Monday, October 6, 2008

Virginia Beach Search Warrant (RICO): Details

This is also considered "Exhibit 1" in my previous post about Harlow Cuadra and Joseph Kerekes' motion to suppress evidence seized from their car and home:

Section 1Section 2

Section 3: The things or person to be searched for are described as follows:

Any and all documents having to do with the booking of escorts, to include ledgers depicting appointments, appointment locations, client names and/or escort names, the length of the appointments and any telephone numbers associated with either the clients or the escorts. Also to be searched for are the financial records either belonging to Norfolk Companion Inc., Norfolk Gay Escorts companies to include those financial records of Harlow Raymond Cuadra and Joseph M. Kerekes or anyone else receiving monies of financial benefit from the proceeds of either the listed companies or the listed persons. Also to searched for are the bank records, bank accounts and/or checking and saving accounts, safe deposit boxes and/or keys, photographs of escorts or employees of the escort companies, paperwork describing the physical stature and/or race of the escorts or employees, contracts for the employees, computers, to include hard drives or central processing units, disks, memory devices utilized to store computer data or to backup computer data and United States currency or other financial specie.

Any and all bank records, bank statements, cancelled checks, deposit tickets and source items, loan account statements, and credit or loan applications.

Books, records, invoices, receipts, records of real estate transactions, personal property transactions and related records, passbooks, money drafts, letters of credit, money orders, bank drafts, cashier’s checks, safe deposit box keys, money wrappers, United States Currency, and other items evidencing the obtaining, secreting, transferring, and/or concealment of assets and the obtaining, secreting, transferring, concealment and/or expenditure of money. Additionally, any and all documents, business records, and financial records that, by their nature reveal, an attempt to disguise and conceal the true nature of a prostitution business; address and/or telephone books, rolodex indices and any papers reflecting names, addresses, telephone numbers, pager numbers, fax numbers, and telex-numbers of co-conspirators, associates, employees, customers, financial institutions, and other individuals or businesses with whom a financial relationship exists;

Indicia of occupancy, residency, rental and/or ownership of each premise to be searched, including utility and telephone records and bills, envelopes, rental and purchase or lease agreements and keys;

Asset ownership documentation including titles, purchase orders, sales orders, payment booklets, and other evidence of the purchase orders, sales orders, payment booklets, and other evidence of the purchase of assets by the individuals listed in the affidavit;

Photographs, including still photos, negatives, videotapes, films, undeveloped film and the contents therein, as well as slides, that demonstrate evidence of co-conspirators, assets, and/or associates or clients;

Documents and papers reflecting operation of a business whose nature is prostitution, including "owe" sheets, physical descriptions/attributes of employees, locations of prostitutes including lists of hotel names, numbers and room numbers, correspondence, and appointment books;

Documentation regarding any operation of a credit card terminai used to transmit credit card data to a third party processing company;

Documents relating to the expenses associated with the ongoing operations of the businesses listed herein, including payroll records, tax bills and records, utility and telephone agreements and bills, rental agreements, and any other associated business expenses;

Electronic equipment, telex machines, facsimile machines, currency counting machines, telephone answering machine and related manuals used to generate, transfer, count, record, and or store any items above;

Any federal or state returns, to include individual income taxes, corporate taxes, partnership taxes, employment taxes and applicable sales taxes, together with any schedules and forms relating thereto with respect to the tax periods 2005-present.

Any federal or state applicable tax forms such as Forms W-2 and Forms 1099 and related documents. Any payroll records, contractor agreements, employment agreements or related documents.

Any and all assets, personal property, luxury items, jewelry, U.S. Currency, vehicles, or any and all items obtained, used, or associated with the furtherance of the criminal enterprise, or associated with the laundering of assets derived in whole or in part from the criminal enterprise, or prostitution ring.

SECTION 4: The material facts constituting probable cause that the search should be made:

The Virginia Beach Police Department Special Investigations received a complaint in January 2006 that a prostitution ring was being operated in the City of Virginia Beach, disguised as a legitimate escort service advertised as Norfolk Companions Inc. This escort service is owned and operatod by Harlow Cuadra and Joseph Kerekes. A similar complaint was received in August 2006, alleging that the web site boisrus.com was operating as a front for illicit prostitution. The State Corporation Commission lists Harlow Cuadra as the president of Norfolk Companions and the City of Virginia Beach shows a business license issued to Norfolk Companions, at 2537 N. Landing Road, Virginia Beach, VA. As of December 27, 2006, Norfolk Companions Inc has listed their address as 1028 Stratem Court, Virginia Beach, VA 23451. A DMV and Pistol records check shows both Harlow Raymond Cuadra (W/M; 08/05/1981; SSN: XXX-XX-XXXX) and Joseph M. Kerekes (W/M; 12/30/1973; SSN: XXX-XX-XXXX) as both residing at 1028 Stratem Court.

Confidential Informant (CI #170 is a reliable confidential informant, whose information has been corroborated, and was once employed by Norfolk Companions Inc. CI #170 states that Norfolk Companions Inc. is owned by Harlow Cuadra and his business partner Joseph Kerokes and that they operate the business from their house in Virginia Beach located at 1028 Stratem Court. CI # 170 states that potential clients sign up to be members of a website called boybatter.com for $200.00, where they are able to purchase XXX DVD videos and also order escort services on a linked website, boisrus.com. CI # 170, while working as an escort for Norfolk Companions was directed by Harlow Cuadra to perfonn sexual acts with paying clients. Cuadra was present during the performance of the sexual acts with those clients.

