Asset Search/Fraud Investigation

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Asset Recovery Workshop October 8-11, 2018
Photo from the asset recovery workshop held October 8-11, 2018 in Abuja, Nigeria.

Fifteen West African countries sent judges; &/or prosecutors; &/or law enforcement agents to attend the asset recovery workshop I recently lectured at in Abuja, Nigeria. I was one of four resource persons at the workshop which was a joint project of the European Union and the Inter Governmental Action Group Against Money Laundering In West Africa. At the work shop, I talked about government officials, (i.e “politically exposed persons“), who launder large bribe payments offshore. I explained that others hiding vast sums of money also usually launder their money offshore. Therefore, if you are going to conduct asset searches to detect hidden money, you should learn to spot the money laundering indicators.

I) MONEY LAUNDERING INDICATORS

The indicators include: employing strawpersons to act as bank signatories; abusing trusts; hoarding cash/engaging in bulk cash smuggling; etc. I made a list of the indicators at my post “Red Flags For An Asset Search.” The money laundering case involving  Mr. Vladimir Kuznetsov has some of these indicators. As I mentioned in a lecture I gave during the asset recovery workshop, Mr. Kuznetsov was a Russian diplomat working at the United Nations in New York City. Prosecutors in the United States accused Mr. Kuznetsov of washing bribe payments through Nikal, Ltd. which was a suspected offshore shell company Mr. Kuznetsov had formed. Mr. Kuznetsov used Nikal, Ltd. to open an offshore bank account in Antigua & Mr. Kuznetsov titled the offshore bank account in the name of Nikal, Ltd.

Mr. Kuznetsov’s associate, (who took bribe payments from companies seeking contracts at the United Nations), transferred bribe payments to Mr. Kuznetsov’s offshore bank account. Mr. Kuznetsov then reportedly wire transferred the bribe payments in his offshore account to financial accounts in New York City at Chase Manhattan Bank &/or the United Nations Federal Credit Union. On March 2, 2007, Mr. Kuznetsov was convicted of conspiracy to commit money laundering.  On October 12, 2007, Mr. Kuznetsov was  sentenced to fifty one months’ imprisonment. Money laundering indicators or red flags that Mr. Kuznetsov had hidden money were Mr. Kuznetsov’s use of a  suspected shell company, Nikal, Ltd. &  Mr. Kuznetsov’s use of the offshore bank account.

II) ASSET SEARCHES & THE MONEY LAUNDERING STAGES

Besides recognizing money laundering indicators, understanding the way money laundering works can help you succeed at your asset searches. Money laundering occurs in three stages: placement, layering & integration. These stages are thought to have been present in Mr. Kuznetsov’s case. Mr. Kuznetsov’s associate placed bribe payments into Mr. Kuznetsov’s money laundering circuit. This placement occurred when the associate wire transferred bribe payments to Mr. Kuznetsov’s offshore bank account. Mr. Kuznetsov layered by washing the bribe payments through his offshore bank account titled in the name of Nikal, Ltd. This layering disguised Mr. Kuznetsov’s beneficial ownership of the offshore account & the bribe payments. Integration would have happened if Mr. Kuznetsov introduced the washed bribe payments into the economy.  Mr. Kuznetsov could have integrated the bribe payments reportedly at the New York financial accounts, by using the bribe payments to buy things. Placement, layering & integration are described at this Egmont Group Money Laundering Video:¹

¹Video Courtesy of The Egmont Group of Financial Intelligence Units.

Copyright 2018 Fred L. Abrams

On October 8th & 9th in Abuja, Nigeria I will lecture about asset recovery & tracking assets.  I will present 2 lectures to law enforcement agents who work in West Africa. The lectures are called “Whistleblowers, Secret Bank Accounts & Recovering Hidden Assets” & “Asset Recovery Case Studies & Discussion.” I am presenting the lectures during an asset recovery workshop held by The Inter Governmental Action Group Against Money Laundering In West Africa (GIABA).

