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Government and People
AFFIDAVIT IN SUPPORT OF SEARCH AND SEIZURE WARRANTS
1, Katherine L. Andrews, a Special Agent of the Federal Bureau of Investigation (FBI), United States Department of Justice (DOJ), being duly sworn, do depose and state as follows:
1. I am a Special Agent of the Federal Bureau of Investigation (FBI) assigned to the Washington Field Office and have been so employed since 1998. Before being hired by the FBI, I was employed as an assistant vice president with a major financial institution for seven years.
2. 1 am currently assigned to the Government Fraud/Public Corruption squad of the FBI's Washington Field Office. I have conducted complex government fraud investigations since 1998 and have received advanced training in white collar crime investigations, including specialized classes in money laundering, Department of Housing and Urban Development fraud programs and investigation of public corruption. I have been the affiant in support of several search warrants and have participated in the execution of many search warrants since 1998.
3. In September 2002, the United States Attorney's Office for the District of Columbia received from the Washington Teachers' Union Local 6 ("WTU" or "the union"), whose parent body is the American Federation of Teachers, AFL-CIO ("AFT"), and from the AFT itself, a referral of allegations of serious criminal activity, including but not limited to allegations of embezzlement of WTU funds through the improper personal use of various WTU deposit and credit accounts, on the part of officers, employees, and certain vendors of the WTU. Since September 2002, the FBI has conducted a j joint investigation of these and other allegations with investigators from the Department of Labor, Office of Labor Management Standards ("DOL-OLMS"), which has oversight responsibility for certain labor organizations, including WTU. Subsequent to the initiation of the investigation, Special Agents of the Internal Revenue Service, Criminal Investigations Division ("IRS-CID"), and the District of Columbia Office of Inspector General ("DC OIG") have helped to conduct the investigation. .
4. The statements set forth in this Affidavit result from my own review, as well as the review of other agents of the FBI, DOL-OLMS, IRS-CID, and DC OIG of thousands of pages of documents obtained from WTU, WTU accountants and purported auditors, and vendors whose goods and services were purchased through the use of WTU depository and credit accounts, financial institutions holding WTU and various other persons' depository accounts, and various other sources; review of WTU official financial statements (including Forms LM-2, which labor organizations such as WTU are required to file annually with DOL, and IRS Forms 990, which WTU was required to file with the IRS); interviews of various persons; and representations of WTU and AFT counsel, who have informed investigators that they are conducting an internal investigation and audit of the matters described herein.
5. The government's ongoing investigation has developed probable cause to believe that several persons engaged in a conspiracy to and did commit serious felony offenses against the United States, in violation of Title 18, United States Code, Section 371, including but not limited to using the mails and wires to defraud and deprive another of money, property, and its intangible right to honest services, in violation of Title 18, United States Code, Sections 1341, 1343, and 1346; false statements, in violation of Title 18, United States Code, Section 1001; money laundering, in violation of Title 18, United States Code, Sections 1956 and 1957; embezzlement from a labor union, in violation of Title 29, United States Code, Section 501(c); and tax evasion, in violation of Title 26, United States Code, Section 7201, as well as probable cause to believe that the places described in the attachments to this Affidavit contain evidence and/or instrumentalities of these offenses, which may be seized pursuant to the warrant that this Affidavit supports.
6. Although a complete accounting of the losses to the union has not been finalized, investigation to date reveals that these persons converted well in excess of $2,000,000 in union funds to their personal use by, among other things, 1) charging personal expenses to union-paid credit cards without proper reimbursement of the union treasury or authorization of the union's executive board or membership; 2) writing union checks to themselves; and 3) writing and causing the writing of union checks to persons other than themselves who then cashed the checks and made the cash proceeds available to union officers. The investigation also indicates that the co-conspirators sought to conceal their misappropriation of WTU funds by failing to ensure that proper financial and accounting procedures were in place and, later, by enlisting the services of an accountant who had in some cases assisted them in the preparation of false and misleading personal tax returns and false and misleading financial reports for the Department of Labor and IRS.
7. In addition, the investigation has revealed that various individuals who participated in or aided and abetted the misappropriation of WTU funds failed to claim the full amount of their income from WTU, whether legitimate income or ill-gotten gains, on their personal tax returns filed with the IRS.
8. This Affidavit is submitted in support of search warrants for various locations within the District of Columbia, the District of Maryland, and the Eastern District of Virginia, and seeks authorization to seize evidence of the aforementioned offenses, including tangible property purchased through and constituting evidence of the alleged embezzlement scheme, personal and business financial records and papers containing evidence of the scheme and evasion of federal tax liability, and computers and equipment associated therewith, which may be instrumentalities of and contain evidence of the aforementioned offenses. The locations to be searched and their relationship to union officials who participated in or aided and abetted the misappropriation of WTU funds are described briefly below and more fully identified in the attachments to this Affidavit applying to each location:
9. Attachments A-1 through A-7 describe the locations to be searched. Attachments A-1 through A-3 describe locations within the District of Columbia. Attachments A-4 through A-6 describe locations within the District of Maryland. Attachment A-7 describes a location within the Eastern District of Virginia. All statements made in Attachments A-1 through A-7 are adopted into the body of this Affidavit as if fully set forth herein.