CI #170 received payment in check form and in cash from Norfolk Companions Inc. for his escort/sexual services rendered. The checks were drawn from the company’s checking account though Bank of the Commonwealth for $150.00, which is 30% of the $500.00 booking fee Norfolk Companions Inc. received. CI #170 states that Harlow Cuadra and Joseph Kerekes are the primary escorts, but they also employ several other young men as well. CI #170 has worked as an escort in the past for Norfolk Companions Inc and oontinues to have contact with Cuadra and Kerekes. This affiant observed the workings of Cuadra’s website, boisrus.com. This afflant learned from the website that an “in call” service is $200.00 per hour and “out cal1” service is $250 an hour. CI #170 states that “in-call” refers to a date that is held at Cuadra's house and “out-call” refers to the escort going to the client’s home or hotel room. In call services are advertised “all inclusive” and are held at their house at 1028 Stratem Ct., the room provided has a massage table, multiple head shower, king sized bed, leather coach and hot tub, alcohol and snacks are provided for the client and Cuadra and Kerekes offer the client use of their video camera to tape the encounter. Out call services require the escort/prostitute to meet with a client at a home or at a hotel room where money would be given for sexual services; the escort/prostitute would comply with the client’s sexual request as directed by Cuadra and Kerekes, the escort/prostitute would then take the money back to Cuadra and Kerekes where they would give the escort/prostitute a percentage of the earnings. Cuadra and Kerekes advertise a “Signature Combo Deal” for $350.00 per hour at their “one million-dollar location” and that “rates are all inclusive. No tips needed! Top, bottom, versatile, vanilla, active, passive service is rendered as needed!” This affiant affirms that these terms refer to sexual positions and preferences.

As of May 12, 2007, CI #170 has had continuous contact with both Harlow Cuadra and Joesph Kerekes, They have offered CI #170 cash bonuses to return to full employment. CI #170 states full employment to included escort/prostitution as well as filming pornographic movies.

Based upon this Affiant’s training and experience and upon my participation in investigations of other illegal enterprises involving violations of Prostitution laws, IRS laws, the Money Laundering Control Act, and related offenses, this affiant knows that:

- Money laundering is the process of conducting financial transactions intended to conceal or disguise the true source of illegal cash proceeds.
- Large scale prostitution rings are motivated by the profits generated from prostitution, which they usc to enhance their lifestyle or recognition in the community through the purchase of luxury items. Assets may include the purchase and leasing of property, the purchase and rental of communications equipment.
- Large scale prostitution rings often use various money laundering schemes to purchase luxury items with prostitution proceeds. These methods include the use of debit and credit cards to purchase luxury items, goods and services in an effort to conceal their purchases from law enforcement.
- Large scale prostitution rings use U.S. currency (cash) and credit card service companies as a method of conducting their illegal business.
- Large scale prostitution rings spend cash proceeds in a manner designed to hinder law enforcement’s detection of the assets acquired.
- Large scale prostitution rings may have legitimate income. Often they co-mingle legitimate ftinds with illegitimate in an attempt to conceal and disguise their sources of income.
- The conversion or disposition of large amounts of cash at financial institutions is problematic for persons involved in illegal activity due to financial institution currency reporting requirements.
- Individuals involved in illegal activity attempt to evade ot avoid the filing of Currency Transaction Reports because these forms create a “paper trail” which can he used by law enforoenient as evidence to convict those involved in criminal activity and those who laundered the proceeds.
- In order to evade or avoid the filing requirements of CTRs, persons with illegal proceeds often “structure” cash transactions so that no one transaction exceeds $10,000. Structuring involves paying the total amount of cash in several smaller transactions over a period of time, whereby each smaller transaction avoids the filing of a CTR.
- Access to a targets credit history is an essential element in tracking illegitimate proceeds.
- Credit reports also provide law enforcement with indicators that money laundering through cash structuring is taking place.

SECTION 6:

[X] I have personal knowledge of the facts set fourth in this affidavit OR
[X] I was advised of the facts set fourth in this affidavit, in whole or in part, by an informer - this informer's credibility or reliability of the information may be Determined from the following facts:

This affiant has been employed in a law enforcement capacity with the City of Virginia Beach since December 1998; first with the Virginia Beach Sheriffs Office and subsequently with the Virginia Beach Police Department. This affiant has attended two Department of Criminal Justice Police academies where narcotics identification was taught by sight, smell, and texture, as well as burned; furthermore, this affiant is a Virginia State Police certified Drug Abuse Education instructor where advanced drug recognition was taught, specifically marijuana. This affiant has attended numerous Drug Enforcement Agency sponsored street drug seminars, as well as Department Special Investigation Drug seminars. This affiant has authored and served numerous narcotics, fraud (section-8), and common nuisance warrants and has made over sixty arrests for marijuana and cocaine alone. Detective Childress is currently assigned as a detective in Special Investigations vice/narcotics unit. Detective Childress has authored search warrants pertaining to drug conspiraces, and has investigated numerous prostitution criminal solicitation and pandering cases.

Special Investigations Confidental and Reliable Informant #170 has provided information that this affiant has been able to verify true and correct. CI #170 made statements against his penal interest to Detective Childress and provided substantial amounts of information that was corroborated through independent Police investigation.