10-05-04 -- Regpay Co. LTD -- Criminal Complaints -- News Release

Child Porn Investigation Yields More Arrests in N.J.; Developments Continue in United States and Abroad

NEWARK, N.J. - Nine men from across New Jersey were charged and/or arrested today, accused of downloading and possessing child pornography from the Internet - the latest in a string of domestic and international developments flowing from the prosecution of a Belarus-based child pornography enterprise, its owners, affiliates and hundreds of subscribers worldwide, U.S. Attorney Christopher J. Christie announced.

Charges and arrests in the United States and abroad stemming from the investigation are approaching 1,000 individuals.

Among the nine charged today in New Jersey is a psychologist, a former private school teacher, a banker and school janitor. Each of those defendants is scheduled to make an initial appearance at 2 p.m. today before U.S. Magistrate Judge Madeline Cox Arleo. (See addendum to this news release for information on these and other defendants.)

"This continuing investigation highlights the global reach of law enforcement into the seediest portions of cyberspace," said Attorney General John Ashcroft. "Nothing is more important than protecting our children from those who push, peddle or purchase child pornography."

"Child pornography is a scourge that has spread explosively across the globe aided by the Internet," said Christie. "It has been a remarkable effort, starting right here in New Jersey, to bring so many people to account worldwide for dealing in this despicable trade in innocent children."

Over the summer, five other individuals from New Jersey were arrested on similar criminal complaints. Some of those were considered priority defendants who had contact with children and, with the exception of one, admitted either having or trying to have sex with children. Some of the defendants are being held without bail. Among those charged over the summer was a former West Wildwood, N.J. councilman, a Nutley, N.J. man who admitted fondling or raping at least nine children, and a former Passaic County, N.J. school principal.

All of the defendants - the nine charged today and the five previously arrested - had subscribed via credit card to one particular child pornography website, which allowed subscribers to download or upload child pornography.

Each of the defendants is charged today with possession of child pornography and face a maximum penalty of five years in prison and a $250,000 fine.

In January, Christie announced an Indictment against the operators of Belarus-based Regpay Co. LTD, a credit card processing and Internet-based enterprise, which sold thousands of memberships worldwide to dozens of child pornography websites, including its own. Around that time in January, a total of approximately 35 people, many of them from New Jersey, were arrested in the United States as subscribers to Regpay websites who downloaded and/or possessed child pornography.

In all, 53 people have been charged in New Jersey in connection with the Regpay investigation. Domestically, approximately 170 have been charged, with many more hundreds charged in other countries based on Regpay subscriber information passed on to international authorities. (For the original news release on Regpay, go to www.njusao.org and follow redirected links to 2004 news releases and the Jan. 15 news release and related documents. Also, go to the Immigration and Customs Enforcement website, at www.ice.gov for information on Operation Predator).

Meanwhile, other developments continue to unfold in the Regpay investigation:

On Friday, two individuals associated with LB Systems, Inc. - a Southern California company created to assist Regpay and others in Belarus process credit card sales for previously approved transactions involving child pornography - entered guilty pleas in federal court in Newark for their involvement in this scheme. Yaroslav Grebenschikov, 33 of Los Angeles, pleaded guilty to a charge of conspiracy to launder money for Regpay and its principals. Natan Moshkovich, 32, of Encino, California, pleaded guilty for his failure to report the offense to law enforcement.

Grebenschikov admitted that in late June 2003, he assisted individuals associated with Regpay in the formation LB Systems and the opening of a bank account which he used to transfer funds to banks in Latvia at the direction of these individuals. He further admitted that he assisted these individuals in processing transactions for previously approved Regpay sales. Grebenschikov stated that he used another company's merchant account to process the transactions and after receiving the proceeds sent them by wire to Latvia. From June 2003 through January 2004, Grebenschikov wired more than $200,000 in funds to individuals associated with Regpay.

And yesterday, a federal grand jury in Newark returned a Superseding Indictment in the Regpay case. In addition to the original defendants, Arthur Levinson, 44, of Fort Lauderdale, Florida, is charged with conspiracy to commit money laundering and conspiracy to engage in financial transactions in amounts exceeding $10,000 which were the proceeds of a specified unlawful activity. Levinson is the owner and president of Connections USA, Inc., the company used by Regpay to launder in excess of $2 million. Two of Levinson's employees and the company have previously entered guilty pleas. Alexander Pesin, 44, of Woodland Hills, California, is also charged in the Superseding Indictment for his role in assisting Grebenschikov with the formation of LB Systems and in Counts Nine and 10 with Levinson.

Internationally, arrests and searches have occurred in numerous countries. Those cases were developed from leads from the District of New Jersey's original Regpay investigation. Following the dismantling of the Regpay leadership, ICE agents in domestic ICE offices and 52 attaché offices worldwide turned their focus to those who purchased child porn subscriptions from Regpay sites in the U.S. and abroad. Approximately 930 individuals have been charged and/or arrested worldwide in the investigation. ICE has charged approximately 170 in the United States. Foreign law enforcement, acting on ICE leads, have arrested and/or charged more than 760 individuals in Australia, Denmark, Finland, France, Hong Kong, Norway, Scotland, Spain, Sweden, Switzerland and the United Kingdom.

In September, for example, Swiss authorities executed approximately 400 search warrants, examined more than 100,000 photo and video files and arrested at least 10 individuals. Eight of the 10 arrested in Switzerland were also suspected of child molestation.

In addition to the many ICE Special Agents involved worldwide - in particular in New Jersey under the direction of Special Agent in Charge Kyle Hutchins - Christie credited Special Agents of the IRS Criminal Investigation section, under the direction of Special Agent in Charge Patricia J. Haynes, in Newark; Postal Inspectors of the U.S. Postal Inspection Service, under the direction of Martin D. Phanco, Postal Inspector in Charge, in Newark, for their work in the Regpay investigation.

DEFENDANTS CHARGED IN CRIMINAL COMPLAINTS

Charged today:

Mark Adams, 42, of Little Egg Harbor, construction contractor; voluntary surrender.

John Bansemer, 56, of Newton, recently retired part-time middle school bus driver; voluntary surrender.

Andrew Chaplowitz, 44, of Springfield, arrested.

William Deustachio, 38, of Scotch Plains, bank manager; voluntary surrender.

Stefan Goff, 53, of Trenton, former private school teacher, resigned; voluntary surrender.

Robert Manosky, 61, of Milford, media consultant, IT specialist; being sought.

George Reilly, 48, of Trenton, school janitor; arrested.

Clinton Walker, 30, of Rockaway Borough, delivery driver for auto parts store; arrested.

David Watral, 55, of Greenwich Township, Cumberland County, psychologist (adult and child); voluntary surrender.

Arrested in June and July:

Kevin W. Hildreth, 35, of Nutley, arrested on June 9 and ordered held without bail. Occupation: butcher. According to the complaint, Hildreth has admitted that, during the past 16 years, he has fondled, molested, or raped at least nine separate children in New Jersey or Pennsylvania.

Wayne Errickson, 36, of North Plainfield, arrested on June 18, formerly a teaching assistant in the North Plainfield school district; released on $100,000 bond.

William E. Braker, 58, of West Wildwood, arrested on June 2, a systems manager, former borough commissioner and church deacon; released on $50,000 bond.

John Mangan, 58, of South Toms River, arrested on July 1, former public school principal in Passaic County, who was working at a grocery deli counter at the time of arrest; ordered detained without bail.

Richard Allen Brooks, 34, of Eatontown, motel night manager/maintenance worker, arrested July 15; ordered detained due to government's assertion that he had molested at least two minors.