A Textbook Case of Alleged Money Laundering?

On November 18, 2019, the U.S. Attorney for the Southern District of New York announced the arrest and unsealed the indictment of Bruce Bagley – a 73-year-old college professor whose scholarship focuses on U.S.-Latin American relations, with an emphasis on drug trafficking and security issues. He has been charged with two substantive counts of money laundering and one count of conspiracy to launder money. If convicted, Dr. Bagley faces up to twenty years’ incarceration.

Dr. Bagley, a now-suspended professor at the University of Miami in South Florida, is chair of the school’s Department of International Studies. Before that, he served as the associate dean of UM’s Graduate School of International Studies, and taught Latin American Studies at the prestigious School of Advanced International Studies (SAIS) of the John Hopkins University in Bologna, Italy. Dr. Bagley’s scholarship includes the books Drug Trafficking in the Americas (1994), Drug Trafficking Research in the Americas (1997), and International Relations in Latin America (2013).

As alleged, from November 2017 through April 2019, Dr. Bagley used domestic banks to launder $3 million in proceeds from an alleged Venezuelan corruption and bribery scheme connected with public works projects. Dr. Bagley used a shell company (“Company-1” in the indictment) to open a bank account in Weston, Florida and receive the funds. Dr. Bagley received the funds from foreign bank accounts, held by a “purported food company” as well as a wealth management firm, in UAE and Swiss banks. Prosecutors contend that Dr. Bagley took 10% of the funds for himself, and transferred the rest to an unidentified co-conspirator. In October 2018, the bank closed the account for suspicious activity, but two months later, Dr. Bagley opened a new account, through which he received additional funds. Allegedly, Dr. Bagley also “entered into multiple sham contracts purporting to justify the transfer of money.”

The conspiracy charge, under 18 U.S.C. § 1956(h), pertains to the entire time period at issue and involves the full amount of the alleged $3 million in bribery proceeds. Interestingly, however, the two substantive counts have been charged under the “sting” provision of the criminal money laundering statutes, 18 U.S.C. § 1956(a)(3)(B). These counts rest on two bank transactions involving $250,000 and $224,000 in funds “believed [by the defendant] to be the proceeds of specified unlawful activity” and occurring in January and February of 2019, respectively – shortly after the first bank account was shut down for suspicious activity. According to the indictment, “Individual-1,” who typically accompanied Dr. Bagley when he made withdrawals from the bank, “represented to” Dr. Bagley that the $250,000 was derived from the corruption scheme; a law enforcement officer made similar representations to Dr. Bagley as to the $224,000 sum. Thus, it appears from the indictment that “Individual-1” was cooperating with the government, which had set up an undercover investigation of Dr. Bagley near the end of the alleged scheme.

Dr. Bagley’s attorney wrote to Bloomberg: “The arrest came as a complete surprise to everyone and we are just now reviewing the indictment. Based on my extensive knowledge of Dr. Bagley, both professionally and personally, I am confident he will be vindicated at the end of the day.” Dr. Bagley himself told a local news station, “I’m feeling just fine. Not guilty. That’s how I’m feeling. They’ve got it all wrong.” As we have blogged, it is sometimes difficult for the government to prove a specific intent to conceal in money laundering offenses.

Conversely, the S.D.N.Y. U.S. Attorney quipped: “About the only lesson to be learned from Professor Bagley today is that involving oneself in public corruption, bribery, and embezzlement schemes is going to lead to an indictment."