I. Whistleblowers, Secret Bank Accounts & Recovering Hidden Assets

At this lecture I analyze how vast sums of money can be hidden in a wide variety of cases.  I talk about cases as diverse as narcotrafficking; terrorist financing; public corruption; tax fraud; securities fraud; & divorce.  I also discuss the tools for finding assets hidden offshore.  During the lecture I emphasize how law enforcement agents can employ whistleblowers to try to detect hidden assets. I additionally cover:

II. Asset Recovery Case Studies & Discussion

At “Case Studies & Discussion” I go over how criminals hide their illicit assets offshore.  I also talk about how law enforcement agents try to track illicit assets through: (1) mutual legal assistance treaty (“MLAT”) requests & (2) asset forfeiture laws.

III. My Coursebooks For The Lectures

To review the coursebooks I am giving to those attending my October 8th & 9th lectures, click on these images:

 

 

Image: Lucian3D/Shutterstock.com

Copyright 2018 Fred L. Abrams

Following a money trail as part of your asset searchI. DURING YOUR ASSET SEARCH LOOK FOR A MONEY TRAIL

There is always a money trail you can follow during your asset search. This is true no matter how your adversary hides assets.  Even if your adversary maintains a secret offshore bank account there is a money trail. The money trail at the offshore bank would consist of: account opening documents; monthly account statements; and bank signature cards.  Therefore, as part of your asset search you would seek these documents from the offshore bank.  You might do this by employing a letter rogatory or a compelled consent form.

II. MONEY TRAILS WITH MANY ELEMENTS

Perhaps most important to remember is that a money trail can involve many elements. The suspected money trail in the criminal case of USA v. Tully Lovisa et. al., is thought to include: nominees (i.e. intermediaries/straw persons); shell companies; and post office boxes in New York and the Netherlands. Prosecutors may claim Mr. Tully Lovisa &/or his co-conspirators used these elements to launder the illicit profits of an advance fee scheme.  The July 10, 2018 indictment in the case alleges Mr. Lovisa &/or his co-conspirators mailed phony prize notices to hundreds of thousands of victims.

The notices supposedly indicated the victims won cash prizes ranging from tens of thousands to millions of dollars.  The notices allegedly said the victims could collect the prizes by mailing a $20 or $25 processing fee to the post office boxes in New York or the Netherlands.  According to the indictment, Mr. Lovisa &/or his co-conspirators never paid valuable prizes to the victims and the supposed scheme generated  more than $30 million in illicit profits from the processing fees paid by the victims.

III. THE 2010 LAWSUIT AGAINST MR. LOVISA

In 2010 the Federal Trade Commission sued Mr. Lovisa for an alleged advance fee scam similar to the alleged advance fee scam described at Mr. Lovisa’s July 10, 2018 indictment. The 2010 lawsuit was settled via a stipulation filed with the Court on 4/19/12.  A review of the 2010 lawsuit reveals the suspected money trail in that case could have consisted of shell companies and post office boxes. The 2010 lawsuit claimed Mr. Lovisa had sent personalized mailers in violation of 15 U.S.C. §45 (a), which prohibits unfair or deceptive acts. One of these alleged mailers mentioned by the 2010 lawsuit, is reproduced below.

First image: pickbiz/Shutterstock.com

Copyright 2018 Fred L. Abrams

Hidden Money SearchMy tips for finding hidden money are at Seven Tools For A Successful Asset Search. Hiring a private investigator is also usually a good idea. For additional help in your search for hidden money, you may need some of the following.

A) HANDWRITING EXPERTS

If forged documents were used to hide or steal money, you may need handwriting experts/forensic document examiners to conduct a questioned document examination.  “A Case of Tax Fraud, Identity Theft & Murder” showed how forged letters were used by “Chuck” to steal money from “Mr. Wallace’s” Cayman Island bank account. Chuck forged Mr. Wallace’s signature in 2 letters Chuck sent to “Bob,” a  banker at the Cayman Island bank. By impersonating Mr. Wallace at the 2 forged letters, Chuck was able to drain Mr. Wallace’s Cayman Island bank account. Although I partly sanitized it for privacy reasons, one of the letters Chuck forged is available here.

