In 2010, German customs police discovered that Mr. Cornelius Gurlitt had travelled by train from Zurich to Munich with a large sum of cash.  A subsequent investigation revealed that Mr. Gurlitt reportedly failed to file tax returns.  Since Mr. Gurlitt was suspected of a possible tax fraud, a search warrant for his Munich apartment was issued.  Reuters, the Daily Mail, and The Economist explained that during the execution of the search warrant, approximately 1400 paintings were discovered stashed in the apartment.

As Germany Says 590 Artworks in Munich Haul May Be Nazi Loot suggests, some of these paintings will be the subjects of Holocaust-era art restitution claims filed by the heirs of Jewish art collectors.  Raymond Dowd, Esq. handles these kinds of claims.  Mr. Dowd tried Bakalar v. Vavra, Index No. 05-CV-3037 (S.D.N.Y.), the first Nazi-era art case ever to go to trial in federal court.  He also lectured widely on Nazi-era art restitution cases, including at Yad Vashem, Jerusalem, Israel; the Jewish Museum, Berlin, Germany; The Prague Conference on Holocaust-Era Assets, Czech Republic; the New York State Bar Association and the Association of the Bar of the City of New York.

Continue Reading Stashed Paintings Bring Issue Of Art Restitution To The Forefront

My October 24th post “Concealing Monies In A Cayman Islands Bank Account”, supplied the fact pattern of a divorcing husband hiding funds offshore.  That divorcing husband hid assets by putting a lawyer and other elements to work.  The following money laundering typology ¹ similarly analyzes a scheme thought to have been facilitated by a lawyer:

¹Money Laundering Typology Courtesy of The Egmont Group of Financial Intelligence Units

Copyright 2013 Fred L. Abrams

This is the second post in the “Divorce & Hidden Money” series:

A divorcing spouse may combine a number of elements in one scheme to hide marital assets.  Bearer shares can be one of these elements, as more fully set forth at my post Bearer Shares & An Asset Search.  Bearer shares are negotiable instruments that for example, give their possessor ownership rights in a business entity.

There is no central registry of ownership for the bearer shares and the name of their owner does not appear on the face of the bearer share certificate.  Among other things, the bearer shares permit an individual to secretly own a shell company and use it to open bank accounts with complete anonymity.  The divorcing husband the subject of Bearer Shares & An Asset Search, had secreted millions in a Cayman Islands bank account maintained by a Panamanian shell company.

The Panamanian shell company  was controlled by the divorcing husband and his business partners.  As the diagram from Bearer Shares &  An Asset Search depicts, the divorcing husband  hid millions by combining elements consisting of a Cayman Islands bank account, a Panamanian shell company owned via bearer shares and a lawyer who secreted the husband’s bearer shares in a stock custody account:

How can a divorcing wife or husband uncover a concealment scheme combining a number of elements?  These schemes can sometimes be detected through the use of civil law tools, financial investigators, etc., as described by my post A Primer For Gathering Financial Intelligence.

Copyright 2013 Fred L Abrams

This is the first post in the “Divorce & Hidden Money” series:

During ultra-high net worth divorces, one party can conceal vast sums of money from the other by going offshore.  Stated differently, divorcing spouses may hide their wealth by utilizing cross-border elements, as money launderers do.   The Financial Action Task Force mentions these elements at a F.A.Q. webpage which says “[l]arge-scale money laundering schemes invariably contain cross-border elements.”

Cross-border elements can include foreign bank accounts and nominees.  Expensive stamp or coin collections, fine art and antiquities are sometimes secretly purchased offshore or transferred there.  Valuable real estate bought in a foreign jurisdiction might also be possessed with anonymity by titling it in the name of a paramour or other intermediary.  In anticipation of a divorce, yachts, airplanes, luxury automobiles, diamonds and jewelry may too be hidden offshore.

Foreign trusts or foundations, shell companies, sham loans, fraudulent conveyances and offshore credit or debit cards, can also play roles in these cross-border schemes.  The article Hiding Millions From Your Ex Gets Harder, Thanks To Offshore Tax Crackdown discussed the suspected use of offshore elements by a divorcing husband, Alaskan plastic surgeon Michael D. Brandner.  At the time of his divorce, Dr. Brandner may have parked assets in Central America to hide them from his wife of 28 years.

