Long time Nxivm bookkeeper Kathy Russell went from witness to defendant - fast. Now she us rumored to be considering a plea deal. It will almost certainly include prison time - despite her having the least charges of any of the defendants.

Timeline of Kathy Russell taking the fall for Keith and Clare, with a little help from her Bronfman-paid attorney

The story of Kathy Russell is rather pathetic.  And it does seem like her first attorney, William Fanciullo, represented her right into an indictment that could have easily been avoided.

It almost seems like he was really not working for Kathy at all, but, instead, for Bronfman-Raniere interests.

Let’s look at the timeline carefully:

April 19, 2018

The government indicted Keith Raniere and Allison Mack. [Raniere had already been arrested and housed in jail for more than three weeks based on a criminal complaint].

April 25, 2019

Six days after the indictments, Kathy Russell received a subpoena, summoning her to testify before a federal grand jury in Brooklyn, NY on May 10, 2018. The subpoena was slipped under the door of her Albany-area apartment, without any attachments or cover letter.

There was no notice, her new defense attorneys point out, advising her that she was a target of the investigation, or, in contrast to subpoenas received by other Nxivm-related individuals, was there a letter advising her that she was a “subject” and providing an “Advice of Rights.”

Shortly after receiving the subpoena, Russell retained William Fanciullo, Esq., a former Assistant United States Attorney (AUSA) for the Northern District of New York who practices criminal defense law in the Albany area.

On his website, Fanciullo states that “[a]s an Assistant U.S. Attorney, Mr. Fanciullo handled all aspects of cases, including grand jury investigations” and that “[a]s a more experienced AUSA, he handled the most difficult and complex cases.” He notes on his website that he represents clients in connection with “federal and state grand juries.”

April 30, 2018

Somehow, Russell, who, according to her financial affidavit, had no savings and virtually no assets, got the money to retain the high-priced, experienced criminal defense lawyer. It is suspected that the money was provided by Clare Bronfman.

Fanciullo emailed the lead prosecutor, Moira Kim Penza, to advise her of his representation and to confirm the date and time of Russell’s appearance.

Penza responded within 15 minutes of his email, replying, “We will plan to see Kathy Russell on May 10 as directed on the subpoena. If you wish to discuss with me in advance please feel free to reach out at the number below.”

Fanciullo chose not to contact the government prior to Russell’s appearance. Other than the one email communication with Penza, Fanciullo did not communicate about Russell’s status in the investigation prior to the grand jury date.

Instead, Fanciullo led Kathy like a lamb to slaughter, not once inquiring if she could be spared the risk of an indictment – which is normal protocol for a criminal defense attorney that is looking out for his client who is being called to the grand jury.

The mere fact that Fanciullo did none of these things strongly suggests that someone other than Kathy Russell was calling the shots on the way this was to be handled.

May 10, 2018

Russell, accompanied by Fanciullo, appeared in the Eastern District of New York, in response to the subpoena. Prior to her testimony, the prosecutor asked Fanciullo, in the presence of Russell, and agents from the FBI, if he had any questions or wished to speak with the prosecutor before Russell’s testimony began.

Fanciullo declined. He had not a single question. It was almost as if he was not even representing Russell but Bronfman-Raniere.

Russell went into the grand jury chambers. Fanciullo waited outside, as is the custom for attorneys to do in grand jury proceedings.

At the outset of her examination, which commenced at 2:33 p.m., the prosecutor advised Russell that she was not being called to the grand jury as a “target,” which the prosecutor defined for Russell as “a person to whom the prosecutor or the grand jury has substantial evidence linking to a commission of a crime and who, in the judgment of the prosecutor, is a putative defendant.”

Russell was also told that she had been sworn to tell the truth and could be charged with perjury if she did not, that she had the right to counsel in connection with her appearance, that she could consult with her attorney before answering any questions and that if she could not afford an attorney, one would be provided for her by the Court.

She was asked whether she was paying for her lawyer and whether she had destroyed any documents prior to her appearance.

Russell suddenly pulled out a sheet of paper she had brought with her into the grand jury chamber. She read from it as she invoked the 5th Amendment.

