Asset Search Blog : Asset Search & Hidden Assets : Lawyer & Attorney Fred Abrams : Tax Fraud, Asset Investigations

The General Inspector of Financial Control in Poland received an anonymous tip letter about alleged suspicious activity.  This tip ultimately related to Ukraine resident Sergly Savchuk;  Prime Invest L.L.C. of Florida and the Sesa Polska & Tecza Mazur limited liability companies of 50 Platowcowa Street, Warsaw:

The Warsaw Circuit Prosecutor's Office next started their financial fraud investigation of Sesa Polska and Tecza Mazur at 50 Platowcowa Street.  These Warsaw prosecutors presumably wanted to determine whether the Platowcowa Street companies, Prime Invest LLC and Mr. Savchuk, had laundered money in violation of Article 299 of Poland's penal law.

It soon became apparent that Prime Invest L.L.C was a suspected shell company that had maintained a bank account in Poland.  Mr. Savchuk might have also beneficially owned Prime Invest L.L.C. and had possibly used it in 2004 for the nominee purchase of the former "Evita" mineral water plant in Biskupiec. 

Prime Invest L.L.C. additionally had an agent in Delaware.  To elicit evidence about Prime Invest L.L.C., the Warsaw prosecutors decided on using a letter rogatory (a.k.a. request for legal assistance) in Delaware. 

 

The Warsaw prosecutors pursued their letter rogatory through the U.S. Attorney's Office in Delaware on October 14, 2009, pursuant to 28 U.S.C. §1782 (Assistance to foreign and international tribunals and to litigants before such tribunals). On October 22, 2009 the U.S. District Court issued its Order permitting disclosure about Prime Invest L.L.C. via the Warsaw prosecutor's letter rogatory:

   

(Click On The Letter Rogatory To Read It)

 

 

(Edited November 27, 2009)

Satellite Image: Google Maps

Copyright 2009 Fred L. Abrams

The following occurred over a four month period during 2002, and has been supplied by an investigator I have worked with.  Some of it has been changed / sanitized for privacy reasons: 
 

As part of his tax fraud, Mr. Wallace contacted a Cayman Island bank by mail in order to open a personal account with it.  He mailed account opening documents to it which included a copy of his U.S. passport and also supplied the names of references. According to these documents, Mr. Wallace lived in Miami and was a real estate developer.  Based upon all of the foregoing, the Cayman Island bank opened Mr. Wallace's personal account with a "O" balance.  Just six days later however, bank "X" in Panama wired $6.3 million to Mr. Wallace's Cayman account without any mention of the remitter. 


Mr. Wallace then went on a business trip to Central America for several months; so he rented his Miami home to "Chuck".  Although Mr. Wallace hadn't known at the time, Chuck was a small-time crook.  In fact, soon after Chuck took possession of Mr. Wallace's home, Chuck started stealing Mr. Wallace's mail.  One of the letters Chuck had stolen was written by "Bob", a personal banker from the Cayman Island Bank where Mr. Wallace maintained his account.  Bob had written to Mr. Wallace about a lucrative investment opportunity. 

Surmising from Bob's letter that Mr. Wallace had a sizable bank account, Chuck wrote to Bob pretending to be Mr. Wallace.  As the sanitized copy of Chuck's First Letter can only partly demonstrate, Chuck had assumed Mr. Wallace's identity in that particular letter by forging Mr. Wallace's signature.  To comfort Bob, Chuck's First Letter had also asked Bob for the minimum balance required to keep Mr. Wallace's account open. Chuck's "softening up" letter further suggested to Bob that Mr. Wallace's funds might soon be needed "at very short notice" for an alleged real estate deal in Mexico.  In the sanitized copy of Chuck's Second Letter, Chuck again pretended to be Mr. Wallace as he wrote to Bob at the Cayman Island Bank.  In his Second Letter, Chuck directed the wire transfer of Mr. Wallace's funds from the Cayman Island Bank to Chuck's own bank account in Mexico.


When Mr. Wallace next unexpectedly arrived at the Cayman Island Bank to make a cash withdrawal, he was shocked to learn that his account had been drained.  The Bank then showed Mr. Wallace "his" letters and explained that it had remitted his funds to Mexico just two days earlier because of "his" instructions.  Concluding that his identity had been taken over by Chuck, Mr. Wallace apologized for his error and immediately booked a flight bound for Miami.  Shortly thereafter, Mr. Wallace was arrested while fleeing from his Miami home after having killed Chuck there. 

