Three Southern California businessmen and three British brokers were arraigned Monday in Los Angeles on charges that they conspired to defraud the Internal Revenue Service by showing fictitious “wins” and “losses” on the London Commodities and Metal Exchange.
Indicted on conspiracy and a variety of mail and wire fraud counts were Michael Giannini, 66, of North Hollywood; Stewart Gorenstein, 42, of Irvine, and Ronald Kane, 53, of Canoga Park.
Charged with taking part in the scheme with them were David Lamb and Geoffrey Tijou, both 41, and Barry Hughes, 33, all of London.
Following Monday’s arraignment before U.S. District Judge Terry Hatter Jr., attorneys for the British defendants complained that they had been “lured” to this country by undercover IRS agents and arrested for activities that are legal in the United Kingdom. The agents, they said, had paid the London men their fares and expenses to Los Angeles, ostensibly to discuss investments.
“What has been done to these men by the IRS constitutes serious violations of international law,” said Tijou’s lawyer, Harland Braun. Hatter set a hearing for Thursday to determine if the defendants from London would be allowed to return to England before trial on the charges.
Another defense attorney, James Twitty, added: “What the Americans do about their taxes on wins and losses is their business. To charge these fellows from London for what is legal under their country’s law just isn’t fair.”
Assistant U.S. Atty. Terree Bowers declined to comment on these accusations but maintained that the indictments returned by a Los Angeles federal grand jury were justified. In explaining the charges filed against the six defendants last week, he said:
“Actually, there were two schemes in this case. One involves the creation of false losses through trades on the commodities exchange in London and the return of the money supposedly lost through corporations set up in places like the British Virgin Islands and the Bahamas. The second scheme involved the laundering of money on wins so that taxes would not have to be paid.”
If convicted, the maximum penalty that could be imposed on each defendant is five years’ imprisonment and a $10,000 fine.