At Idaho family’s cellphone trial, Apple, Samsung reps to testify. And maybe defendants
After three days of jury selection, opening arguments began Thursday in the jury trial of nine Idahoans accused of a years-long scheme to sell counterfeit cellphones and accessories online.
While prosecutors alleged that the nine family members engaged in money laundering and selling counterfeit goods, defense attorneys painted them as entrepreneurs who simply worked the secondary market and believed their businesses were legitimate. Attorneys said a lot of the charges are rooted in misunderstandings, and also claimed some defendants were lumped into the case because of their family name.
The nine — Pavel, Gennady, Piotr, Timofey, Kristina and Natalya Babichenko; David Bibikov; Anna Iyerusalimets; and Mikhail Iyerusalimets — are accused of engaging in a conspiracy to smuggle counterfeit products into the country, sell the fake goods online as if they were real, and launder the money to different entities, including the building of apartment buildings in Brazil.
Opening statements started at around 11 a.m. Thursday after U.S. District Court Judge B. Lynn Winmill gave instructions to the jury. Assistant U.S. Attorney Katherine Horwitz began her remarks with two stories of allegedly faulty and fake products sold by the Babichenkos, a family originally hailing from Georgia, a country formerly part of the Soviet Union.
In 2015, a man purchased a Samsung phone charger online, only to find it hissing and heating up when he plugged it in, she said. He noticed several misspellings on the charger itself — instead of “risk” it had “rink” — or logos peeling off the products. Another man purchased a charger through Amazon only to have it begin overheating after it was plugged into an outlet, and the charger later burned his wife, Horwitz said.
Horwitz told the court that federal authorities seized more than 2,000 items sent from the Babichenkos’ Ada County warehouse to customers over two days, Aug. 21-22, 2018, with the latter being the same day that FBI and Homeland Security agents raided a warehouse and multiple properties owned by the family.
Horwitz said the family had over 150 individual businesses that were used to sell the products, and she outlined how they received multiple notices from places such as Amazon and eBay instructing them to stop selling items reported to be faulty or counterfeit. She said that nearly 60 items were seized by U.S. Customs and Border Protections and that the companies received hundreds of complaints from customers online.
Horwitz went on to allege that members of the family sent funds to Brazil to purchase land and build apartment buildings, and prosecutors believe that was an effort to launder money collected by selling the phones and products.
While the prosecution painted the defendants as members of a criminal conspiracy, defense attorneys said those charged were either under the impression that their business was legitimate or simply added to indictments with little evidence to support the charges.
Attorneys for multiple defendants, including Pavel, Piotr and Timofey Babichenko, told the court that the charges are rooted in misunderstandings, as their clients believed they were conducting legitimate business on the secondary phone market.
For others, such as Anna Iyerusalimets, Kristina Babichenko and David Bibikov, their attorneys argued that there is no evidence showing they were involved in any of the alleged illegal activity, and they were simply lumped in because of family affiliations.
Jeff Brownson, a defense attorney for Gennady Babichenko, told the court that his client was one of two people not involved with a single purchase observed by law enforcement. Gennady was cited by law enforcement as a means for laundering money to Brazil.
Brownson told the court that Gennady built a denture business from the ground up and was not part of the cellphone business. Brownson said his client used the money from the denture business to buy land and develop property in Brazil — not to launder money, but as part of religious prophesy.
He explained that Gennady Babichenko and his siblings believe there will be a mass migration of Slavic Pentecostals to Brazil, and that’s why he used money for projects there. Brownson said Gennady also loaned money to other family members, which he said prosecutors have cited as a means for money laundering.
In total, Brownson said Gennady put about $2.4 million in funds into projects in Brazil.
Witnesses from huge companies such as Apple and Samsung are slated to testify about the counterfeit products seized, according to Horwitz, during what is expected to be a lengthy trial. Defense attorneys hinted that defendants could take the witness stand.
Paul Riggins, an attorney for Piotr Babichenko, told the court that his client will testify in the hopes of explaining the secondary resale market for cellphones, saying the government is misunderstanding aspects of the market.
“He will tell you how and why he did things,” Riggins said.
A 10th defendant in the case, Artur Pupko, is also slated to testify. Pupko was charged along with the nine other defendants in 2018 and pleaded guilty in September 2019 to three counts of trafficking in counterfeit goods. A judge ordered him to pay $9.5 million in restitution to Apple and Samsung for his role in producing counterfeit phones. Pupko has yet to be sentenced.
The nine other defendants could face up to 20 years in prison and $250,000 fines on the money laundering, wire fraud and mail fraud counts; and up to 10 years in prison and $5 million fines on counts of counterfeiting trademark goods.
The trial is slated to take place over 10 weeks at the James A. McClure Federal Building and Courthouse in Boise.
This story was originally published June 24, 2021 at 5:15 PM.
