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.