The September 2009 Asset Search Blog article “Money Laundering By Minneapolis Money Managers?”, raised the issue of whether Associated Bank had violated federal anti-money laundering regulations.  This article discussed whether an account opened at Associated Bank in the name of Crown Forex, LLC, had been used to launder Ponzi scheme proceeds.  It pointed out that U.S. financial institutions like Associated Bank were obligated to verify a customer’s identity and follow a written Customer Identification Program.

The receiver trying to recover assets lost to Trevor Cook’s Ponzi scheme has now filed a complaint against Associated Bank over this same Crown Forex, LLC account.  The complaint available below alleges “Associated Bank knowingly aided and abetted one of the largest Ponzi schemes in Minnesota’s history.”  Complaint, p. 8¶ 13.  The complaint seeks damages for causes of action sounding in fraud, breach of fiduciary duty, conversion and false representations.

It claims at p. 9 ¶13 & p. 24 ¶48, that Associated Bank ignored “red flags” related to the Crown Forex, LLC account.  The complaint’s exhibits also include the January 15, 2010 affidavit of Lien Edward Sarles, a former Associated Bank employee.  The affidavit basically alleges that Associated Bank failed to follow the required customer verification procedures, at the time the Crown Forex account was opened.

As mentioned at “Using Red Flags To Recover Ponzi Proceeds“, suing financial institutions in the aftermath of a Ponzi scheme is nothing new.  These lawsuits sometimes assert that a financial institution negligently or recklessly permitted Ponzi schemers to launder illicit proceeds through a financial account.

  (Click On The Image To View The Receiver’s Redacted Complaint) 

Copyright 2013 Fred L. Abrams

A StarTribune article says that Trevor Cook’s currency program fraud was the second-largest Ponzi scheme in Minnesota history. The article too mentions that prosecutors have accused one of the scheme’s participants, Gerald Durand, of a murder-for-insurance plot.  The suspected plot surfaced at the “Government’s Motion For An Evidentiary Hearing Regarding Durand“, filed December 26, 2012 in U.S.A. v. Beckman, et al., U.S. District Court, District of Minnesota, Index No. 11-cr-00228.  As more fully set forth by a December 27th court filing, Mr. Durand’s defense counsel calls the murder plot “imagined” and claims “…the government, at the eleventh hour, has its snitch cry bloody murder.”

Meanwhile, the court-appointed receiver tasked with recovering Trevor Cook’s Ponzi scheme proceeds, published statistics about the scheme’s 724 damaged investors.   The statistics are accompanied by a graph, adding insight into the demographics of the damaged investors:

Chart Courtesy of: The Cook, Kiley & Beckman Receiverships

Copyright 2013 Fred L. Abrams

A whistleblower claim against Deutsche Bank and HSBC’s settlement with U.S. Treasury:

  • At “Human Intelligence & The SEC’s Whistleblower Program”, Labaton & Sucharow partner Jordan A. Thomas examines the critical role whistleblower tips will have in the SEC’s detection of fraudsters / recovery of assets.  One example of the foregoing might be the whistleblower tip of former Deutsche Bank risk analyst, Dr. Eric Ben-Artzi.  Mr. Thomas represents Ben-Artzi and a press release reveals that Ben-Artzi claims there were multi-billion dollar securities law violations at Deutsche Bank.  The article “Did Deutsche Bank Fraudulently Hide Huge Losses?“, also reports on Ben-Artzi’s SEC whistleblower tip.
  • The U.S. Treasury Department announced its largest collective settlement ever, $875 million dollars to be paid by HSBC, which has approximately $194 billion in assets and 300 branches.   This settlement resolves charges that HSBC had lapses in its anti-money laundering program and failed to place controls on foreign correspondent accounts.  An assessment of civil damages outlines the charges that were leveled against HSBC:
(Click On The Image To Read The Entire Assessment of Damages)

Copyright 2012 Fred L. Abrams

The ACAMS / MoneyLaundering.com article “FATF’s Focus on Asset Forfeiture Could Challenge Some Nations”, especially raises the issue of recovering corruption proceeds.  Near the end of this article, I am mentioned as saying that as part of their effort to crack down on corruption, Financial Action Task Force examiners may expect jurisdictions to track bribes paid by local companies to foreign governments:

FATF’s Focus on Asset Forfeitures Could Challenge Some Nations¹

October 31, 2012, By Brian Monroe

An intergovernmental group’s revised expectations of how countries should seize looted assets may prove difficult to meet, and could lower the mutual evaluation scores nations receive for their anti-money laundering controls.

