Bank Returns Alleged Fraud Money to U.S.

Citibank has turned over to the federal government $8.1 million allegedly laundered by a Malibu entrepreneur under investigation for allegedly defrauding 900,000 credit card holders, officials said.

The money, turned over to the FBI, represents a portion of the $45 million Kenneth H. Taves allegedly generated by improperly billing credit card numbers he purchased from a San Fernando Valley bank.

Citibank in New York received the money from its affiliate in Sydney, Australia. The money had been placed there by European Bank, an institution in the South Pacific island nation of Vanuatu, authorities said.

Investigators believe Taves initially hid much of the proceeds in the Cayman Islands. Then--after the Federal Trade Commission accused him of fraud--he had some of the funds wired to European Bank.

A federal judge presiding over the FTC’s civil case against Taves already found him liable, saying he falsely billed card holders for access to his adult entertainment Web sites--a service they didn’t purchase.

He also has been indicted for filing a false statement to the FTC, and is set to go to trial Jan. 23. He is expected to be indicted for the alleged fraud in several weeks. He has denied wrongdoing, saying computer users entered fraudulently obtained card numbers to gain entry to his Web sites.

A Citibank spokesman could not be reached.