It seems that Fanciullo prepared and advised Russell in advance for the possibility that her conduct was within the scope of the grand jury’s investigation and/or that the government might ask questions that might be harmful to Bronfman-Raniere – because he evidently armed her with a written 5th Amendment invocation to read.

The prosecutor advised Russell, on the record, of her 5th Amendment rights not to incriminate herself, making a series of statements conveying the government’s view of the scope of Russell’s 5th Amendment rights.  Then the prosecutor asked Russell if she understood the advisements.

Russell answered affirmatively.

Russell testified for nearly two hours. She answered the prosecutor’s questions on some topics, including her experiences with NXIVM and the numerous courses she took; her positions as proctor, coach, and bookkeeper; the general nature and philosophy of NXIVM and related entities, including JNESS, SOP, and SOP Complete; and certain NXIVM rules, rituals, and ranking systems, including V-Week the 10 day celebration of the nativity of Keith Raniere AKA Vanguard.

Throughout this process, the prosecutor actively encouraged Russell to share her opinions.

The prosecutor engaged Russell in an extended conversation about whether she had ever asked Keith Raniere about allegations that he had sexually abused minors or raped women or girls.

During her colloquy with Russell, the prosecutor commented on the government’s court filings and efforts to collect evidence.

Although she freely answered many questions, Russell also asserted her 5th Amendment right in response to certain questions, including questions regarding bookkeeping, taxes, individuals of interest in the investigation, such as Clare Bronfman, and DOS.

She was asked about the movement and storage of cash, and the maintenance of tax returns for companies affiliated with NXIVM.

The prosecutor also asked Russell a series of questions related to an alleged border crossing Russell made in 2004 and the email hacking of Nxivm enemies.

Over the course of her testimony, Russell invoked the 5th Amendment approximately 75 times.

In addition to invoking the 5th in response to questions about obvious potential criminal conduct, she invoked it on a wide variety of topics ranging from her level of education, how she reconciled her decision to move to Albany to work for Nxivm at the time she had an adolescent son in Alaska, questions about her job as a bookkeeper for Nxivm, whether she was a member of DOS, and whether Keith Raniere had any children.

As for invoking the 5th on whether she was a member of DOS, it seems peculiar since, later on, her new attorneys, in making a motion to sever her trial from Raniere and Mack’s trial, used the argument that Russell was not a member of DOS.

This leads to the inevitable question: Why couldn’t Russell just answer the question in the grand jury – of whether she was a member of DOS – with a “No.”

How would that have incriminated her? Unless of course she was a member of DOS, and she has lied to her attorneys about that.

Nevertheless, in the grand jury, each invocation of the 5th was honored by the government. On numerous occasions, after an invocation by Russell, the government asked a “catch-all” question to determine whether Russell would invoke as to an entire topic, rather than asking Russell additional questions.

After Russell testified, the prosecutor spoke with Fanciullo, again in the presence of Russell and FBI agents. The prosecutor explained to Fanciullo that the government’s investigation was ongoing and that the government was continuing to gather new evidence every day.

The prosecutor then offered to meet with Russell and her counsel pursuant to a proffer agreement.

A proffer agreement is a written contract between a federal prosecutor and a criminal defendant or someone who is under criminal investigation, in which the accused person agrees to provide the government with helpful information. The mere fact that the government offered a proffer agreement to Russell indicates to any thinking person that she was a possible future target, even if she was not one that day, and that Fanciullo would have certainly understood this given his experience with the DOJ.

May 14, 2018

Fanciullo emailed the prosecutor to ask for a copy of the proposed proffer agreement, which the prosecutor provided.

May 22, 2018

The prosecutor received an email from Fanciullo stating, “Ms. Russell respectfully declines your proffer proposal.”

This, in itself, makes one wonder whether Russell was badly advised by Fanciullo or whether she was just a blockhead, ready to take the fall for Bronfman-Raniere.

Or maybe she is smarter than we give her credit for. Perhaps she was promised a handsome sum of money when she got out of prison if she took the fall, or at least kept her mouth shut and took the 5th even if it got her indicted.