Among other things, Dr. Brandner could have used a shell company to open a secret bank account.  He too might have converted over $3 million into five cashier’s checks and then secretly transferred these funds to Central America.  If guilty of the wire fraud charges he faces, Dr. Brandner could be sentenced to 20 years of prison and fined $250,000.  The case pending against Dr. Brandner is known as USA v. Brandner, United States District Court for the District of Alaska, Index No. 13-cr-00103.  Prosecutors in the case are also seeking asset forfeiture.   To read Dr. Brandner’s First Superseding indictment, click here.

Copyright 2013-2018 Fred L. Abrams

Google finance says that since 1993, Mr. Ty Warner’s company Ty Inc. “produced more than 370 different Beanie Babies with colorful names such as Feder Bear (current) and Cheeks the baboon (retired).”  Google finance reveals that Mr. Warner creator of the Beanie Babies, parlayed his profits into his purchase of a half-dozen luxury hotels.  Mr. Warner is a billionaire, with a net worth of 2.6 billion as of September 13th.

As outlined by a press release and his criminal information, Mr. Warner was accused of utilizing Swiss bank accounts to hide undeclared revenue from the IRS.  At his arraignment hearing last Wednesday, Mr. Warner pleaded guilty to tax fraud.  The Chicago Tribune reported that Mr. Warner told the judge at the hearing ‘I apologize for my conduct. It’s a terrible way to meet you’.  

An October 2, 2013 plea agreement reveals that Mr. Warner participated in an abusive offshore tax avoidance scheme.  To read Mr. Warner’s plea agreement, click on the image below:

Continue Reading Beanie Babies Tycoon Hid Cash In Secret Swiss Bank Accounts

Throughout its five seasons, Breaking Bad highlighted the ways narco-trafficker Walter White and his co-conspirators hid the illicit proceeds of their made-for-TV crimes.  Breaking Bad could even be considered a case study of how determined criminals and others hide assets.  For example, at Problem Dog, Season 4, Episode 7, Walter and his wife Skyler faced the dilemma of trying to conceal $7 million in drug profits, by laundering it through their A1A Car Wash.

During Mandala, Season 2, Episode 11, Skyler’s boss Ted Beneke admitted to hiding nearly $1 million in undeclared revenue from the IRS.  In furtherance of this tax fraud, Ted had cooked the books of his company, Beneke Fabricators.  At Caballo Sin Nombre, Season 3, Episode 2,  Walter’s partner Jesse Pinkman seemingly washed $400,000 through the cash purchase of his parent’s home.  In Gliding Over All, Season 5, Episode 8, Skyler disclosed she rented a storage unit to conceal a hoard of cash.  At the end of Crawl Space, Season 4, Episode 11, Walter was also shown next to some illicit cash he had earlier secreted beneath his house:

Continue Reading How Walter White Could Take His Money To A Swiss Bank

The very last paragraph of my post Fighting Financial Fraud At UK Banks, featured a former vice-president of a global bank who indicated: “there was little standing in the way of a determined criminal because of the ‘complicity or misfeasance’ of many banks and the use of nominees to open bank accounts.”

I believe that little has changed since Fighting Financial Fraud At UK Banks was published in 2007.  Nominees, (i.e. intermediaries), are still often employed to stash cash in foreign bank accounts or to otherwise hide assets.  USA v. Fredrick, et al., Index No. 13-cr-00072 might be an example of such a case.  The Wall Street Journal reported about Fredrick, at U.S. Alleges Two Doctors Hid Millions in Assets Offshore.