10. Attachment B describes the matters and things to be seized at all locations within the District of Columbia, the location within the Eastern District of Virginia, and the two residential locations within the District of Maryland: 1) 1307 Lark Lane, Fort Washington, Maryland 20744; and 2) 12000 Quartette Lane, Bowie, Maryland 20720. Attachment B does not cover items to be seized at the business location, Miller Furs, at 6900 Wisconsin Avenue, Chevy Chase, Maryland 20815. Attachment B describes by vendor, and with varying degrees of particularity, specific goods purchased unlawfully with embezzled union funds. In addition, Attachment B describes documents to be seized. All statements made in Attachment B are adopted into the body of this Affidavit as if fully set forth herein.
11. Attachment C describes the procedures for conducting the search and seizure of computer equipment at all locations with the exception of Miller Furs, at 6900 Wisconsin Avenue, Chevy Chase, Maryland 20815, where no such equipment is to be seized.
12. Attachment D describes the items to be seized at Miller Furs, at 6900 Wisconsin Avenue, Chevy Chase, Maryland 20815.
13. WTU made its regular payroll to salaried officers and employees through the automated system provided by the firm PAYCHEX. In addition, WTU maintained a checkbook from which checks could be, and were, written by hand.
14. WTU checks required the signatures of two of the persons occupying the offices of president, vice president, and treasurer.
15. WTU's officers owed a fiduciary duty to WTU and its members obligating them to hold the union's money and property solely for the benefit of its members and not to use union funds for purely personal purposes.
16. Among other financial controls, the Department of Labor required WTU annually to submit Forms LM-2, listing disbursements, including salary and payments for official business and personal expenses. Forms LM-2 are maintained by the Department of Labor for public inspection and are designed to ensure some accountability to the union membership for the officers' and employees' expenditures. A review of these Forms LM-2, signed by BULLOCK, as WTU president, and BAXTER, as treasurer, reveals that WTU's disclosures were incomplete, false, and misleading in that they grossly understated disbursements to some officers and employees, including BULLOCK, BAXTER, and HEMPHILL, and omitted disclosure of disbursements of over $1,000,000 to other employees, including employees paid their compensation in cash.
17. AFT's constitution required all of its affiliated unions to perform an audit or review of its finances every two years and to submit a written report of the audit or review, which would be available to the membership of WTU. During at least the period 1998 through 2002, WTU, through its elected president, BULLOCK, and elected treasurer, BAXTER, failed to produce such a report.
18. In the section of this Affidavit titled "Evidence of Fraud," I describe over $2 million in unauthorized, personal, and/or improper expenditures of union funds by union officers and others, over the period 1995 to the present. The vast majority of the purchases occurred between 1998 and the present. There is probable cause to believe that these purchases were unauthorized by WTU for one or more of the following reasons: 1) because many purchases were of an obviously personal nature; 2) because many of the goods purchased were delivered to BULLOCK's home or other proposed search locations, and not to the union's office space; 3) because these purchases constituted disbursements to BULLOCK, BAXTER, HEMPHILL, and others that should have been, but were not, disclosed as such on WTU's Forms LM-2; 4) because WTU's meeting minutes contain no discussion of the purchases indicating their disclosure to the union's membership; 5) because witnesses and other union representatives have advised investigators that the expenditures had no even arguable benefit to the union; and 6) because the absence of required financial reports to AFT suggests that the expenditures were being concealed (for, if they were not, the expenses should have been discussed openly).
19. There is probable cause to believe that many of the described purchases were of durable, investment or heirloom items (including furs, ball gowns, art, furniture, china, crystal, silver, jewelry, and electronic equipment) that can be reasonably expected to be maintained by the purchasers or recipients in their residences over a period of years.
Evidence of Fraud
BARBARA A. BULLOCK
20. BARBARA A. BULLOCK was the salaried president of WTU from approximately 1994 until September 2002, when she tendered her resignation. Forms LM-2 filed by the union, as well as IRS Forms W-2 Forms covering this period indicate that from 1994 through 2002, BULLOCK was paid a salary ranging from $86,232 to $106,840. A limited review of PAYCHEX records reveals that BULLOCK received regular salary payments from WTU's payroll account, which constituted these amounts. These amounts are set forth as disbursements to BULLOCK on WTU's Forms LM-2.
21. An analysis of WTU's credit and charge card records, WTU bank account records, and WTU meeting minutes reveals that from November 1995 through March 2002, BULLOCK made unauthorized personal charges for goods and services of over $1 million from 1995 through her resignation from the presidency of WTU in September 2002.