B) LINK CHARTS

Link charting software enables one to visualize relationships and associations between people and/or things. This visualization can assist you or your private investigators in following a money trail/tracking assets. You may similarly use link charts in court to support your claim that money was hidden from you. A link chart of a money laundering circuit is discussed at the webpage How FINTRAC Builds A Case. Link charts for analyzing telephone toll calls, methamphetamine and cocaine distribution and various crimes are published by RFF Electronics.

C) FORENSIC COMPUTER EXPERTS

Forensic computer experts can assist you if you give them physical access to items thought to store digital evidence. These items can be a computer, mobile phone, flash card from a digital camera, etc. At a forensic computer examination, the experts can use keywords to search for hidden assets; look for databases like Quickbooks; search for logins at banks; and seek data which was supposedly deleted.

Image: Zenzen/Shutterstock.com

Copyright 2018 Fred L. Abrams

An Asset Search For Tax FraudA scheme to hide assets may start out with the primary goal of placing assets beyond your reach. The scheme may then develop the secondary goal of hiding assets from tax authorities/committing a tax fraud. To increase your chances of a successful asset search, you should therefore look for indicators of tax fraud. A good list of the indicators is published by the IRS at IRM 25.1.2.3, Fraud Handbook – Indicators of Fraud.

Just one indicator listed at the Fraud Handbook is “deposits into bank accounts under nominee names.” This means secretly depositing money into bank accounts titled in the names of  intermediaries (i.e. nominees).  “Red Flags & The IRS Search For Attorney Memmott’s Assets” analyzes the tax fraud case against the now-disbarred California attorney Orion Memmott. Prosecutors accused Mr. Memmott of hiding assets from the IRS by titling real estate & bank accounts in the names of nominees.

In USA v. Beverely, Docket No 17−cr−60093, prosecutors similarly accused Timothy J. Beverley of hiding assets from the IRS.  Prosecutors claimed Mr. Beverley of Pompano Beach, Florida failed to report to the IRS $2.2 million he allegedly stole from his employer.  Page 4 ¶14 (b) of Mr. Beverley’s superseding indictment said Mr. Beverley hid his stolen money in bank accounts titled in the names of nominees. Mr. Beverley supposedly committed the theft & alleged tax fraud while on supervised release from his earlier money laundering case.  In the laundering case, prosecutors accused Mr. Beverley of hiding the illicit proceeds of a bank fraud. Mr. Beverley apparently hid the proceeds of the bank fraud by washing them through bank accounts belonging to the NASCAR team Mr. Beverley once owned—Tyler Jet Motorsports.

Copyright 2018 Fred L. Abrams

Today’s post mentions how a tip collected from Colombian authorities revealed a bribery scheme thought to involve drug kingpin Jose Bayron Piedrahita-Ceballos.

During your asset search gather tips from witnesses who not only know about your adversary’s assets but are also at odds with your adversary. If you are litigating against your adversary you might collect tips from these witnesses by deposing them. Additionally, you should consider hiring a private investigator to conduct witness interviews to sniff out tips concerning your adversary’s assets. A witness interview I attended alongside an investigator is described at my post: “An Asset Search By Pursuing Interviews & Tips.”

The public corruption case brought against former Homeland Security Investigations Special Agent Christopher V. Ciccione, II (“Ciccione”), could show the importance of gathering tips when searching for assets. U.S. law enforcement officials collected a tip which led them to discover illicit assets or bribes given to Ciccione: about $20,000 in cash; a Rolex watch worth approximately $12,000; a hotel stay at the Marriott in Bogota, Colombia; a party; a dinner; liquor; & the services of prostitutes. The tip originated from governmental authorities in Colombia who had tapped phones & detected the apparent bribery scheme between Ciccione & Colombian narcotics kingpin Jose Bayron Piedrahita Ceballos (“Piedrahita”). At his 11/30/17 Factual Basis For Plea, Ciccione admitted taking the bribe payments, except for the Rolex watch.

