The former Cayman-based investment advisor Eric St-Cyr and fellow Canadian Patrick Poulin have each been sentenced to serve 14 months in prison and three years of supervised release on money laundering charges.
St-Cyr, 50, founder and director of Clover Asset Management, was arrested on March 12, together with Clover investment advisor Joshua VanDyk, 34, a U.S. citizen, and Turks and Caicos-based attorney Poulin, 41, after they assisted undercover U.S. Internal Revenue Service investigators in laundering the purported proceeds of a bank fraud through an offshore structure designed to conceal the true owners of the funds.
In their plea agreements and statements of fact, the defendants admitted that they had developed and marketed a method for U.S. clients to covertly funnel funds from the United States through the Turks and Caicos to the Cayman Islands. St-Cyr and VanDyk invested the laundered funds on the clients’ behalf and represented that the funds would not be reported to the U.S. government.
The sentence handed down to St-Cyr was significantly more lenient than the 27 months demanded by prosecutors. Attorneys for the defendant had requested 26 months, not considering any reduction recommended in the government’s motion. These sentencing positions in turn were substantially lower than the sentencing guidelines of 41 to 51 months.
Senior U.S. District Judge T.S. Ellis III in the Eastern District of Virginia presented his verdict on Oct. 3 after considering the defendants’ substantial cooperation with ongoing government investigations.
Deputy Assistant Attorney General Ronald A. Cimino for the Justice Department’s Tax Division said the “two defendants are cooperating with the IRS, and we anticipate that other investigations will develop from the information they have provided.”
In documents filed with the court, St-Cyr’s lawyers stated that although he would have been able to meet the bail conditions, St-Cyr had decided “to begin serving his punishment” since his arrest. “He has consistently worked to be an honest and useful cooperator for the government, at times placing his security in jeopardy,” the document said. A further motion, presumably detailing the extent of the cooperation, was filed under seal.
During the two-year investigation, undercover IRS agents operated in the Cayman Islands, the Turks and Caicos Islands and Canada.
“The sentences imposed by the court today show that those who use offshore accounts and entities for money laundering and tax evasion will be punished,” Mr. Cimino said.
The sentences were less than half of the 30-month prison sentence that St-Cyr’s co-worker Joshua VanDyk received in an earlier sentencing in September.
St-Cyr’s lawyers asserted St-Cyr was “at most equally culpable to Mr. VanDyk,” arguing that VanDyk was initially contacted by an undercover IRS agent when he worked with another firm in the Cayman Islands. St-Cyr had only met with undercover investigators at a later stage to close the deal, documents filed by the defense stated.
They further claimed that St-Cyr was a 66 percent owner of Clover Asset Management, with the remainder held by Cayman firm Delta Group, and VanDyk had an option to buy half of St-Cyr’s ownership share for $1. Because St-Cyr had received the same compensation as VanDyk from Clover, his lawyers had asked the court to follow the same reasoning as in the VanDyk sentencing.
In the defendant’s position on the sentencing, attorneys for St-Cyr said once he is released “his punishment will have just begun” because he will no longer be permitted to work in the financial industry or contribute to financial publications. Under Cayman law, he will also not be allowed to return to the Cayman Islands. As a result, his family is forced to sell their home in Cayman and move back to Canada. The document further said St-Cyr would have to rebuild his life from scratch, including his private life as his wife had recently filed for divorce.
Poulin, at the time a partner with Turks and Caicos law firm Bishop’s Legal, served as an intermediary in the transactions by setting up an entity named Zero Exposure Inc. and by functioning as a director on behalf of the U.S. investigators, whose affiliation with the offshore corporation would not be identified.
In an initial test run, US$200,000 were sent from the U.S. to Poulin’s escrow account in the Turks and Caicos and then sent on from the law firm’s trust account to Clover in the Cayman Islands disguised as the funds of the offshore corporation.
Court documents filed by prosecutors state Poulin proposed several structures to undercover investigators to make it difficult to identify the true owners of the funds. Among others, he allegedly recommended the layering of structures across different countries by establishing a foundation in country A, a corporation in country B and an investment account in country C, as well as the use of nominee board members, nominee directors and nominee shareholders.
According to transcripts of meetings with undercover investigators, he also discussed the use of his attorney confidentiality privileges as a shield, saying that in the past he had only one anti-money laundering request from the U.S. and one tax information exchange agreement request from Canada which “went away” when he claimed attorney-client privilege.
Poulin’s sentence was also substantially lower than the 31 months imprisonment suggested by the prosecution and his own defense counsel. In a sentencing position, his lawyer noted that Poulin has been disbarred in Turks and Caicos and Canada and his law license in Quebec has been suspended. He has also filed for personal bankruptcy in July 2014.
When contacted by the Cayman Compass about what has happened to Clover Asset Management and its investors’ funds, the Cayman Islands Monetary Authority said it is unable to comment at this time.