She should not count on the payment from Bronfman, if it is true that any was offered, since Bronfman – by the time she is finished with this case and the inevitable, subsequent civil lawsuits against her – may be a pauper and have nothing to give Kathy when she gets out of prison in 5 or 10 years.

July 23, 2018

About two months after Russell declined to proffer, the same federal grand jury before which she testified in the Eastern District of New York returned an indictment, charging her and five others with participating in a long-running racketeering conspiracy, among other crimes.

Russell was charged with racketeering conspiracy, in violation of 18 U.S.C. § 1962(d) and is named in Predicate Acts One and Two relating to identity theft. Racketeering Act One alleges a conspiracy to commit identity theft and to unlawfully possess a false identification document as to a victim identified as “Jane Doe 1.”

Racketeering Act Two alleges a conspiracy to commit identity theft as to two victims. This was in connection to NXIVM’s gaining access illegally to email accounts of “enemies” in order to monitor their emails.

July 24, 2018

Russell was arrested. Fanciullo represented the defendant at her initial appearances in the Northern and Eastern Districts of New York.

In their July 24, 2018 letter concerning bail, the government explained that Act One, alleging conspiracy to commit identity theft for the purposes of evading immigration laws arises “…out of a scheme by co-conspirators to smuggle an alien into the United States through Canada after the alien was denied legitimate entry into the United States.” Specifically, the government alleges that “Russell drove from Albany, New York to Toronto, Canada [in 2004] where she met the alien and provided her with an identification card bearing the last name and birth date of a woman who had recently died.”

As to Predicate Act Two, the government’s bail letter describes this act as “part of the scheme to obtain usernames and passwords of people believed to be Nxivm’s enemies so their emails could be monitored by the Enterprise.”

August 9, 2018

The government was informed that Justine Harris, Esq. would be replacing Fanciullo as lead counsel for Russell. Harris and a colleague filed a notice of appearance on behalf of Russell.

Fanciullo, after leading Russell into an indictment, for one reason or another, was replaced by Harris.

***

Did Fanciullo quit or was he fired? Was he unwilling to sell Russell further down the river, as Bronfman might need, or did he handle this so poorly that he was fired?

Regardless, it is a strange and weird story, of a woman who for years was always being punished by Raniere, Bronfman, Nancy Salzman, and other high-rank Nxivm members for her alleged misdeeds.

She was called stupid, mocked behind her back, spoken of as the weak link in the organization, openly talked about as a woman who talked too much and could not keep the company’s business secret.

She blabbed about herself never filing income taxes for years and how she helped hide cash for Nxivm.

The woman who was tasked with keeping double sets of books, of hiding cash, storing it for Nancy Salzman and Raniere, was considered the fool of Nxivm. A fool amid wise ones like Raniere, Salzman, Karen Unterreiner, and others.

Kathy knew lots of dirty little secrets about Nxivm yet, instead of blabbing – she could likely have told these secrets with a proffer deal and get off the hook – yet she chose to invoke the 5th – likely to protect Bronfman-Raniere.  It was certainly not to protect herself, as is obvious by her indictment.

Kathy Russell was a person so little regarded in Nxivm that she was often mocked and abused by the High-Rank. She was even assigned the lowly task of cleaning up Raniere’s sex lair at 8 Hale Court.

She was also encouraged by Raniere, in what can only be seen as his cruel and sadistic joke: He told her – she was in her 50s [she is now 60] – that she could be a world-class ballerina even at her age.

I will never forget how Kathy told me she was performing in recitals in Saratoga with a ballet school – where she would perform on stage.  Upon further questioning, I learned that she was by far the oldest ballerina in her school. The rest of the ballerinas were aged 6 -13 years old.

I have this mental image of 50 plus-year-old Kathy, doing pirouettes with eight-year-old girls, with their parents in attendance, parents who were younger than her, with Kathy not realizing how insane and foolish it was to be thinking stardom was yet to come to her in ballet.

She believed in Keith Raniere; that it was only a matter of time before everything he said – he, the smartest and most ethical man in the world – would come true.

Now look at what believing in Keith and trying to protect him has done for Kathy Russell.