22. These expenditures included purchases of art, jewelry, haute couture (including custom-made dresses, shoes, and furs), food and wine, wigs, and antique furniture. Among these purchases were: a $20,000 mink coat, along with other mink coats that your affiant has learned are or have been stored at Miller Furs in Chevy Chase, Maryland; nearly $500,000 in custom-made clothing from a Baltimore clothing maker known as Van Style, which clothing is believed to be maintained at her District of Columbia residence; more than $9,000 at retailer Bloomingdales; more than $9,000 for clothing and accessories from a Florida vendor known as Body Scentre Limited; more than $11,000 in purchases from a retailer known as Friedman's Shoes in Atlanta, Georgia; more than $5,000 to Galt Brothers Jewelry in Washington, D.C.; more than $5,000 to Graffiti AudioVideo for electronic equipment; more than $12,000 at retailer Hecht Company; more than $3,000 at the Hermes Boutique in Vienna, Virginia; more than $5,000 for bedding and a desk pad from the Horchow Collection; more than $6,000 to vendor J. Crew; more than $15,000 to vendor Jacobson Stores, Inc., for St. John Knit apparel; more than $4,000 for merchandise from Little Switzerland JNU, in Juneau, Alaska; more than $60,000 to MS Rau Antiques in New Orleans, Louisiana (including $57,000 for a 288-piece Tiffany sterling silver set); more than $17,000 to Miller Furs; more than $150,000 at retailer Neiman-Marcus; more than $50,000 at retailer Nordstrom; more than $4,000 at beauty salon Oriental Oasis; more than $25,000 for services of the Parkway Custom Dry Cleaners in Chevy Chase, Maryland; more than $9,000 to Ramee Art Gallery in Washington, D.C.; more than $40,000 at retailer Saks Fifth Avenue; more than $50,000 at a vendor known as Snazzy Limited in Orange Park, Florida; more than $4,000 at the St. John Boutique in Beverly Hills, California and New York, New York; more than $2,500 for china or crystal from The Lenox Shop in Williamsburg, Virginia and Prince William, Virginia; more than $6,000 in gourmet kitchen equipment from retailer Williams-Sonoma; almost $4,000 to jeweler Tiffany & Co.; more than $20,000 to the Atlanta gallery of the artist William Tolliver; and more than $7,000 to Wagner Opticians.
23. I have personally visited the offices of WTU, located at 1717 K
Street, Northwest, Suite 902, in Washington, D.C. With the exception of
a few pieces of artwork and furnishings, few of the above-described
purchases were observed within WTU's office space. It is also my
observation that the space is functional office space, not unlike that
of a federally-operated office. It is not lavish in decor; nor can it be
described as comparable to that of a corporate executive. The
furnishings do not appear expensive; nor does the office generally
appear to be furnished with antiques.
BULLOCK and GWENDOLYN B. CLARK
24. GWENDOLYN B. CLARK, who resides in Alexandria, Virginia, is BULLOCK's sister. Your affiant has learned from Alexandria antiques dealer Tradition de France that a two-door, French, hand-painted armoire from the store was purchased by HEMPHILL with the WTU American Express card and delivered to CLARK's residence in March of 2000. In addition, CLARK has claimed to another person that she received a number of unnamed "gifts" from BULLOCK.
25. CLARK and BULLOCK share a bank account at SunTrust Bank. Witnesses have advised us that large sums ofmoney from WTU's checking account at Independence Federal Savings Bank were converted to cash by BULLOCK's driver, LEROY HOLMES, and deposited into this joint BULLOCK/CLARK SunTrust account.
26. CLARK also has a Diners Club account on which BULLOCK and CLARK's daughter, ERIKA CLARK, both are authorized users. Payments exceeding tens of thousands of dollars were drawn on the WTU checking account at Independence Federal Savings Bank to pay the CLARK/BULLOCK Diners Club balance. Among the vendors from whom goods and services were purchased with this Diners Club account are Van Style, Saks Fifth Avenue, Neiman-Marcus, Tiffany & Co., and Miller Furs.
27. In addition, I have learned that CLARK (who is a federal government employee), doing business as "Gwen's of Columbia," provided Christmas decorations for WTU office space and provided invoices to WTU. WTU paid CLARK thousands of dollars with checks signed by BULLOCK, some of which were then deposited into the joint CLARK/BULLOCK checking account.
28. 1 have learned that the Internal Revenue Service has no records of CLARK reporting income from either the business "Gwen's of Columbia" or the WTU.
JAMES O. BAXTER II
29. JAMES O. BAXTER 11 was at all times during the WTU presidency of BULLOCK the elected treasurer of WTU. At various times, he was a salaried employee of WTU and a full-time, salaried official of the District of Columbia Government, serving as Interim Director, Office of Labor Relations and Collective Bargaining. BAXTER was employed with that office starting July 7, 1997, and continuing through June 15, 2002, at an ending salary of $96,273. Together with BULLOCK and WTU's vice president, ESTHER HANKERSON, BAXTER had j joint check-writing authority at WTU. Together with BULLOCK, BAXTER was personally responsible for signing and certifying the accuracy of information contained in WTU's Forms LM-2.
30. For Tax Year 2001, WTU submitted a Form W-2 to the IRS for income (wages, tips, and other compensation) paid to Baxter of $64,483.86. For the period October 1, 2000 through September 30, 2001, WTU's Form LM-2, signed by BAXTER on December 28, 2001, stated that BAXTER had received gross salary of only $55,709, with no additional disbursements, including additional disbursements for official business.
31. Investigators have reviewed WTU bank records for the period October 1, 2000 through September 30, 2001 and determined that the actual total disbursements to BAXTER during the period covered by the LM-2 signed by BAXTER on December 28, 2001 was at least $117,845.70, including some payments designated "Pension Funds."
