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(i.e., plastic vials). Incident to the arrest, law enforcement
agents searched the Vortex facility and the Zhadanovs’ apartment
where they seized $827,981 in cash from the safe.
Mr. Zhadanov pleaded guilty in March 1994 to charges of
conspiracy to aid and abet the distribution of crack cocaine and
money laundering. Pursuant to his plea agreement, Mr. Zhadanov
agreed to forfeit the $827,981 in cash seized from the safe, his
properties, Vortex’s assets, funds in his personal bank accounts,
and Vortex funds traceable to the UBS account in Switzerland.
Mr. Zhadanov also agreed to cooperate with the Internal Revenue
Service by filing accurate personal and corporate Federal income
tax returns for relevant years. In return, Mr. Zhadanov received
a reduced sentence of 5 years in prison at his sentencing hearing
in August 1994.8
F. Notices of Deficiency and Reconstruction of Income
Vortex filed timely corporate tax returns for FYEs 1991 and
1992. Vortex received an extension to file its FYE 1993 return
8In the criminal proceedings against Mr. Zhadanov in the
United States District Court for the Eastern District of
Pennsylvania, Mrs. Zhadanov, Eli Zhadanov, and Mr. Zhadanov’s
mother, Maria Zhadanov, filed a claim to recover a portion of the
seized funds in which they alleged they owned in the aggregate,
$200,000 of the $827,981 seized from the Zhadanovs’ safe and
subject to forfeiture. During the forfeiture hearing, Mrs.
Zhadanov introduced into evidence the Vortex cash receipts
journal in an attempt to explain the source of cash in the safe.
The journal had not been seized with the Vortex corporate records
during the May 1993 search of the Vortex factory and the
Zhadanovs’ residence. The District Court denied the claims of
Mrs. Zhadanov, Eli, and Maria Zhadanov.
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