Ciccione admitted that while a Special Agent, he took the bribes to orchestrate the dismissal of Piedrahita’s drug trafficking indictment filed in federal court in Florida. Ciccione’s 11/30/17 Factual Basis For Plea Agreement explained Ciccione had improperly obtained official authorization for Piedrahita & Piedrahita’s family to enter into the U.S. It also said Ciccione leaked the names of 2 DEA confidential informants to Mr. Juan Carlos Velasco Cano, who was Piedrahita’s associate. On 9/21/17 Ciccione was indicted for his role in the alleged scheme & on 2/9/18 Ciccione was sentenced to serve 3 years in prison. Two more Asset Search Blog posts mentioning tips include “Mr. Benjamin’s Divorce & His White Collar Crimes” & “Warsaw Prosecutors Eye Possible Money Laundering At 50 Platowcowa Street.”

Image: Courtesy of U.S. Treasury’s Office Of Foreign Assets Control

Copyright 2018 Fred L. Abrams

Asset Searches in the U.S.
This post says you can sometimes pursue asset searches in the U.S. because of your foreign lawsuit.

You may be able to use 28 U.S.C. § 1782 to perform asset searches connected to your foreign: divorce; dispute over a will; financial fraud claim; etc. This is true because pursuant to 28 U.S.C. § 1782, the U.S. District Court can allow you to serve subpoenas in the U.S. in furtherance of lawsuits in a foreign land.  You would serve these subpoenas on U.S.-based witnesses with knowledge of the assets. One subpoena based on 28 U.S.C. § 1782 is supplied at my October 18, 2017 post “Asset Searches In the U.S. Because of Lawsuits Outside The U.S.”  Based on 28 U.S.C. § 1782, the U.S. District Court also allowed service of a subpoena upon J.P. Morgan Chase Bank, N.A. in New York City.  On January 3, 2018 the U.S. District Court issued its Order authorizing issuance of this subpoena in the case known as In Re Application of Shanghai Xiaosheng Industrial Investment Co. LTD.

According to court filings, Shanghai Xiaosheng Industrial Investment Co. LTD., (“Shanghai”), needs evidence from J.P. Morgan Chase Bank, N.A. to frame a lawsuit it will file in China against 9th Base Investment Limited (“9th Base”).  Shanghai was reportedly defrauded out of more than $31 million US dollars by 9th Base.  On or about October 12, 2015 Shanghai allegedly transferred yen valued at $31 million US dollars out of China into 9th Base’s New York bank account at J.P. Morgan Chase Bank, N.A.  Shanghai apparently transferred the $31 million as part of a deal in which Shanghai was suppose to eventually acquire 28.57% of Kailai Oil & Gas Holdings, Ltd., which develops oil & gas in Papua, Indonesia. Shanghai alleged that 9th Base fraudulently induced Shanghai to transfer the $31 million &/or that 9th Base was unjustly enriched by the $31 million dollars. To learn more about Shanghai’s allegations against 9th Base, read the December 20, 2017 Declaration of Shen Jinrong available below.

First Image: Mattz90/Shutterstock.com

Copyright 2018 Fred L. Abrams

Searching for an adversary’s hidden assets can be like tracking a shell-game-operator.  In USA v. Khalili for instance, Mr. Dan Farhad Khalili was accused of hiding assets & undeclared revenue from the IRS for 15 years at 5 offshore banks. The offshore banks were located in Switzerland & Israel. Although on 4/27/11 Mr. Khalili applied for the IRS’ Voluntary Disclosure Program, the IRS found him ineligible for it. Mr. Khalili ultimately pleaded guilty to failing to file U.S. Department of Treasury Reports of Foreign Bank & Financial Accounts. On 4/25/17 Mr. Khalili was sentenced to 1 year & 1 day of prison. When you search for assets hidden through sophisticated schemes similar to the one Mr. Khalili was accused of, it may help to keep 3 goals in mind. These goals are to detect the paper trails, look for compartmentalization & seek transparency.

I. Detect The Paper Trails

One way your adversary may hide the paper trail of an offshore bank account is to open an offshore post office box. Your adversary could then have the offshore bank send monthly bank account statements & other documents to the offshore post office box. By maintaining these banking documents offshore, your adversary reduces the risk that you; domestic tax authorities; or anyone else; will detect the secret offshore bank account.

II. Look For Compartmentalization

A former intelligence officer I knew kept 1 cellular phone for incoming calls & another for outgoing calls. By compartmentalizing incoming & outgoing calls, the former intelligence officer was trying to hamper any investigation of his telephone toll records. Your adversary may compartmentalize his/her financial activities in a scheme to hide assets from you. For more information read my post “Compartmentalization & An Asset Search.”

III. Seek Transparency

By eliminating paper trails & compartmentalizing, your adversary can make his/her financial activities nontransparent. Your adversary can also make financial activities nontransparent via: fraudulent asset transfers; bulk-cash smuggling; art assets & cultural heritage property; diamonds or other portable valuable commodities; etc. These common concealment methods are outlined at “Red Flags For An Asset Search.”

Image: Brian A Jackson/Shutterstock.com

Copyright 2017 Fred L. Abrams

In the criminal case against Robert Bandfield, the IRS & SEC searched for assets laundered offshore. These assets were the proceeds of stock pump & dump schemes.  The illicit proceeds of the pump & dump schemes were more than $250 million. The $250 million was believed to be hidden by money laundering carried out by Mr. Robert Bandfield & his co-conspirators.

According to a 2/6/17 press release, Mr. Bandfield was the “architect of [an] offshore fraud haven.” Mr. Bandfield seems to have owned 2 nominee incorporation services, which established & sold shell companies. The 2 nominee incorporation services formed offshore shell companies believed to have helped launder the $250 million.

Red flags Mr. Bandfield & his co-conspirators allegedly hid the $250 million included their suspected misuse of:

After Mr. Bandfield’s 9/5/14 indictment by a grand jury sitting in Brooklyn, N.Y., Mr. Bandfiled was arrested on 9/9/14 at the airport in Miami, Florida. The indictment charged Mr. Bandfield & others with conspiracy to commit securities fraud; conspiracy to defraud the U.S. via tax fraud; & money laundering conspiracy. On 2/6/17 Mr. Bandfield was sentenced to 72 months imprisonment.  The sentence was based on Mr. Bandfield’s guilty plea to the money laundering conspiracy charged by his second superseding indictment available here.

Image: Olga Sabarova/Shutterstock.com

Copyright 2017-2018 Fred L. Abrams

A person who resides & is sued out of the U.S. may hide assets in the U.S. This person could hide assets by secretly: purchasing real estate in the U.S.; opening bank accounts in the U.S.; titling property in the names of shell companies formed in the U.S.; etc. How can you search for assets which are hidden in the U.S.? If the hidden assets are connected to a lawsuit outside the U.S., (& you are an interested person in this lawsuit), you might subpoena witnesses in the U.S.

You would try to collect evidence about the hidden assets by issuing subpoenas to witnesses who know about the assets. These witnesses can be: banks;  gatekeepers like lawyers & accountants; businesses which establish shell companies (i.e. nominee incorporation services); relatives of the person hiding assets; etc. You may apply for subpoenas pursuant to 28 U.S.C. §1782 in the U.S. District Court which possesses personal jurisdiction over the witnesses; and as set forth at Fed.R.Civ.P. 45. At your application filed in the U.S. District Court, you would also show you need to subpoena the witnesses because of your lawsuit outside the U.S.

In the Ex-Parte Application of June Wu, Ms. Wu a Taiwanese national, sought permission from the U.S. District Court in Delaware to issue subpoenas under 28 U.S.C. §1782. Ms. Wu apparently deposited $3 million into a bank account in Taiwan for a prospective investment in the Delaware company Tagboard, Inc.  Ms. Wu’s $3 million was then allegedly embezzled out of Taiwan & supposedly transferred to Tagboard, Inc’s bank account in the U.S. At its 9/13/17 Order, the U.S. District Court authorized Ms. Wu’s attorney to serve subpoenas about the $3 million.  The Order permits Ms. Wu’s attorney to elicit evidence by using subpoenas including this one:

(Click On The Image To View The Complete Subpoena)

Image of Map: Thitirat J13/Shutterstock.com