32. Although BAXTER received thousands of dollars in direct payments from the union, as well as tens of thousands of dollars in American Express charges over the period December 1995 through July 2002 for restaurants, bars and nightclubs, gasoline for multiple vehicles, vehicle repairs and maintenance, art (including art from Ramee Art Gallery), flowers, and other expenses (many of which should have been reported to the Department of Labor even if they had been properly authorized, under the category "Disbursements for Official Business"), these payments are not attributed to him as they should have been on Forms LM-2 that he signed.
33. BAXTER, with the help and assistance ofothers, used his position as
elected treasurer to convert union funds by writing thousands of dollars
in union checks to himself for services described in WTU records only as
"professional fees" or "professional services." In
fact, witnesses have advised investigators that BAXTER performed few
services justifying these payments and stated that BAXTER appeared in
the office merely to "sign checks."
GWENDOLYN M. HEMPHILL
34. GWENDOLYN M. HEMPHILL was formerly BULLOCK's assistant at WTU, with the titles Assistant to the President and Legislative Representative. Among other things, HEMPHILL was responsible for preparing union checks for BULLOCK's and BAXTER's signatures and for affixing BULLOCK's signature stamp to union checks. WTU submitted Forms W-2 to the IRS revealing that from tax years 1999 through 2001, HEMPHILL received a salary from WTU ranging from approximately $53,000 to $70,000.
35. An analysis of WTU credit card records for the period of May of 1998
to December of 2001, reveals that HEMPHILL used her WTU credit and
charge cards to make apparently personal purchases of tens of thousands
of dollars, including: fine art (including approximately $20,000 to
Ramee Art Gallery), a $4,324.87 payment towards an armoire from an
Alexandria, Virginia antiques store delivered to GWENDOLYN B. CLARK;
electronic equipment (including a $12,999 50" plasma, flat screen
television purchased from Graffiti Audio-Video and delivered to her
home, which her husband, LARRY HEMPHILL paid personal funds of over
$2,000 to have installed in their residence in January 2002); over $2,000 to Princess Jewelers; a $950
handbag from Neiman-Marcus; evening gowns from Rizik Brothers; and
thousands of dollars for vehicle maintenance, gasoline, sorority dues
and contributions, personal medical and dental expenses for her husband
and herself, women's and men's clothing, hotels for personal travel, and
36. LEROY HOLMES was BULLOCK's driver and a person performing various
odd jobs, including maintenance and deliveries, for the union. From 1999
until 2002, HOLMES received scores of WTU checks (made payable to
himself, as well as legitimate vendors of WTU, the names of which are
crossed out and Holmes's name inserted in their place) bearing the
signatures of BULLOCK and BAXTER and totaling in excess of $1,000,000,
which he converted to cash to pay himself more than $90,000 per year,
plus additional funds to maintain and pay for personal vehicles, and
provide cash to others (including at least one other WTU employee who
was paid in cash, apparently to avoid tracing by the IRS and other tax
authorities), including but not limited to BULLOCK and HEMPHILL. Your
affiant has also learned that HEMPHILL was personally responsible for
providing HOLMES with these WTU checks, which HOLMES cashed at
Independence Federal Savings Bank, which held WTU's major operating
37. The investigation has uncovered evidence of more than $100,000 in WTU payments to an entity known as Expressions Unlimited, which your affiant has learned is operated or owned by persons named ERROL ALDERMAN and MICHAEL MARTIN. Since at least 1999, MARTIN has been a full-time, salaried employee of the District of Columbia government. He has held the title "Program Analyst" with the District of Columbia government and now holds the title "Supervisory Program Analyst," within the District of Columbia Department of Health, Office of HIV/AIDS Administration. In this most recent capacity, MICHAEL MARTIN's salary is approximately $62,000 per year.
38. MICHAEL MARTIN is married to HEMPHILL's daughter, CHERYL MARTIN, who investigation has revealed was on occasion a temporary employee of WTU and the recipient of several thousand dollars in wages from the union. In addition, MICHAEL MARTIN was personally paid (over and above payments to Expressions Unlimited) more than $20,000 in WTU funds by WTU checks bearing the signatures of BULLOCK and BAXTER. Some, but not all of the payments to Expressions Unlimited purport to be supported by union vouchers prepared by HEMPHILL, which merely stated the amounts of the payments, but not the services rendered.
39. In October 2002, MICHAEL MARTIN faxed from his office within the District of Columbia government to WTU internal investigators copies of "invoices" for services that he claimed to have provided to BULLOCK to support personal payments from WTU to him. These "invoices," which appear to have been generated by computer, were for services such as "image consulting," "search for additional artwork for WTU office suites . . . and transporting Barbara Bullock in search of additional wardrobe," "consult on up coming [sic] fall [art] collections," and "[p]reparation for WTU Christmas Party, to include menu selection, holiday decoration and attire/fashion consulting for the celebration." Your affiant has compared the dates and amounts on these purported invoices with the dates and amounts of WTU checks payable to MICHAEL MARTIN and Expressions Unlimited. In some cases, the amounts and dates of the invoices do not match the amounts and dates of the checks paid by WTU. For example, on July 15, 1998, WTU paid MICHAEL MARTIN personally, with a check signed by BULLOCK and BAXTER, $1,100. WTU provided to investigators no corresponding invoice for this check. Based on statements of witnesses familiar with WTU's operations and the suspicious nature of the invoices MICHAEL MARTIN provided WTU's internal investigators, there exists probable cause to believe that many of the services purportedly provided by MICHAEL MARTIN and Expression Unlimited, in fact were not provided or were not for legitimate union business. Witnesses have indicated that MICHAEL MARTIN, in fact, served as BULLOCK's "hairdresser."