 

 


About the author

Frank Parlato

Frank Report’s founder and lead writer Frank Parlato is one of the internet’s most acclaimed investigative journalists. His writing and investigations have helped expose major criminal organizations and scandals.

Frank’s work has been cited in major publications all over the world, including The New York Times, New York Post, The Daily Mail, VICE News, CNN, Rolling Stone, and more.

He is also the publisher and editor-in-chief of Artvoice, The Niagara Falls Reporter, Front Page and the South Buffalo News.

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  • I think most people here, including Frank and Heidi, are missing the point about Kathy Russell.

    Kathy won’t turn against Keith or Clare for the same reason that a parent won’t turn against their own child, regardless of the consequences.

    Kathy has NOTHING in life without Clare, Keith and NXIVM.

    NXIVM provides Kathy with employment, friends and ‘hope’ for her future.

    Without NXIVM Kathy will never be employed again, except maybe as a toilet cleaner (but even that’s unlikely at her age).

    Without NXIVM Kathy will lose her best friends and her ONLY friends, forever.

    Without NXIVM Kathy will lose all ‘hope’ in her life. Without hope, a person has no reason to live anymore.

    Kathy has ZERO in life, if you take away NXIVM.

    Kathy is like a physical manifestation of NXIVM philosophy inside a human body. She doesn’t have a personality outside of what NXIVM dictates.

    Guess what?

    If a parent had to serve 3 years in prison to protect the life of their child, you better believe they’d do it without even thinking twice.

    Heidi would do it. So would Frank. So would any parent. Not only that, but they’d do it with a smile on their face and not even view it as a real sacrifice. That’s love. Kathy truly loves NXIVM, Keith and Clare.

    So why do people not understand that Kathy doesn’t view her situation as a sacrifice? She views it as a sacred duty to protect the only family she has.

    India Oxenberg was able to break free because she has a loving family and a great life outside of NXIVM, with a great future to look forward to. Kathy doesn’t have any of that waiting for her.

    Without NXIVM, Kathy would be sitting penniless in a homeless shelter, probably doing the books for the local crack dealer in return for tuition money for ballerina school.

    I think Kathy will gladly serve 3 years in prison for NXIVM and not even think twice about it. Penza is wasting her time if she thinks Kathy will ever cut a plea deal. Never gonna happen.

    • Bang Cocky, you seem increasingly concerned that Kathy or Allie — any defendants other than your AZ represented Bronfman/Salzman clutch — might miraculously come to their senses on their way to the slaughter and take those prized plea deal seats you’ve reserved for Clare, Nancy, Michelle and Ben.

      Kathy (and Allie) — the writing is on the wall — CLARE CANNOT REPLENISH THE TRUST FUND TO PAY YOUR LAWYERS no matter how many times you incriminate yourself by taking the 5th or how well you served their interests. They’ve spent the money on motions defending Socrates and nullifying your conflict of interest claims on appeal. They’re trying to keep you from making a deal ahead of them so they don’t have to compromise on theirs. And, very soon, there may be other defendants vying for those plea deal seats when superseding indictments are announced, who will at the very least, drain what little is left of the unreplenishable trust bone dry. You’ll likely have to deal with a Public Defender sooner or later no matter what only if it’s after the Salzman clutch or new defendants cut their deal, you’ll have nada to deal with!

      ACT NOW! EMPOWER YOURSELVES! PUT ON YOUR BIG GIRL PANTIES, PICK UP THE PHONE, CALL THE DOJ AND PLEA!

      And Bang Cocky, why don’t you get into some really good, pure, high grade, uncut Mexican stuff?

  • I feel sorry for this woman. I don’t excuse her illegal activities, she’ll pay for her sins as we all do.
    No need to be rude and comment about the ballarina thing though. Let people dream their dreams. For shame FP….

  • This truthful story about Kathy Russell literally makes me sick to my stomach.

    The least culpable person is set up to take the fall for the fiendish Grifters of NXIVM.

    A woman who does the taxes for NXIVM and its numerous front companies is ridiculed as stupid.

    Why would a stupid person be hired to do NXIVM’s taxes? For years?

    Because she would be easy to lie to.

    Because she wouldn’t ask too many questions.