Earlier this month, the Paris-based Financial Action Task Force (FATF) outlined in guidance how jurisdictions should best assist one another with asset forfeitures, calling for the implementation of formal and informal mutual legal assistance arrangements and the creation of specialized units to expedite responses to intergovernmental inquiries.

How willingly nations cooperate with one another will be an important factor in how FATF evaluates their anti-money laundering (AML) and counterterrorism financing regimes going forward, according to an individual familiar with high-level discussions within the intergovernmental group.

“Asset confiscation and recovery is a very important objective and an indicator of the success of the overall regime,” said the person, who asked not to be named. The issue is linked to FATF’s increased focus on fighting corruption, the individual said.

In February, individuals involved in FATF talks told ACAMS MoneyLaundering.com that the group was revising how it scored regimes to emphasize efficacy, and would consider forfeiture sizes, conviction rates and other factors. The shift follows FATF’s decision to streamline its AML and counterterrorism financing standards earlier this year.

As part of that effort, the group plans to grade countries on both technical compliance and how effectively they implement financial crime controls, including asset forfeitures, sources said this month. The two separate grades will be combined in an overall score included as part of each mutual evaluation.

But meeting FATF’s asset forfeiture standard, as outlined in its Oct. 19 best practices, will be challenging for nations of all stripes, according to Tom Lasich, a former head of training at the Switzerland-based International Centre for Asset Recovery and a former Internal Revenue Service criminal investigator.

Continue Reading Recovering Assets By Cracking Down On Corruption Proceeds

This Asset Search News Roundup reports on Michael and Linda Mastro’s supposed concealment of two diamond rings-

The October 25, 2012 indictment of Michael Mastro and his wife Linda, alleges violations of money laundering and bankruptcy fraud laws.  Among other things, the indictment accuses the Mastros of fraudulently hiding portable valuable commodities, such as a platinum ring with a 27.80 carat pear shape diamond and one 14 karat white gold ring with a 15.93 carat round diamond.

These rings might have been parked offshore, as suggested by “Mastros’ $1.4M diamonds now reportedly in France.”  According to page 15, ¶44 of the October 25th indictment, Linda Mastro falsely testified during her March 24, 2010 deposition, about the whereabouts of the rings.  At the deposition, Linda Mastro stated she brought the rings to Italy on or about November 2009.  As page 33, lines 15-25 of the deposition transcript show, Linda Mastro too asserted she could not recall if she left the rings in Italy:

(Click Above To Read The Entire Deposition Transcript)

Copyright 2012 Fred L. Abrams

When analyzing the secret transfer of Nazi-looted art to museums and private collections, one may detect the use of multiple jurisdictions, nominees, forgeries or other common concealment methods.

In some cases, these concealment methods are jointly employed to launder the title of looted artwork, similar to the way that illicit funds may be laundered.  Furthermore, because more than 20% of Europe’s art is believed to have been looted by the Nazis during WWII, countless cases exist which can be studied.

There are of course a wide variety of other situations in which assets are secretly transferred by way of concealment methods like multiple jurisdictions, nominees, etc.  The 2007 National Money Laundering Strategy published by U.S. authorities, describes businesses known as “nominee incorporation services”.  Page 64 of the 2007 Money Laundering Strategy, indicates that nominee incorporation services can help their clients open U.S. bank accounts and form U.S. shell companies with anonymity.

By forming these shell companies and opening bank accounts, the nominee incorporation services are thought to have helped launder or secretly transfer as much as $36 billion annually, just from the former Soviet Union alone.

