FBI Arrests Florida Attorney on Charges of Laundering Stock Fraud Proceeds

On Wednesday, Michael J. Scaglione, Esq., 41, an attorney in Coral Gables, Florida, was arrested on charges pertaining to the laundering of more than $750,000 he believed were proceeds from a penny stock fraud scheme. In reality, the money was given to Scaglione by an undercover law enforcement agent, and Scaglione, who was told the money was proceeds of stock fraud, agreed to launder it through an escrow account using his position as a partner at Scaglione Law Firm in Coral Gables.

The complaint unsealed on Wednesday in the Eastern District of New York mentioned that in his dealings with Scaglione, the undercover agent posed as a middleman working with corrupt stock brokers who artificially inflated prices of worthless stock against high commissions. Scaglione agreed to launder the proceeds of the stock fraud through his attorney escrow account to hide it from the Securities and Exchange Commission and the IRS.

True to his word, Scaglione funneled over $7,50,000 given to him, including $88,000 cash that was handed over to him in a Federal Express box in the lobby of a Miami Beach hotel. The complaint observed that Scaglione diligently structured the movement of the funds to avoid any triggering of financial reporting requirements. In exchange for the service, he took about $25,000 in fees.

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Recorded conversations show that Scaglione assured the undercover agent that the money was "safe" and he also accepted an additional $500,000 in cash which he believed to be proceeds of penny stock fraud and meant for laundering. He was arrested with the cash on him.

United States Attorney, Lynch, said, "As alleged in the complaint, Scaglione hid behind his license to practice law as he threw himself into the purported scheme to launder money. In so doing, he crossed the line from attorney to defendant…"

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The FBI Assistant Director in Charge, Venizelos, states, "As alleged, the defendant breached the code of ethics for his profession and flagrantly broke the law, in laundering what he believed to be the proceeds of criminal activity. Contrary to the counsel he gave, the attorney-client privilege is not a veil of secrecy to hide criminal conduct."

The allegations need to be proved through trial, and until then, under law, Scaglione is presumed innocent.

IRS Special Agent in Charge, Weirauch, stated that such attempts may "appear to be victimless crimes … (but) they erode our nation's financial systems and ultimately harm the American public …"

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