in connection with the loans described in paragraph 7, above, and others taken out from BofA. NEMAZEE, WITH KASHANCHI S ASSISTANCE, DEFRAUDS CITIBANK OF $74.9 MILLION 11. On or about August 22, 2005, Nemazee entered into a written arrangement with Citibank, whereby Citibank agreed to lend Nemazee, on an unsecured basis, up to $25 million (the Unsecured Citibank Loan ). In connection with this lending arrangement, Nemazee falsely represented to Citibank that he owned over $500 million in United States Treasury securities, $100 million of which had already been pledged to Bank of America. The Unsecured Citibank Loan was extended multiple times, most recently as of on or about November 20, 2008, when the outstanding balance that Nemazee owed Citibank on the Unsecured Citibank Loan was over $20 million. 12. On or about December 22, 2006, Nemazee entered into a written arrangement with Citibank whereby, in exchange for pledging certain collateral to Citibank, Nemazee had the right to borrow up to $25 million from Citibank (the Secured Citibank 6
Loan ). The terms of the Secured Citibank Loan were modified multiple times, most recently as of on or about November 20, 2008, when the amount of funds that Nemazee could borrow from Citibank was increased to $80 million. 13. In connection with the Secured Citibank Loan and its subsequent modifications, Nemazee falsely represented, in substance and in part, that he held a specified account (the Citibank Pledged Account ) at Westminster. Nemazee further falsely represented, in substance and in part, that the Citibank Pledged Account contained millions of dollars of United States Treasury securities. 14. In relation to all or substantially all of Nemazee s borrowings from Citibank, SHAHIN KASHANCHI, the defendant, manufactured at Nemazee s request account statements, that were purportedly issued by Westminster and purportedly evidenced Nemazee s ownership in, among other accounts, the Citibank Pledged Account, of millions of dollars of United States Treasury and other securities. 15. In truth and in fact, the Citibank Pledged Account did not exist and Nemazee did not own the millions of dollars of United States Treasury securities that he had pledged to Citibank as collateral for his loans from Citibank. Nor did Nemazee own over $500 million in United States Treasury securities at any time during which the Unsecured Citibank Loan was outstanding. 7
16. As of approximately August 23, 2009, Nemazee owed Citibank approximately $74.9 million. NEMAZEE, WITH KASHANCHI S ASSISTANCE, DEFRAUDS HSBC TO PAY OFF HIS DEBT TO CITIBANK 17. Starting in or about early 2009, Nemazee began meeting with representatives of HSBC regarding a line of credit. In the course of his meetings and communications with HSBC, Nemazee falsely represented to HSBC, in substance and in part, that he held two specified accounts at Westminster, one of which would serve as pledged collateral for the line of credit from HSBC (the HSBC Pledged Account ). Nemazee further falsely represented, in substance and in part, that the HSBC Pledged Account held over $125 million in United States Treasury securities and that the other account at Westminster held over $636 million of United States Treasury securities. 18. Thereafter, in or about August 2009, Nemazee entered into a written arrangement with HSBC whereby, in exchange for pledging the United States Treasury securities in the HSBC Pledged Account as collateral to HSBC, Nemazee had the right to borrow up to $100 million from HSBC (the Secured HSBC Loan ). 8
19. In truth and in fact, the HSBC Pledged Account did not exist and Nemazee did not own the millions of dollars of United States Treasury securities that he had pledged to HSBC as collateral for his loans from HSBC. Nor did Nemazee own over $636 million in United States Treasury securities at any time during which the Secured HSBC Loan was outstanding. 20. In relation to all or substantially all of Nemazee s borrowings from HSBC, SHAHIN KASHANCHI, the defendant, manufactured at Nemazee s request account statements, that were purportedly issued by Westminster and purportedly evidenced Nemazee s ownership in, among other accounts, the HSBC Pledged Account, of millions of dollars of United States Treasury and other securities. 21. In or about the beginning of August 2009, representatives of Citibank began to seek from Nemazee verification of the existence of the assets held in the Citibank Pledged Account. 22. In order assist Nemazee in falsely and fraudulently providing verification of the existence of the assets held in the Citibank Pledged Account, SHAHIN KASHANCHI, the defendant, manufactured fake letterhead of Pershing LLC ( Pershing ), the entity at which the assets held in the Citibank Pledged Account were held in custoy. On or about August 14, 2009, KASHANCHI sent the fake Pershing letterhead to Nemazee, 9
which Nemazee subsequently used to defraud Citibank. 23. Specifically, on or about the afternoon of August 14, 2009, SHAHIN KASHANCHI, the defendant, wrote, in an e-mail to Nemazee, in part: Here is a try. Looks good from my end, but I am going off the fax which is not great quality. Compare it to an original if you have it. This is a PDF document, so you should be able to print it out on your end. 24. Later on or about the afternoon of August 14, 2009, SHAHIN KASHANCHI, the defendant, wrote, in an e-mail to Nemazee, in part: Her [sic] are 2 versions. Each one is one step larger. Let me know if either one works, and if so which file (they have 7.5 and 8 in the title). Attached to this e-mail were two substantially similar versions of fake Pershing letterhead. 25. On or about August 23, 2009, Nemazee was met in person by Special Agents of the Federal Bureau of Investigation and questioned about, among other things, the existence of the collateral for the Citibank loans. 26. On or about the afternoon of August 24, 2009, and in order to avoid discovery that the collateral for the Secured Citibank Loan that had been pledged by Nemazee did not, in fact, exist, Nemazee drew down upon the Secured HSBC Loan in the amount of approximately $74.9 million, substantially all of which was used to repay Nemazee s outstanding loan to Citibank. 10
MEANS AND METHODS BY WHICH NEMAZEE, WITH KASHANCHI S ASSISTANCE, DEFRAUDED BofA, CITIBANK, AND HSBC 27. Among the means and methods by which Nemazee, with the assistance of SHAHIN KASHANCHI, the defendant, carried out the fraud upon BofA, Citibank, and HSBC were the following: a. Nemazee provided fake account statements evidencing his ownership of United States Treasury and other securities at Westminster, which contained a telephone number purportedly for Westminster, but which was in fact assigned to a virtual office that Nemazee himself had established. The fake account statements were manufactured by SHAHIN KASHANCHI, the defendant, who was periodically paid by Nemazee for having manufactured the fake account statements. b. Nemazee forged the signatures of representatives of Westminster, Pershing, and another entity relating to Pershing known as Pershing Advisor Solutions LLC ( PAS ) on various documents relating to his borrowings that he provided at various times to BofA, Citibank, and HSBC, including on fake Pershing letterhead that had been manufactured at Nemazee s request by KASHANCHI. c. Nemazee established at least two virtual offices at locations in Manhattan that held themselves out, at Nemazee s direction, as being associated with Westminster and Pershing. As a result, in the event that representatives of BofA, Citibank, or HSBC sought to confirm the existence of the 11
assets reflected on the fraudulent documents submitted by Nemazee, they would, in fact, have been contacting a telephone number at one of the virtual offices assigned to Nemazee himself, and not Westminster, Pershing, or PAS. d. SHAHIN KASHANCHI, the defendant, periodically transmitted by electronic mail to Nemazee the fake Westminster account statements and, when attaching them to electronic mail sent to Nemazee gave the files names that included the words COLLATERAL and/or HSBC. e. SHAHIN KASHANCHI, the defendant, created the fake Westminster account statements and, when designating the title of the non-existent accounts, typically indicated, in substance and in part, HASSAN NEMAZEE COLLATERAL or HASSAN NEMAZEE COLLATERAL + HSBC. STATUTORY ALLEGATIONS 28. Starting in or about 1997 and continuing until in or about August 2009, in the Southern District of New York and elsewhere, SHAHIN KASHANCHI, the defendant, unlawfully, willfully, and knowingly executed and attempted to execute a scheme and artifice to defraud a financial institution, the deposits of which were insured by the FDIC, and to obtain moneys, funds, credits, assets, securities, and other property owned by and under the custody and control of a financial institution, the deposits of which were insured by the FDIC, by means of false and 12
fraudulent pretenses, representations, and promises, to wit, KASHANCHI aided, abetted, counseled, commanded, induced, and procured the commission of bank fraud by Nemazee, the victims of which bank fraud included HSBC and other financial institutions, the deposits of which were insured by the FDIC, by, among other things, manufacturing fake account statements and other documents submitted to BofA, Citibank, and HSBC that, among other things, falsely and fraudulently represented that Nemazee owned millions of dollars of United States Treasury and other securities. (Title 18, United States Code, Sections 1344 and 2). FOREPERSON PREET BHARARA United States Attorney 13