“Better Call Saul” & “Breaking Bad” remind us to look during asset searches for lawyers hiding money. In these fictional cable TV series, criminal defense lawyer Saul Goodman laundered money for meth maker Walter White & his co-conspirator Jesse Pinkman. At Breaking Bad’s Season 3, Episode 11 for example, Saul Goodman recommended washing illicit drug monies by investing them in a laser tag business. As set forth below, we should always look during asset searches for lawyers hiding money.

A) Hiding Assets Via A Sham Corporation

Moreover, Ohio criminal defense lawyer Matthew J. King was the subject of the article “Lawyer who suggested ‘Breaking Bad’ method to launder cash has conviction upheld by appeals court.”  Mr. King allegedly offered to hide/launder illicit drug monies through a sham corporation. Mr. King learned how to do this by watching Breaking Bad’s Saul Goodman on TV. Mr. King also allegedly offered to wash illicit drug monies by placing them in his attorney escrow account. On October 14, 2014 Mr. King was indicted on three counts of money laundering. On August 30, 2016 Mr. King was convicted and was sentenced to 44 months in prison on each count (to be served concurrently).

B) Some Other Concealment Methods

The case against Maryland criminal defense lawyer Kenneth Wendell Ravenell also reads like a script from Breaking Bad or Better Call Saul. Mr. Ravenell’s September 18, 2019 indictment charged him with a racketeering conspiracy, drug conspiracy and money laundering conspiracy.  Mr. Ravenell’s indictment claimed he helped his drug-trafficking client launder illicit drug monies.  The indictment basically alleged Mr. Ravenell could have hidden money or washed it in these ways:

  • placing illicit drug monies into law firm bank accounts;
  • commingling illicit drug monies with monies in a personal bank account;
  • disguising illicit drug monies as client funds then using the monies to pay other lawyers;
  • telling drug dealers how to engage in bulk-cash smuggling (& transport illicit drugs);
  • investing illicit drug monies in a restaurant in Glen Bernie, Maryland & additional businesses;
  • and using law firm mail to distribute money orders drug dealers purchased with illicit monies.

Video: AMC Network Entertainment, LLC

Copyright 2020 Fred L. Abrams

Money laundering by rigging courtsOne money laundering method involves hiding money by rigging court cases.¹ A plaintiff sues a defendant over a supposed breach of contract. Meanwhile, nobody knows the defendant is the plaintiff’s strawperson and the two have rigged the court case. When the plaintiff wins the bogus breach of contract case, the Court issues a money judgment against the defendant. Then, the plaintiff secretly transfers money to the defendant. The defendant launders plaintiff’s money by paying it to the plaintiff to satisfy the money judgment. This kind of money laundering could have occurred in the following fact pattern which I have changed for privacy reasons. The fact pattern includes comments about money laundering from counsel in Switzerland.

I) Mr. “J’s” Missing $500 Million At His Swiss Bank

Mr. “J” who lives in New York City e-mailed a NY lawyer. Although Mr. J’s e-mail was written in English it had some spelling errors. Mr. J’s e-mail said that Mr. J sold his commercial real estate to corporation “X” for $500 million USD in cash. X however, failed to pay Mr. J the $500 million. Mr. J then brought a lawsuit against X in Zürich, Switzerland and the Court entered a $500 million money judgment against X. To satisfy the judgment, X deposited $500 million in cash into Mr. J’s  bank account in Zürich. Mr. J’s e-mail also claimed the $500 million was now missing from Mr. J’s Zürich bank account. Mr. J’s e-mail said Mr. J wanted to hire the NY lawyer to recover Mr. J’s $500 million from the bank in Zürich.

II) Was Mr. J Hiding Money Through Money Laundering?

The NY lawyer thought that Mr. J might have been hiding money at his Zürich bank account. The NY lawyer therefore forwarded Mr. J’s e-mail to counsel in Zürich, Switzerland. Counsel in Zürich sent the New York lawyer a reply e-mail which said in relevant part:

In my view [Mr. J’s e-mail] is indeed suspicious. I see several signs for this, for example: The text is confusing and has English mistakes (‘proof’ instead of ‘prove’). The sums involved are extravagant and are simply too important to have disappeared. While the absolute size of the amounts involved is not unheard of, it would be unusual for such sums to be deposited in cash. This means that the transactions involved would have been carefully investigated by the bank as part of their due diligence, but no details of this investigation are offered [at Mr. J’s e-mail]. It is a known tactic of money laundering to obtain judgements or arbitral awards in rigged cases (where the opposing parties are in fact conspirators) to justify a seemingly impeccable source of funds. The background of the Zürich proceedings is not explained in any way. If one really wanted to get to the bottom of this, the best course would be to seek legal assistance from the Swiss authorities. For this, some US (or other) prosecutor would need to make a request to the Swiss authorities, perhaps based on alleged money laundering. The Swiss authorities should then be able to access the bank documentations from anywhere in Switzerland (and not only from Zürich), the court documents from the alleged Zürich proceedings, even files from lawyers. Based on this information further steps could be contemplated. I advise utmost caution in dealing with this matter.

 

¹I listed additional laundering methods at “Red Flags For An Asset Search.”

Copyright 2020 Fred L. Abrams

(This chart identifies alleged members and suspected businesses of the drug trafficking organization discussed at the press release available by clicking here.)

Make flowcharts in your asset search to show how your adversary has hidden money or other assets from you. The flowcharts in your asset search might document that your adversary hid assets through any one or a combination of the following:

  • fraudulent transfers
  • business entities;
  • nominees;
  • foreign bank accounts;
  • trusts;
  • sham loans;
  • multiple jurisdictions; etc.

How your adversary hid assets may become even more apparent to you if you make a flowchart (a.k.a. link chart). A free platform for making flowcharts is at the Visual Investigative Scenarios webpage. It is a good flowcharting tool for tracking assets & cases involving asset recovery.

Chart courtesy of U.S. Department of the Treasury.

Copyright 2020 Fred L. Abrams

This 40th post in my Divorce & Hidden Money series mentions Mr. Vardan Keshishyan, who reportedly hid money from his divorcing wife by smurfing (a.k.a structuring ).  In the context of money laundering, a smurf makes cash deposits below a bank’s threshold for reporting cash deposits to the government. By doing this the smurf hopes to fly under the government’s radar. There is even a variation of smurfing called “cuckoo smurfing.”

While Mr. Keshishyan was a U.S. ICE deportation officer, he was arrested on September 25, 2019 for suspected smurfing in violation of 31 U.S.C. § 5324(a)(3). On or about November 7, 2014, Mr. Keshishyan’s then-wife filed for divorce in Los Angeles Superior Court, Case No. BD611140. During the divorce, Mr. Keshishyan and his then-wife sold their marital residence.  Mr. Keshishyan’s share from the sale was about $96,369.22.  Based on the allegations at Mr. Keshishyan’s indictment, Mr. Keshishyan is believed to have lied about what had happened to this money. At a June 2015 hearing in the divorce, Mr. Keshishyan reportedly testified he lost $95,000 of the $96,369.22 he received from the sale of the marital residence. This supposedly partly happened because Mr. Keshishyan had made a bad investment.

Instead of losing the $95,000, Mr. Keshishyan apparently transferred it to his bank accounts along with other money totaling $99,000.  Mr. Keshishyan reportedly split the $99,000 into eleven cash deposits made to his bank accounts. Mr. Keshishyan is believed to have smurfed because each of his alleged eleven cash deposits were below the $10,000 threshold for banks to report the deposits to the government. Although not a divorce & hidden money case, the fact pattern below shows how a traffic stop by police officers led to a smurfing investigation.

Local Municipality Case Example (Drugs and Money Laundering) courtesy of US Treasury’s FinCEN.

Copyright 2020 Fred L. Abrams

Free Asset Search Tools

Free asset search tools range from seeking information about shell companies to detecting real estate ownership in New York City. At “CorporationWiki” you may possibly gather information about shell companies & at “ACRIS” you can search for NYC real estate ownership. I mentioned CorporationWiki & ACRIS at “A Low-Cost Asset Search” or “Asset Searches & Open Source Intelligence” which list more asset search tools. In addition, you can search leaked documents by using free asset search tools.

Computer hackers or informants may supply journalists with stolen banking; attorney-client privileged; or other confidential documents. When the stolen documents concern the public, “there is a significant legal distinction between stealing documents and disclosing documents that someone else had stolen previously.” Democratic Nat’l Comm. v. Russian Fed’n, 392 F. Supp. 3d 410, 431 (S.D.N.Y. 2019). As a result, journalists sometimes disclose leaked documents.

The International Consortium of Investigative Journalists (“ICIJ”) for example, publishes its Offshore Leaks Database. Consequently, you can use this database to run free searches of specific persons or business entities. Although this database does not include banking information or e-mails, it has leaked information regarding more than 785,000 offshore entities.  Likewise, you can search the Distributed Denial of Secrets website.  Besides documents stolen from the Cayman National Bank, Isle of Man by hacker Phineas Fisher, this website has many more leaked documents.

Copyright 2019 Fred L. Abrams

Last Tuesday Senator Warren released her plan to track hidden money & fight corruption. Money launderers, tax dodgers, narco-traffickers; terrorist financiers and other fraudsters can easily establish shell companies without disclosing who actually owns the shell companies. They open bank accounts and maintain the bank accounts in the names of the shell companies, as mentioned at my December 10th & December 17th posts. As a result, the money launderers, terrorist financiers, tax dodgers, etc. secretly transfer money through these bank accounts.  By following these steps, they wash the money & hinder an asset search.

Therefore, part of Senator Warren’s plan seeks “beneficial ownership” disclosure regarding shell companies. The plan at Senator Warren’s website however, does not explain who would make the disclosure. Businesses that form and sell shell companies might have to identify the beneficial owners of shell companies and report this information to governmental authorities which track hidden money.  The beneficial owners of shell companies could also be required to make reports to governmental authorities.

Whatever your views about Senator Warren are, you will hopefully agree that it would be a good idea to require “beneficial ownership” disclosure. For the reason that the misuse of shell companies has real-world consequences as the “Victims of Offshore” video explains.

Video: Courtesy of ICIJ

Copyright 2019 Fred L. Abrams

An asset search for stock share certificates begins with looking for red flags.  These red flags are listed at the July 2019 paper “FIU Tools and Practices for Investigating Laundering of The Proceeds of Corruption.”  As page 19 paragraph 29 of the paper says, you should look for:

[R]eceiv[ing] or purchas[ing] shares (or the option to purchase shares):

  • In a company in exchange for services; or
  • In a company where the purchase is financed by the vendor; or
  • In a company where the purchase price is below the net asset value of the company; or
  • In a company and receives a dividend from the company which is disproportional to the purchase price; or
  • Which give the right to sell shares at a price which is higher than either the current market value or the price at which the shares were purchased; or
  • And profit from a share transaction where the purchase and selling dates of shares are within a short time period.”

The July 2019 paper is about corrupt politicians who launder illicit assets. Bribe-taking politicians for instance, may hide bribe monies by transferring them through “several foreign jurisdictions.”  Crooked politicians or other launderers also use stock share certificates in their schemes to hide assets.  They first establish shell companies. Next, they issue the stock share certificates for the shell companies to themselves. The crooked politicians/launderers then title bank accounts; real estate; high-value automobiles; etc. in the name of the shell companies. To see how some individuals carry out this kind of scheme you can read my post “Bearer Shares & An Asset Search.”

Copyright 2019 Fred L. Abrams

Mobsters and fraudsters hiding assets seem to favor Formations House in London, an Organized Crime and Corruption Reporting Project webpage revealed. The webpage is called “#29LEAKS: Inside A London Company Mill.” Its first paragraph describes some of the customers thought to use Formations House:

What do a Swedish Hells Angels boss, an Iranian state oil company, the Italian mob, and a fake Gambian bank have in common? The answer: A company services firm called Formations House, hidden behind the doors of one of London’s most exclusive addresses.

Formations House is a Nominee Incorporation Service (“NIS”).  This means it sells shell companies and other business entities to its customers. Another NIS was the Mossack Fonseca law firm known across the globe because of the Panama Papers.  While the business community has a legitimate need for NIS & shell companies, mobsters & fraudsters can buy shell companies from a NIS. The mobsters & fraudsters use the shell companies for hiding assets. They open bank accounts titled in the name of the shell companies and launder money through the accounts. Or they use their shell companies to purchase real estate, fine art, diamonds, etc. This misuse of shell companies is so rampant, it reminds me of the catchphrase “nothing to see here move along.”

To remain anonymous, the mobsters & fraudsters can use false identities when they purchase a shell company from a NIS.  For greater anonymity, the mobsters or fraudsters sometimes buy the services of a nominee/a straw man who acts as the director, manager or shareholder of a shell company.  Then the straw man, (rather than the mobster or fraudster), is listed at government registries as the shell company’s director, manger or shareholder.  When mobsters or fraudsters use a straw man this way, it makes it even more difficult to detect the mobster’s or fraudster’s shell companies and bank accounts. “Of course there are laws that are suppose to prevent this,” the video below about Formations House basically explains.

Video: Organized Crime and Corruption Reporting Project

Copyright 2019 Fred L. Abrams

Opioid Crisis

The N.Y. State Attorney General has pursued an asset search of the Sackler family, Purdue Pharma and business entities related to them. The N.Y. State Attorney General tried to do this through its lawsuit in Suffolk County N.Y. against the Sackler family and Purdue Pharma. At court filings in the Suffolk County case, the N.Y. State Attorney General essentially alleged the Sackler family hid assets through:

The N.Y. State Attorney General and others filed lawsuits against the Sackler family because the family owns Purdue Pharma which makes OxyContin. Many blame OxyContin for the U.S. opioid crisis. According to the U.S. Centers for Disease Control and Prevention, the opioid crisis led to nearly 217,000 deaths in the U.S. from 1999 to 2017.