Investigators from the U.S. next paid a visit to the Cayman Island Bank.  Although they had first thought that Chuck had been the true beneficial owner of the Cayman Island account, they discovered that Mr. Wallace was.  Investigators also learned that Mr. Wallace was not just simply a real estate developer involved in a tax fraud / abusive offshore tax avoidance scheme.  Instead, Mr. Wallace was actually a major illegal narcotics trafficker hiding the proceeds of his drug crimes through money laundering.  Investigators finally concluded that much of the foregoing had happened because the Cayman Island Bank had among many other things:

1. Inadequate customer identification procedures / know your customer rules;
    
2. Permitted Mr. Wallace's account to be opened by mail & also with a  "0" balance;
    
3. Neglected to contact a single reference mentioned in Mr. Wallace's account opening documents;
    
4. Failed to recognize suspicious activities like the wire transfer of the $6.3 million from Panama or Chuck's "softening up" letter.

Copyright 2008-2010 Fred  L. Abrams

As the attached sanitized bearer share certificate suggests, bearer shares allow for anonymous share ownership.  A corporation that issues bearer shares has no central registry of their ownership.  The Financial Action Task Force additionally explains, bearer shares are: "negotiable instruments that accord ownership in a corporation to the person who possesses the bearer share certificate".  Via its 33rd Recommendation and Chapter 4, pages 15-16 of its Report on Money Laundering Typologies 2001-2002, the Financial Action Task Force also warns that bearer shares can be used to launder money.

I too have seen how bearer shares had likely been used to launder marital assets and evade U.S. taxes.  In that particular case, (the facts of which have been changed below for privacy reasons), the divorcing husband and his business partners had accumulated $18 Million in undeclared revenue while residing in the U.S.  The husband and his partners then secretly formed a shell corporation in Curacao, the Dutch Antilles, which they jointly owned through bearer shares. 


To prevent the interdiction of their bearer shares by domestic authorities, the husband and his partners retained a Dutch lawyer to hold the bearer shares in a trust.  As their trustee, the Dutch lawyer deposited the bearer shares into a stock custody account at a Rotterdam bank.  As the following diagram demonstrates, the husband and his partners finally deposited their $18 million in undeclared revenue in a Cayman Island bank account in the name of their Curacao shell company:

As described above, the husband and his partners hid their $18 million from the United States by using multiple jurisdictions which included Curacao, Rotterdam and the Cayman Islands.  The husband and his partners also concealed their beneficial ownership of the $18 million by using protective layers consisting of: bearer shares; a nominee shell company from Curacao; and an offshore bank account in the Cayman Islands.  Such layering is characteristic of money laundering and sometimes ends in the kind of tax fraud case filed by the U.S. Department of Justice against Mr. Walter Anderson.  As my post  "A $365 Million Dollar Tax Fraud" mentioned, Mr. Anderson used bearer share certificates and shell companies to conceal the undeclared revenue he had parked offshore.

(Edited January 10, 2010)

Copyright 2008-2010 Fred L. Abrams

While "Roger" and I were walking near Bahnhofstrasse Street, Zurich, Roger suddenly stopped and had us duck into a corner shop. Once inside the shop Roger appeared to be looking for a particular item displayed in the shop's front window, although he was really scrutinizing the outside street.  He explained afterwards how it was necessary to check if we were being followed: "But first you must choose a side street or a main street where there are not many pedestrians or traffic, not a busy thoroughfare. You take mental pictures of everyone you think could be potential followers or surveillance cars as you continue along, before entering a store with windows which will permit you to survey the street".


Roger had a knack for locating offshore financial information because of his former work as an intelligence officer.  He and I were in Zurich on our way to meet my local Swiss counsel.  We were following the money trail of a financial fraudster who pretended in his U.S. court case to have a negative net worth.  Roger had brought with him the details of the fraudster's finances, which demonstrated that the fraudster had hidden tens of millions of dollars by money laundering through Switzerland.  Roger was about to share this information with me for the first time, at our meeting with the Swiss counsel.


In some cases, offshore financial information discovered during an asset search suggests that a foreign criminal law has been violated.  In Switzerland for example, one might conceivably violate criminal laws by lying about the beneficial ownership of a bank account, as mentioned in this legal memo from Swiss counsel: