(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

Today’s post is about Mr. Alex Nain Saab Moran (“Saab”) and Mr. Alvaro Pulido Vargas (“Pulido”) who could have hidden money at offshore banks; multiple jurisdictions; and in a nominee bank account (i.e. a bank account titled in the name of an intermediary).  I listed these three methods for hiding assets at “Red Flags For An Asset Search.”  On July 25th Mr. Saab and Mr. Pulido were indicted in Florida for suspected money laundering & an alleged bribery scheme. The alleged scheme is believed to have involved Mr. Saab’s and Mr. Pulido’s bogus invoices which they submitted to the Venezuelan government.

I. SUSPECTED HIDDEN MONEY AT OFFSHORE BANKS

Their July 25th indictment basically alleges Mr. Saab and Mr. Pulido hid the money the Venezuelan government paid them because of the alleged bogus invoices.  These payments to Mr. Saab and Mr. Pulido could have been for as much as $350 million U.S. dollars. Mr. Saab and Mr. Pulido are thought to have laundered the payments by transferring the payments from banks in Venezuela to offshore banks in multiple jurisdictions. Mr. Saab and Mr. Pulido may have also hidden money by using a nominee bank account titled in the name of a co-conspirator.  Based on the foregoing, money laundering indicators in this case might possibly have been the use of: offshore bank accounts; multiple jurisdictions; and a nominee bank account.

II. HOW THE ALLEGED SCHEME WORKED

In 2011 the Venezuelan government awarded Mr. Saab and Mr. Pulido a contract to construct low-income housing in Venezuela.  Mr. Saab and Mr. Pulido then shipped construction materials to Venezuela to build the housing. Mr. Saab’s and Mr. Pulido’s July 25th indictment claims they submitted bogus invoices to the Venezuelan government for these construction materials.  The indictment alleges Mr. Saab and Mr. Pulido invoiced the Venezuelan government for multiple shipments of construction materials when they sent only one.  Mr. Saab and Mr. Pulido supposedly bribed Venezuelan government officials who photographed one shipment of construction materials in different locations to make the one appear to be multiple shipments.  Bribe-taking officials allegedly made sure the Venezuelan government paid Mr. Saab and Mr. Pulido’s bogus invoices. The July 25th indictment also says Mr. Saab’s and Mr Pulido’s alleged bribe payments violated the U.S. Foreign Corrupt Practices Act.

III. MORE ALLEGED WRONGDOING

Finally, Mr. Saab’s and Mr. Pulido’s indictment was not the only thing that happened to them on July 25th. On July 25th the U.S. Treasury Department accused Mr. Saab and Mr. Pulido of stealing money from a food program for the poor in Venezuela.  Mr. Saab and Mr. Pulido supposedly hid these illicit proceeds by employing shell companies. Consequently, the U.S Treasury Department put Mr. Saab and Mr. Pulido on one of its sanction lists.

Copyright 2019 Fred L. Abrams

As part of your asset searches, you or your lawyer may hire private investigators. These private investigators sometimes interview witnesses to find hidden assets. However, ethical rules apply to your lawyer when he/she employs private investigators for witness interviews. The applicable ethical rules can vary, depending on the state or jurisdiction a lawyer practices law in.

A. AVOID TRICKING WITNESSES WHILE INTERVIEWING THEM

Interviewing witnesses or gathering informants’ tips can be critical to the success of asset searches. The witnesses or tipsters can be an ex-husband or ex-wife; a paramour; disgruntled business partner; bookkeeper; etc. Meanwhile, ethical rules prohibit lawyers from using trickery while interviewing these witnesses and collecting their tips.  Therefore, when lawyers hire private investigators, the private investigators  should not make misrepresentations to witnesses or trick the witnesses at interviews. Otherwise, the lawyers who hired the investigators could violate ethical rules.

B. ASSET SEARCHES, PRIVATE INVESTIGATORS & A WITNESS INTERVIEW

The following hypothetical featuring a Michigan lawyer, shows how ethical rules can be violated. The Michigan lawyer represents a divorcing wife in her Michigan divorce.  The divorcing wife tells the Michigan lawyer that her ultra-high-net worth husband is hiding marital assets. Therefore, the Michigan lawyer hires private investigators to perform asset searches of the husband.  Since the husband has a paramour, the Michigan lawyer tells one of the private investigators to befriend the paramour. The private investigator is to use the bogus friendship to interview the paramour about the husband’s assets. The Michigan lawyer also tells the private investigator to use the bogus friendship to conceal the fact that the private investigator works for the Michigan lawyer.

Meanwhile, a review of The Michigan Rules Of Professional Conduct reveals that the Michigan lawyer violated these five ethics rules:

Copyright 2019 Fred L. Abrams