40. The investigation has also revealed that HEMPHILL's union credit cards were used to pay for furniture delivered to MICHAEL and CHERYL MARTIN's Maryland home (a dining room table from IMI Furniture in Sterling, Virginia, purchased on November 4, 1999 and delivered to their residence), as well as vacations (including a $3,095.20 Bahamas vacation in February of 2000) for MICHAEL and CHERYL MARTIN and another couple.
41. Your affiant has determined that the residence of MICHAEL and CHERYL MARTIN is the single-family dwelling located 12000 Quartette Lane, Bowie, Maryland, 20720. Since October 1999, statements for the bank account of Expressions Unlimited at Bank of America have been mailed to that address. Prior to that time, Expressions Unlimited statements were mailed to an address that ERROL ALDERMAN used. My review of the Expression Unlimited bank records indicates that MICHAEL MARTIN and CHERYL MARTIN make personal use of the funds in that account.
42. A review of bank records indicates that Expressions Unlimited checks totaling more than $10,000 and bearing the signature of ERROL ALDERMAN were deposited into one of HEMPHILL's personal accounts.
43. Documents relating to authorization of expenditure of WTU funds reveal no authorization by the executive board or the membership for the union to pay for image consulting, design services, or hair care services for BULLOCK. Nor were the expenditures disclosed to the membership.
44. Moreover, your affiant has sought, and believes she has obtained, all invoices from MICHAEL MARTIN and Expressions Unlimited in the files of WTU as of September 2002, when BULLOCK, BAXTER, and HEMPHILL ceased to be employed at WTU. WTU was required to produce to the government all versions of documents relating to, among other persons, ERROL ALDERMAN, MICHAEL MARTIN, and Expressions Unlimited. The only versions of invoices produced from the vendor files relating to MICHAEL MARTIN were those bearing the October 17, 2002 fax header from MICHAEL MARTIN's District of Columbia government office. Because no version lacking the recent fax header was produced from pre-existing WTU files, the inference arises that these invoices may have been recently created -- after it became widely known that WTU and AFT had referred these allegations to the United States Attorney's Office, various persons had been interviewed and grand jury subpoenas issued. Also, based on my experience, if these documents were created on MICHAEL MARTIN's office computer, evidence of the date of their creation may exist. Inasmuch as these invoices were within his government office (because the fax line indicates that he sent them from that office to WTU's internal counsel), there exists reason to believe that other documents relating to Expressions Unlimited and WTU may be found both in MICHAEL MARTIN's home and office, as well as on any computers or data storage equipment in either location.
Evidence of False Statements and Tax Violations
45. Your affiant has reviewed Forms LM-2 submitted by WTU, and bearing the signatures of BULLOCK and BAXTER for the years in which they have served in the capacities of President and Treasurer, respectively. Among other things, the Forms LM-2 require filers to state the disbursements to and salaries of officers and employees.
46. The investigation has also revealed evidence of potential tax violations, as income paid by WTU has not been reported to the IRS.
47. Investigation has revealed that the same tax preparer, JAMES A. GOOSBY, JR., prepared: the union's Forms 990 for Tax Years January 1, 1998 through December 31, 1998; October 1, 2000 through September 30, 2001, and a preliminary Form 990 for October 1, 2001 through September 30, 2002; BULLOCK's personal tax returns for tax years 1998 through 2001; MICHAEL and CHERYL MARTIN's personal tax returns for tax years 1999, 2000, and 2001; HOLMES's personal tax returns for tax years 1999, 2000, and 2001; and schedules for use in drafting WTU financial statements and reports, including a financial review or audit required by AFT's constitution. GOOSBY was also involved in the preparation of Forms LM-2 signed and submitted to DOL by BULLOCK and BAXTER.
48. I have reviewed a "Consulting Agreement" dated August 10, 2001, purporting to be between WTU and GOOSBY INCOME TAX SERVICE, which is GOOSBY's business name, for the preparation of WTU financial statements, Forms 990, and Forms LM-2. This contract, executed by HEMPHILL, on behalf of WTU, and GOOSBY called for WTU to pay GOOSBY $5,000 per month. An analysis of WTU records and documents obtained from GOOSBY reveals that WTU did, in fact, pay GOOSBY $5,000 for the period September 2001 through June 2002. Records obtained from GOOSBY reveal that GOOSBY did, in fact, review WTU checks and create schedules of payments to vendors covering a period of several years. GOOSBY shared these schedules with HEMPHILL and BAXTER.
49. For the period October 1998 through September 1999, GOOSBY's schedules reported WTU payments to HOLMES of $210,444.35, WTU payments to ERROL ALDERMAN of $37,011, and WTU payments to Expressions Unlimited of $48,694.49.
50. For the period October 1999 through September 2000, GOOSBY's schedules reported WTU payments to HOLMES of $311,509.30, WTU payments to Expressions Unlimited of $277,829.50, and WTU payments to American Express of $348,111.32.