Copyright 2012 Fred L. Abrams

Recovering corruption proceeds and related issues:

  1. At a news release, the Organisation for Economic Co-operation and Development notes that in twelve years, French authorities had just five convictions in cases arising out of the bribery of foreign officials.  The news release claims that French authorities have a “lacklustre response” to cases involving actual or alleged foreign bribery.
  2. The Role of Financial Intelligence Units in Fighting Corruption and Recovering Stolen Assets is a white paper provided by The Egmont Group of financial intelligence units.  It mentions how government authorities may detect corruption proceeds because  of tips / suspicious activity reports, supplied by financial institutions.  Page 13 of the paper reveals how illicit assets from a politician’s extortion scheme were uncovered as a result of suspicious activity reports, (i.e “SARs”), generated by three  banks:

 

Copyright 2012 Fred L. Abrams

Using whistleblower tips is sometimes the only practical way to uncover assets hidden by determined criminals and others.  The reward programs offered by the IRS and SEC recognize this.  As I note at the end of this October 3rd Reuters article, whistleblowers may sometimes hit a home run and collect a plentiful bounty.  There are, however, those who encounter enormous dangers because they blow the whistle.

LGT Group whistleblower Heinrich Kieber, for example, is in a witness protection program courtesy of German authorities.  Time.com’s August 2011 article, reports that “some say he has a $10,000 million bounty of his head.”  Then there is the pending matter of former HSBC employee Herve Falciani.  An August 31st Businessweek article indicates that the suspected theft of HSBC bank account records by Mr. Falciani, is one reason profits may have declined at HSBC’s Swiss Private Bank.

The article quotes HSBC’s chief executive as saying “[t]he Swiss unit has suffered ‘reputational and financial damage’ since Herve Falciani, a former software technician in Geneva, stole details on 24,000 accounts.”  The July 8, 2010 Wall Street Journal article “Mass Leak of Client Data Rattles Swiss Banking” meanwhile, suggests that Mr. Falciani considered himself to be a whistleblower.  According to the article, Mr. Falciani claimed he ‘acted liked a citizen’ and that he acquired the HSBC records “to expose secrecy in banking practices.”

These HSBC records ended up in the hands of tax authorities across the globe who are trying to detect any tax cheats with assets hidden in the HSBC Swiss accounts.  Mr. Falciani was reportedly arrested in Barcelona, Spain in July, at the request of Swiss authorities.  Reuters reported that Mr. Falciani faced extradition to Switzerland on charges that he violated Swiss bank secrecy law, because of his alleged theft of the HSBC records.  It additionally reported that a banker is thought to have recently been arrested for the separate suspected theft of Julius Baer Swiss bank account records.  The banker may have sold these confidential records to tax investigators from the German state of North-Rhine Westphalia.

Copyright 2012 Fred L. Abrams

The name of a whistleblower is reportedly leaked and concealing assets in Luxembourg:

  • A press release and “Ex-IRS examiner charged with naming whistleblower ” refer to the criminal complaint against Dennis Lerner of Edgewater, N.J.  Mr. Lerner is accused of violating 26 U.S.C. § 7213 (Unauthorized disclosure of information), 18 U.S.C. §§ 207 (Restrictions on former officers, employees, etc.) & 208 (Acts affecting a personal financial interest).  The Court’s docket report reveals that Mr. Lerner was arrested and would be released from custody by way of a $300,000 personal recognizance bond.
  • As a haven for concealing assets, Luxembourg has few rivals.  Some of Bernard Madoff’s Ponzi scheme proceeds or other assets were hidden in Luxembourg.  The ex-president of Guatemala, Alfonso Portillo, is thought to have similarly laundered corruption proceeds through offshore accounts in Luxembourg and elsewhere.  Former Manhattan District Attorney Robert M. Morgenthau also mentioned Luxembourg at his  May 5, 2012 op-ed piece.  At the piece, Mr. Morgenthau too stated: “When I was the Manhattan district attorney, we learned of offshore accounts only through whistle-blowers, cooperators and serendipity.”

Copyright 2012 Fred L. Abrams

As demonstrated by the $104 million dollar IRS award to UBS Swiss bank whistleblower Bradley Birkenfeld, one may hit a home run by blowing the whistle.  Some however, face criminal charges or other extraordinary difficulties because of their whistleblowing.