A U.S. Department of Justice May 16, 2013 press release also discussed Fredrick.  This press release described a suspected tax fraud allegedly facilitated by the use of undeclared foreign bank accounts and nominee entities.  The Fredrick indictment mentioned the supposed nominee entities and Swiss and other foreign banks:

(To Read The Indictment Click Below)

Copyright 2013 Fred L. Abrams

Seizing mob assets and tipping the SEC:

  1. The article “Mafia hurt by asset seizures but still too strong to beat” suggests that Italian asset forfeiture laws are critically important in fighting the Italian mob.  The article quotes a magistrate in Naples who “told Reuters the confiscation of assets was a vital weapon, ‘more important even than the arrest and conviction of bosses,’ because of its visible impact in challenging mafia power.”
  2. “No End In Sight For Decade-Long Conn. Divorce Case” discusses Ms. Karen Kaiser and her ex-husband David Zilkha.  Ms. Kaiser gathered copies of e-mails from the couple’s home computer and these e-mails were eventually supplied as a tip to the SEC.  The e-mails allegedly help show that Mr. Zilkha had provided nonpublic information about Microsoft Corporation, to Pequot Capital Management, Inc. and Pequot’s founder, Arthur Samberg.  A 2010 news release explained that the SEC ultimately filed a complaint against Pequot and Samberg, for alleged insider trading.  The SEC also brought a related proceeding against Mr. Zilkha.  For their assistance with the underlying SEC insider trading investigation, Ms. Kaiser and her current husband received a $1 million dollar SEC whistleblower reward in 2010.

Copyright 2013 Fred L. Abrams

As a DEA Special Agent, Donnie worked in Bolivia, Puerto Rico and Peru.  He had also been a liaison with the Mexican Federal Judicial Police.  After retiring from the DEA, Donnie taught Iraqi border policeman a variety of things, including how to detect cash and drugs hidden through smuggling.  Through his work, Donnie became highly skilled at following money trails in order to interdict illicit drugs and other assets.

At the August 16, 2013 “Asset Search News Roundup”,  Donnie discussed a Mexican court’s release of drug kingpin Rafael Caro Quintero.  Rafael Caro Quintero is accused of participating in the heinous murder of DEA Special Agent Enrique “Kiki” Camarena.  At the August 16th Roundup, Donnie disclosed he became a DEA Special Agent because Kiki had been one.  I asked Donnie how governmental authorities could best try to dismantle the drug cartels and prevent tragedies like Kiki’s murder.  Donnie’s answer highlights the role asset forfeiture has in combating the drug cartels:

Besides subjecting drug kingpins and other cartel members to the death penalty or other stiff sentences, asset forfeiture can help dismantle the drug cartels. The cartels launder their illicit drug proceeds by employing: foreign bank accounts; money mules who smuggle bulk cash; shell companies; diamonds or other valuable commodities; lawyers; bankers; and other middleman willing to assist them. The cartels also wash criminal proceeds by commingling them with legitimate funds from existing businesses.  They can hide their illicit proceeds by purchasing valuable property ranging from real estate to expensive automobiles.

When tens of millions of dollars are smuggled across international borders, this smuggling is usually on behalf of a drug cartel or other organized crime. Through wire taps, informants, surveillance, search warrants, etc., a drug cartel’s illicit funds or other illicit proceeds may be detected.  These proceeds can then be seized and forfeited under U.S. or other laws.  Infighting typically occurs at a drug cartel after law enforcement seizes a large amount of drugs or other cartel property. One hopes that enough cartel property can repeatedly be interdicted to the point that this infighting increases and the cartel ceases its normal operations.

Copyright 2013-2018 Fred L. Abrams

A low-cost asset search; two ex-JP Morgan bankers accused of concealing trading losses; and Rafael Caro Quintero:

Although Caro Quintero was earlier sentenced to 40 years of prison for the heinous 1985 murder of DEA agent Enrique “Kiki” Camarena, a Mexico appellate court released Caro Quintero early. “Mexico seeks to detain recently released drug lord Rafael Caro Quintero” meanwhile, mentions that the Mexican attorney general issued a warrant for the provisional detention of Caro Quintero.  The attorney general did this in anticipation of a formal extradition request from the U.S.  I asked Donnie the former DEA agent to comment on these events and he said:

“Kiki and I went to the same high school and I knew his sisters well.  Kiki was one of the reasons I joined the DEA.  This situation is outrageous and Kiki’s murder should not have happened.  There will never be a closure.  I hope they extradite Caro Quintero to the U.S. and the Mexican Government soon opens its eyes.”

Link Chart: OFAC

Copyright 2013 Fred L. Abrams