51. For the period October 2000 through September 2001, GOOSBY identified, among other expenditures, WTU payments to HOLMES of $414,395.43, WTU payments to Expressions Unlimited of $118,398.26, WTU payments to American Express of $925,111.05, and WTU payments to CHERYL MARTIN of $18,550.
52. For the period October 2001 through December 2001, GOOSBY's schedules reported WTU payments to HOLMES of $110,525.85, WTU payments to American Express of $99,379.89, WTU payments to Expressions Unlimited of $8,800, and WTU payments to MICHAEL MARTIN of $2,500.
53. AFT's constitution requires that each affiliated local union conduct an internal financial review or have an outside auditor prepare an audit report at least every two years. The results of that review are to be shared with, or made available to the membership of the local and submitted to AFT. In addition, WTU's internal rules require the completion of such a financial review. Investigation has revealed that notwithstanding these audit or financial review requirements, a true and correct audit or financial review report was not prepared during the years 1999 through 2002.
54. The investigation has also revealed that members of the union had raised questions about BULLOCK's and BAXTER's stewardship of the union at least as early as 1997.
55. Forms LM-2 required the union's disclosure of disbursements to officers and employees in the following categories: gross salary, allowances, disbursements for official business, and "other disbursements." Although GOOSBY was responsible for assisting WTU in the preparation of its Forms LM-2, which BULLOCK and BAXTER signed and caused to be submitted to DOL, attesting to its accuracy, WTU's Forms LM-2 reported only the WTU payroll disbursements (i.e., PAYCHEX salary) to BULLOCK and HEMPHILL. The amounts reported also substantially understated the amounts disbursed to BAXTER. And WTU reported no disbursements of any kind to HOLMES, even though as HOLMES's personal tax preparer, GOOSBY was aware, at least by April 2002, that HOLMES derived his income primarily from WTU.
56. HOLMES received from WTU an IRS Form 1099 that grossly understated the amount of payments to him, as reflected in WTU's canceled checks and GOOSBY's schedules of checks written on WTU accounts. Although the schedules prepared by GOOSBY indicate payments by check to HOLMES of over $1 million between 1998 and 2001, IRS records do not indicate the receipt of such filings from WTU regarding compensation to HOLMES.
57. Notwithstanding the amounts actually paid by WTU to HOLMES (or listed on schedules prepared by GOOSBY) or reported paid on HOLMES's Forms 1099, HOLMES grossly understated on his personal tax returns, also prepared by GOOSBY, his actual income for the years 1999 through 2001. In fact, HOLMES claimed substantial deductions for unreimbursed business expenses, including wear and tear, maintenance, and other expenses associated with his use of a vehicle to transport BULLOCK, when as he and GOOSBY well knew, WTU paid these expenses and even gave HOLMES funds to assist him in purchasing a new vehicle. Nor did GOOSBY prepare any amended return for this period.
58. GOOSBY learned, at least as early as April 2002, when he was preparing HOLMES's 2001 tax return, that HOLMES claimed that he was not in fact the true recipient of the money reflected in the WTU checks written to him. GOOSBY has stated that HOLMES told him that he was directed by HEMPHILL to cash those checks, keep a portion to pay himself, and return the remainder to HEMPHILL and others. GOOSBY also knew that hundreds of thousands of dollars being paid to American Express were to pay for personal expenditures by BULLOCK that exceeded the amount of her reported compensation. Notwithstanding these facts, BULLOCK's personal tax returns, all prepared by GOOSBY, grossly understated the amounts of money that she actually received from WTU, in each tax year reporting only her WTU salary, as reflected in payments through PAYCHEX. Moreover, for tax years 1998 through 2001, BULLOCK claimed more than $60,000 in deductions for unreimbursed business expenses. Nor did GOOSBY prepare any amended return for this period.
59. The investigation has also obtained from GOOSBY the personal tax returns for MICHAEL MARTIN and CHERYL MARTIN for tax years 1999, 2000, and 2001. Those returns identify no income from WTU - either in the form of payments made to MICHAEL MARTIN or CHERYL MARTIN personally, or in the form of income derived from Expressions Unlimited.
60. BAXTER filed tax returns in 1999 and 2000 in which he claimed no income from WTU despite the fact that he personally wrote checks to himself in the thousands of dollars in those years. BAXTER did claim income from WTU in 2001, the year in which WTU issued a Form W-2 to the IRS indicating that BAXTER had been paid $64,483.86. A limited analysis of the amounts of money paid by WTU to Baxter, much of it by check bearing his own signature, reveals that Baxter received substantial sums of money from WTU in both tax years 1999 and 2000, and that payments to him in 2001 exceeded the amount of income reported to either the IRS or Department of Labor on WTU's Forms LM-2.
61. Given the nature of the expenditures by BULLOCK personally and by others on her behalf, there exists probable cause to believe that many of these items, including thousands of dollars worth of clothing, jewelry, artwork, and home furnishings purchased by BULLOCK using union funds, are stored at BULLOCK's home, a one-bedroom apartment located at 1221 Massachusetts Avenue, Northwest, Apartment 1021, in the District of Columbia. Within the past six months a Neiman-Marcus representative entered BULLOCK's apartment and observed the $6,800 Buccellati ice bucket that was purchased from Neiman-Marcus with funds that were embezzled from WTU and is set forth in Attachment B to this affidavit. In addition, I have learned that a number of the items purchased with the funds embezzled from WTU were delivered to BULLOCK's apartment at 1221 Massachusetts Avenue, Northwest.