    Was Kathy Russell’s initial lawyer, Fanciullo, incompetent or corrupt?

    A lawyer fresh out of law school could negotiate an immunity deal with the DOJ in return for Grand Jury testimony.

    Did NXIVM money (Bronfman money) find its way to Fanciullo?

    “As for invoking the 5th on whether she was a member of DOS, it seems peculiar since, later on, her new attorneys, in making a motion to sever her trial from Raniere and Mack’s trial, used the argument that Russell was not a member of DOS.

    This leads to the inevitable question: Why couldn’t Russell just answer the question in the grand jury – of whether she was a member of DOS – with a “No.” – Frank Parlato’

    What is so sacrosanct about NXIVM DOS that it can’t be talked about?

    This passage reminds me of what the slave “Jane” told Frank Parlato in her interview.

    FR: Did you ever meet Allison?
    Jane: She was my friend. I promised her loyalty She is my Mistress. I am not allowed to talk about meeting Ally…
    https://frankreport.com/2018/10/18/slave-tells-about-her-role-in-gbd-about-allison-kristin-kreuk-i-never-saw-kk-do-anything-illegal/

    What is Kathy Russell hiding about Mistress Ally and DOS?

    Why would Kathy Russell be so reluctant to talk about Mistress Ally and DOS?

    What would loyalty to Mistress Ally entail?

    What stories can’t be told about Mistress Ally and DOS?

    That Ally, like her predecessor Pam Cafritz, was tasked with recruiting girls, for the Vanguard?

    That NXIVM/ money (Bronfman money) was given to Mistress Ally to pay for the Clifton Park townhouse rented by Allison where the DOS slaves were branded?

    That NXIVM money (Bronfman money) was given to Mistress Ally to rent her 3000 dollar per month swank apartment in Brooklyn where NXIVM DOS activities took place including brandings?

    That some of the NXIVM DOS slaves were kept compliant by being force-fed drugs?
    (A rumor on the gossip site Crazy Days and Nights.)

    Sara Bronfman named in Crazy Days and Nights Blind Item about forced sex with Allison Mack, India Oxenberg and Keith Raniere
    https://frankreport.com/2019/01/01/sara-bronfman-named-in-crazy-days-and-nights-blind-item-about-forced-sex-with-allison-mack-india-oxenberg-and-keith-raniere/

    Who had authority to disburse NXIVM money?

    Keith Raniere, the Vanguard?

    Clair Bronfman, the Legatus?

    Nancy Salzman, the Prefect?

    It’s time for Kathy, Russell to save herself by making a plea deal and cooperating.

    Don’t expect Keith, Clair, Allison or Nancy to save you.

    They are all Grifters and Gangsters.

  • How sad for Kathy if she really expects that Keith, Clare, Nancy, any of them will spend a penny or a minute on her once she’s sentenced.

    Most likely, another reason they’ve hired new counsel for Kathy is to negate any conflict or other claim she may have regarding her prior representation.

    If Kathy makes the same poor choices with the new attorneys — rejects or fails to seek a plea deal a second time on the false hope she’s got an appeal due to the prosecution’s actions — as it appears her new counsel is leading her to believe — none can claim anyone other than Kathy herself is at fault.

  • Raniere has created a freaky world for his followers and those who have entered it. The more they were embedded in it and separated and cut off from family and other friends who were not members, the crazier this world could become. The dream of a better world becomes utopia and you wake up in a nightmare. But that doesn’t mean that everyone is a victim, but there were knowing accomplices of Raniere, who participated and profited in this criminal enterprise.

    It can be said that in the end only organised crime is left behind.

About Frank Parlato

About Frank Parlato

Frank Parlato is an investigative journalist.

His work has been cited in major publications all over the world, including The New York Times, The Daily Mail, VICE News, CNN, Fox News, Rolling Stone, People Magazine, and more.

Frank Parlato was the lead investigator and coordinating producer of Investigation Discovery's 2 hour blockbuster special 'The Lost Women of NXIVM.'

Frank Report is dedicated to Frank's investigative journalism and the pursuit of truth.

Read more about Frank Report's mission.

If the whole world stands against you sword in hand, would you still dare to do what you think is right?

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