Kathy Russell had been asked about computer hacking and money laundering
ALBANY — A longtime bookkeeper for NXIVM invoked her right against self-incrimination dozens of times when she testified before a federal grand jury last year, refusing to answer questions about the secretive organization's leaders, her personal life and numerous alleged criminal acts.
The details of the testimony by Kathy L. Russell, 61, who has been associated with NXIVM since coming to the Capital Region from Alaska in 2002, were revealed in a court order unsealed this week in which a federal judge declined to dismiss her criminal case.
During her grand jury appearance last summer, Russell was asked by federal prosecutors about the hacking of computers of NXIVM's "perceived enemies," large amounts of cash coming across the U.S. border, alleged tax evasion and immigration fraud, the branding of women in a secret slave-master club, and NXIVM co-founder Keith Raniere's alleged sexual abuse of underage girls.
Russell was indicted a month after her grand jury appearance in a federal racketeering case that also charged Raniere; NXIVM president and co-founder Nancy Salzman; Salzman's daughter, Lauren; television actress Allison Mack; and Clare Bronfman, the organization's operations director and an heiress of the Seagram's liquor empire.
In the past month, Mack and the Salzmans have pleaded guilty to federal conspiracy and racketeering charges. Bronfman, Raniere and Russell are scheduled to go on trial May 7.
A court order unsealed this week that contains details of Russell's grand jury testimony confirms the breadth of the Justice Department's investigation and the alleged criminal enterprise run by its leaders, who for nearly two decades had avoided meaningful law enforcement scrutiny.
The judge analyzed Russell's grand jury testimony after her attorneys argued the case against her should be dismissed because federal prosecutors were aware of her alleged criminal conduct — and she was therefore a subject of the investigation — but did not tell her that when she testified before the panel. The judge rejected the motion.
Her attorneys said evidence used to support search warrants that were executed at various NXIVM-associated properties in March 2018 — after Raniere was taken into custody in Mexico — indicated the FBI was probing tax evasion and cash smuggling related to Russell's work within the organization.
During her grand jury appearance, prosecutors "engaged Russell in an extended conversation about whether she had ever asked Raniere about allegations that he had sexually abused minors or raped a particular woman," the judge wrote. "The government noted that it had evidence that Keith Raniere had had sex with underage girls."
Prosecutors also pressed Russell about the last time she had been to Canada; whether she had manufactured fake identification for someone; "and if she was 'aware of NXIVM ever paying to obtain passwords to somebody's email account' or 'to hack in somebody else's computer.'"
Later in the day, after Russell had testified before the grand jury for about two hours, she and her attorney at the time, William Fanciullo of Albany, met with FBI agents and federal prosecutors who offered Russell a plea agreement. Eight days later, Fanciullo rejected the offer.
On July 23 — about six weeks after she testified in the grand jury — Russell was indicted and arrested in Albany. She's charged with two criminal acts of identity theft as part of the alleged racketeering conspiracy.
The indictment accuses Russell of helping smuggle a woman through the Canadian border with fake identification, and helping install a "key-logger" device on the computer of a NXIVM accountant to obtain his email and passwords so that his emails could be secretly monitored.
When Russell appeared in U.S. District Court in Albany last July, Fanciullo told the judge his client had very little cash, a car worth about $8,000 and no assets. He said she lived in a Clifton Park apartment.
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