62. In addition, the investigation has revealed that BULLOCK was in the habit of having a dry cleaner come to her apartment as the seasons changed to pick up a substantial portion of her wardrobe for cleaning and storage, and then to return those items in storage to her home and pick up new materials for cleaning and storage at the beginning of the next season. WTU paid for many, if not all, of these cleaning, storage, and delivery expenses.
63. In light of the fact that BULLOCK resides in a one-bedroom apartment in the District of Columbia, the fact that few of the substantial number of goods purchased with her union-paid credit cards are located at WTU office space, the fact that BULLOCK did not maintain her wardrobe in its entirety in her relatively small home, and the fact that deliveries of some purchases, including furniture, can be traced to other persons who participated in the misappropriation of union funds or aided and abetted it, there exists probable cause to believe that many of the items that she purchased are maintained or stored by her co-conspirators and others including HEMPHILL, MARTIN, BAXTER AND CLARK.
64. Further, a search of BULLOCK's residence may be expected to yield books and records relating to her gross underpayment of taxes and myriad other information about her personal finances and that of the union.
65. I have ascertained that HEMPHILL and BULLOCK used union credit accounts to purchase items for each other. In addition, I have determined that a number of specific items, including, for example, clothing in HEMPHILL's size (16) and the 50-inch plasma television were delivered directly to HEMPHILL's residence. Moreover, we have ascertained that in July of 2000 HEMPHILL used WTU funds to purchase more than $10,000 for computer equipment at Comp USA, some of which can reasonably be expected to be currently located at her home.
66. Moreover, HEMPHILL's residence should contain books and records relating to these purchases, tax information, and other matters of interest to the investigation. These materials may be expected to be maintained both in paper and electronic form on personal computers. In particular, files relating to GOOSBY's retention and services may be at her residence, as well as numerous other materials missing from the files of WTU may have been removed to that location. Search Location: MARTIN Office (District of Columbia)
67. As is noted above, MARTIN appears to have faxed invoices purporting to justify payments of WTU funds to himself on October 17, 2002, from his District of Columbia government office to WTU internal investigation counsel. Because these invoices were within his government office (because the fax line indicates that he sent them from that office to WTU's internal counsel), there exists reason to believe that other documents relating to Expressions Unlimited and WTU may be found both in MICHAEL MARTIN's home and office, as well as on any computers or data storage equipment in either location.
68. As has been noted above, I am aware of specific deliveries to the MARTIN residence paid for by WTU funds. In addition, I am aware of other uses of WTU funds by MICHAEL MARTIN and CHERYL MARTIN. Given the Martins' personal relationship with HEMPHILL and BULLOCK, there is reason to suspect that many of the items purchased by them are likely to be stored and kept at their residence.
69. In addition, probable cause exists to believe that the MARTIN residence will contain evidence of tax violations for their failure to report their income from WTU and other sources, as well as books and records relating to the Expressions Unlimited business. These records may be expected to be found both in paper and in electronically-stored form on personal computers.
70. Inasmuch as BAXTER was a co-conspirator of HEMPHILL and BULLOCK in the misappropriation of union funds and the fact that his union account was used to purchase art from Ramee Art Gallery, as was theirs, there exists reason to believe that evidence of these crimes may be found at his residence. Moreover, there exists probable cause to believe that BAXTER's residence holds a number of documents (including documents stored on any personal computer within) relating to his personal finances and taxes, which may assist the investigation in ascertaining the extent of the false and fraudulent representations that may have been made to the government. In addition, BAXTER may also maintain in his home evidence relating to the preparation of union filings, since BAXTER was partly responsible for communication with GOOSBY.
71. I have ascertained that several fur items purchased by BULLOCK with union funds are being stored on BULLOCK's behalf at Miller Furs, located at 6900 Wisconsin Avenue, Chevy Chase, Maryland 20815. Because BULLOCK purchased several fur coats and other high-end clothing with union funds, there exists probable cause to believe that the items maintained at Miller Furs are evidence of the criminal conspiracy.
72. Investigation has revealed that at least one antique piece of furniture, a two-door French hand-painted armoire from Alexandria, Virginia purchased in March of 2000 from merchant Tradition de France with a WTU American Express card was delivered to CLARK at her residence located at 307 Yoakum Parkway, Number 711, Alexandria, Virginia. There exists probable cause to believe, given that it is a large item of furniture, that the armoire remains at that location. Moreover, inasmuch as CLARK's Diners Club account was used to purchase items from Van Style, Neiman-Marcus, Saks Fifth Avenue, Tiffany & Co., and inasmuch as WTU funds paid directly thousands of dollars worth of purchases on that account there, there exists reason to believe that items from these vendors purchased in whole or in part with WTU funds may be found at her residence. This inference is bolstered by the statement of at least one person that CLARK claims to have received "gifts" purchased with WTU funds.
73. In addition, I have learned that BULLOCK caused her WTU-paid driver, LEROY HOLMES, to perform a variety of personal services at CLARK's home, which were paid for by WTU.