SUBPOENAS & LETTERS ROGATORY AS ASSET SEARCH TOOLS

To facilitate its asset search of the Sackler family & Purdue Pharma, the N.Y. State Attorney General used its Suffolk County lawsuit to issue subpoenas to bank witnesses in the U.S. including: J.P. Morgan Chase Bank N.A.; Morgan Stanely & Co. LLC; UBS Financial Services, Inc. & UBS Bank U.S.A; Bank of America N.A.; Charles Schwab & Co., Inc.; Citibank, N.A.; HSBC Bank USA, N.A. & HSBC Securities USA, Inc.; Wells Fargo; & Goldman Sachs & Co. LLC.

The New York State Attorney General subpoenaed the bank witnesses and others to try to collect financial evidence about alleged fraudulent transfers by the Sackler family. One of these subpoenas was issued to BR Holdings, Associates Inc. & it is available here. The N.Y. State Attorney General also pursued its asset search by using the Suffolk County lawsuit to issue letters rogatory to offshore witnesses. One of these letters rogatory is geared toward eliciting evidence from Banela Corporation in the British Virgin Islands. Banela Corporation allegedly owns all the Class A shares of Purdue Pharma, Inc. As letters rogatory can be the primary tools for gathering evidence offshore, the N.Y. State Attorney General may especially need them. This is true since the Sackler family reportedly transferred assets valued at $1 billion offshore.

PURDUE PHARMA’S CHAPTER 11 BANKRUPTCY CASE

On September 15 & 16, 2019 in White Plains N.Y., Purdue Pharma & 23 affiliated debtors filed for a chapter 11 reorganization under the U.S. Bankruptcy Code. U.S. Bankruptcy Judge Drain who presides over the case, issued an injunction on October 11, 2019 suspending lawsuits against Purdue Pharma and the Sackler family.  The October 11th injunction puts a freeze on the above-mentioned subpoenas and letters rogatory, (& the claims against the Sackler family and Purudue Pharma at the Suffolk County N.Y. lawsuit). Furthermore, the first federal civil lawsuit about OxyContin & the opioid crisis is set down for trial tomorrow in Cleveland Ohio. As a consequence of Bankruptcy Judge Drain’s October 11th injunction, the Ohio trial will not include any claims against Purdue Pharma and the Sackler family.

Copyright 2019 Fred L. Abrams

Although I have many asset search tips for you, three stand out if you are trying to detect a large amount of hidden money or other high value assets.  My asset search tips are that you recognize: competing claimants; compartmentalization and laundering links.

A) COMPETING CLAIMANTS

My first asset search tip is that you see if there are claimants searching for the same money you are (i.e. competing claimants). Competing claimants can be a domestic or foreign tax authority; prosecutors seeking asset forfeiture; judgment creditors; court-appointed receivers; etc. Competing claimants may possess a priority claim over the hidden money. Competing claimants may have a greater legal right than you, to recover the hidden money. They sometimes hamper your ability to recover hidden money. If there are competing claimants in your case, you may have to change your asset recovery strategy.

B) COMPARTMENTALIZATION

My second asset search tip is you should look for compartmentalization because it can be used to hide money from you. One former intelligence officer I know compartmentalizes his cell phone calls as a countermeasure to anyone tracking the calls.  The former intelligence officer dedicates one cell phone for incoming calls and dedicates another for outgoing calls. My post “Compartmentalization & An Asset Search” gives another example of compartmentalization. It was about a divorcing husband who hid money via a “back-to-back-loan” (i.e. a loan in which the lender and the borrower are the same).

The husband alleged he was broke as he had defaulted on an arm’s length loan from an offshore bank. The loan however was “back-to-back” as the husband was both the lender and borrower of the loan. Meanwhile, no one knew this as the husband compartmentalized his money transfers related to the back-to-back loan. The husband compartmentalized by transferring his money through multiple jurisdictions such as Germany and Switzerland; and by using two different offshore banks.

C) LAUNDERING LINKS

A person may hide large amounts of money by moving the money through laundering links part of a money laundering circuit. Therefore, my third asset search tip is that you should learn to spot laundering links. Laundering links can be people; bank accounts; shell companies; existing businesses; trusts; foundations; charities; etc. You might possibly sniff out a laundering link by employing private investigators &/or forensic accountants; using legal tools like letters rogatory &/or subpoenas; etc. Below is a chart which shows how used car dealerships; exchange houses; and Lebanese banks were used as laundering links in a money laundering circuit which washed money for Hizballah, drug dealers and others.

 


Money Laundering Link Chart Courtesy of U.S. Treasury.

Copyright 2019 Fred L. Abrams