The New York City Bar Association seminar “The Ins & Outs Of Recovering Assets Via Whistleblowers & Other Tipsters”, discusses these kinds of issues.  It analyzes the dangers some whistleblowers brave, the reward programs offered by the IRS and SEC and the use of whistleblower tips.

The seminar will take place on September 27, 2012 from 6:00 – 9:00 PM, at The New York City Bar Association, 42 West 44th Street in Manhattan.  It will also be broadcast live on the Internet and to register for it, contact the City Bar Center For CLE,  212.382.6663 or visit: https://www.nycbar.org/CLE/pdf/09_12/092712_web.pdf.

An e-mail flyer¹ about this event, was published last week:

CITY BAR CENTER FOR CLE

 

 

 

 

Dear City Bar for CLE:

Last Thursday’s Wall Street Journal article Swiss Prosecutors Probe Julius Baer Data Theft, is about the investigation into the supposed sale of stolen Swiss bank account records to German authorities. The German authorities allegedly purchased these records to crack down on tax evaders who could have hidden assets in the Swiss accounts. Media reports like this, about hidden assets and detecting money in offshore bank accounts, continue to make headline news.

Our new seminar The Ins & Outs of Recovering Assets via Whistleblowers & Other Tipsters scheduled for Thursday, September 27, 2012 from 6:00 p.m. to 9:00 p.m., addresses such issues. It explains how assets can be hidden in cases ranging from tax to securities fraud to divorce. The seminar examines ways whistleblowers are sometimes used to detect and interdict these assets. It discusses the IRS Whistleblower Program, the new SEC Whistleblower program and some relevant Dodd-Frank whistleblower provisions. The seminar’s speakers will additionally address the ethical obligation attorneys have to advise a whistleblower client, about the risks of blowing the whistle.

One of these speakers is attorney Jack Blum. Mr. Blum served as associate counsel, or assistant counsel, or special counsel to three U.S. Senate committees or subcommittees; and been quoted by or mentioned in thousands of newspaper and magazine articles around the world. He was also an expert witness for the U.S. Department of Justice and the Internal Revenue Service.

His select clients include Heinrich Kieber, who blew the whistle on customers with offshore accounts at Liechtenstein’s private bank, the LGT Group. Mr. Kieber sold his whistleblowing tips to the German government, which used them to track suspected tax cheats. Although the German government placed Mr. Kieber in a witness protection program, Liechtenstein authorities seek his arrest for data theft / the alleged sale of the LGT Group account information.

Another speaker at the seminar will be Jordan A. Thomas. Mr. Thomas is a former U.S. Department of Justice trial attorney and an assistant director in the Enforcement Division of the SEC. At the Commission, he had a leadership role in the development of the new SEC Whistleblower Program including drafting the proposed whistleblower legislation and briefing House and Senate staffs on it.

At the SEC, he was also assigned to many of its highest-profile matters including Enron, Fannie Mae, UBS and Citigroup. The cases he supervised, investigated and prosecuted resulted in monetary relief for damaged investors, in excess of $35 billion. He is now a partner and chair of the Whistleblower Representation Practice at Labaton Sucharow LLP.

The chair of the September 27th seminar is attorney Fred L. Abrams. He publishes The Asset Search Blog via the Internet. It discusses legal strategies for recovering assets hidden by determined criminals and others. In describing the seminar, Abrams explained: Since Mr. Blum and Mr. Thomas have been at the forefront of some of the leading cases and legislation in this field, the seminar gives a glimpse of the real-life consequences of blowing the whistle. For more information or to register for the program, please click here.

This program will be held at the New York City Bar, 42 West 44th St. New York, NY, 10036. The City Bar Center for CLE is an accredited provider in the States of New York, California, Illinois, New Jersey and Pennsylvania! We encourage you to register online now, or by phone at 212-382-6663.
Don’t miss your chance to attend this very informative program.

Sincerely,

/s/ Michelle Schwartz-Clement

Director, City Bar Center for CLE

www.nycbar.org/cle

 

¹E-mail flyer reprinted with permission of The New York City Bar Association.