74. Documents and computers containing stored records relating to these Diners Club and American Express payments, as well as the business "Gwen's of Columbia" and any personal tax information, as well as additional items purchased with embezzled funds are likely to be maintained at CLARK's residence.
75. I know that computer hardware, software, documentation, passwords, and data security devices may be important to a criminal investigation in two distinct and important respects:
a. the objects themselves may be instrumentalities, fruits, or evidence of crime, and/or
76. Based upon the facts set forth above, there is probable cause to believe computer hardware, software, related documentation, passwords, data security devices (as described below), and data found at the search locations, were integral tools of these crimes and constitute the means of committing it. As such, they are instrumentalities and evidence of the violations designated. Rule 41 of the Federal Rules of Criminal Procedure authorizes the government to seize and retain evidence and instrumentalities of a crime for a reasonable time, and to examine, analyze, and test them.
77. Hardware: Computer hardware consists of all equipment which can receive, capture, collect, analyze, create, display, convert, store, conceal, or transmit electronic, magnetic, or similar computer impulses or data. Hardware includes, but is not limited to, any data-processing devices (such as central processing units; internal and peripheral storage devices (such as fixed disks, external hard disks, floppy disk drives and diskettes, and other memory storage devices); peripheral input/output devices such as keyboards, printers, video display monitors, and related communications devices (such as cables and connections, as well as any devices, mechanisms, or parts that can be used to restrict access to computer hardware (such as physical keys and locks).
78. Software: Computer software is digital information that can be interpreted by a computer and any of its related components to direct the way they work. Software is stored in electronic, magnetic, or other digital form, including zip drives). It commonly includes programs to run operating systems, applications (like tax preparation, word-processing, or spreadsheet programs), and utilities.
79. Documentation: Computer-related documentation consists of written, recorded, printed, or electronically stored material which explains or illustrates how to configure or use computer hardware, software, or other related items.
80. Passwords and Data Security Devices: Computer passwords and other data security devices are designed to restrict access to or hide computer software, documentation, or other programming code. A password (a string of alphanumeric characters) usually operates a sort of digital key to unlock particular data security devices. Data security hardware may include encryption devices, chips, and circuit boards. Data security software or digital code may include programming code that creates test keys or hot keys, which perform certain pre-set security functions when touched. Data security software or code may also encrypt, compress, hide, or booby-trap protected data to make it inaccessible or unusable, as well as reverse the process to restore it.
81. Based upon my knowledge, training and experience, and consultations with computer specialists from the Federal Bureau of Investigation, I know that searching and seizing information from computers almost always requires agents to seize most or all electronic storage devices (along with related peripherals, as discussed below) to be searched later by a qualified computer expert in a laboratory or other controlled environment. This is true because of the following:
82. Based upon my knowledge, training and experience and consultations with forensic computer examiners, I know that searching computerized information for evidence or instrumentalities of crime commonly requires agents to seize most or all of a computer system's input/output peripheral devices, related software, documentation, and data security devices (including passwords) so that a qualified computer expert can accurately retrieve the system's data in a laboratory or other controlled environment. This is true because of the following: The peripheral devices which allow users to enter or retrieve data from the storage devices vary widely in their compatibility with other hardware and software. Many system storage devices require particular input/output (or "I/O"@) devices in order to read the data on the system. It is important that the analyst be able to properly re-configure the system as it now operates in order to accurately retrieve the evidence listed above. In addition, the analyst needs the relevant system software (operating systems, interfaces, and hardware drivers) and any applications software, which may have been used to create the data (whether stored on hard drives or on external media), as well as all related instruction manuals or other documentation and data security devices.
83. If, after inspecting the I/O devices, software, documentation, and data security devices, the analyst determines that these items are no longer necessary to retrieve and preserve the data evidence, the government will return them within a reasonable time.
84. Data analysts may use several different techniques to search electronic data for evidence or instrumentalities of crime. These include, but are not limited to, the following: examining file directories and subdirectories for the lists of files they contain; opening or reading the first few pages of selected files to determine their contents; scanning for deleted or hidden data; searching for key words or phrases ("string searches").
85. This specifically excludes a search of any kind of unopened electronic mail, and no warrant is herein sought for such unopened electronic mail. If unopened electronic mail is to be searched, a separate warrant will be sought supported by probable cause.
WHEREFORE, your affiant submits that there exists probable cause to believe that BARBARA A. BULLOCK, JAMES O. BAXTER, II, GWENDOLYN M. HEMPHILL, LEROY HOLMES, MICHAEL MARTIN, and others have conspired to commit and committed offenses against the United States, including but not limited to conspiracy, in violation of Title 18, United States Code, Section 371; mail and wire fraud, in violation of Title 18, United States Code, Sections 1341, 1343, and 1346; false statements, in violation of Title 18, United States Code, Section 1001; money laundering, in violation of Title 18, United States Code, Sections 1956 and 1957; embezzlement from a labor union, in violation of Title 29, United States Code, Section 501(c); and tax evasion, in violation of Title 26, United States Code, Section 7201, as well as probable cause to believe that the places described in the attachments to this Affidavit contain evidence of these offenses which may be seized pursuant to the warrant that this Affidavit supports.
Katherine L. Andrews, Special Agent
Subscribed and sworn to before me this 18th day of December, 2002.
John M. Facciola
ATTACHMENTS A-1 through A-7
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