Suspected Ponzi schemer Allen Stanford may have facilitated one of the largest financial frauds known to date.  Any receivers, investors or other stakeholders with claims against Mr. Stanford under bankruptcy or other laws, are of course trying to interdict Stanford’s assets.  As I mentioned in my "March 25, 2009 Asset Search News Roundup", these competing interests of numerous stakeholders / plaintiffs can be a significant problem. 

Some of these problems are highlighted by S.E.C. receiver Ralph Janvey’s April 23, 2009 Report in S.E.C. v. Stanford International Bank Ltd et. al., Index No.: 3-09-CV-0298.  The April 23rd Report explains that receiver Janvey lacked standing to intervene in proceedings related to Mr. Stanford’s assets in Antigua, according to the Antiguan Court.  (Report of the Receiver, dated April 23, 2009, at page 19).  The report also stated that despite an April 1, 2009 meeting, there was no "concrete cooperation agreement" between receiver Janvey and Antiguan liquidators searching for Stanford’s assets. 

As was also reported, Mr. Stanford seeks to disqualify opposing counsel Baker Botts L.L.P. — which is one of the law firms working for receiver Janvey.  Through his motion and / or accompanying brief, Mr. Stanford claimed that Baker Botts was his attorney and that it set up the very business entities / bank involved in Stanford’s alleged fraud. (Accompanying Brief, at pp. 2-4).  Mr. Stanford additionally argued that Baker Botts: "turn[ed] on its former client to dismantle and disembowel the very corporate structures and product lines the law firm created, likely using privileged information in the process.  (Id. at p. 4).

Adding to the above-mentioned complexities, is the fact that about 400 individuals or entities, (possibly defrauded out of more than $100 million by Mr. Stanford), had earlier filed their own intervenor motion and supporting paper, in S.E.C. v. Stanford International Bank Ltd. et. al.  Difficulties caused by competing interests in a different fraud case, are described by my local Swiss counsel in: "Forced Collections Against A Fraudster Like Madoff".

Copyright 2009 Fred L. Abrams

Have the methods mentioned at “Asset Search Indicia For Divorce, Debt Collection & Bankruptcy“, been used to hide assets during a financial fraud?  Are there any red flags that assets are being fraudulently concealed?  Finding answers to these questions can be critically important if you are trying to recover: marital assets; probate assets; bankruptcy estate assets, business assets; trust assets; receivership assets, etc.

In some cases, a beneficial owner may conceal his / her assets in schemes as basic as fraudulently conveying an automobile to a friend or family member.  This and other simple schemes might possibly be detected by the kind of computer-based research mentioned at “A Low-Cost Asset Search“.  Identifying a beneficial owner’s hidden assets may however, ultimately require far more than just computer-based research.  This is true because some beneficial owners hide their assets by using a nominee or intermediary to secretly open bank accounts and to purchase real estate or other property.

Furthermore, asset concealment schemes sometimes utilize foreign bank accounts maintained in multiple jurisdictions.  Ponzi schemer Bernard Madoff for example, concealed assets by relying on foreign bank secrecy laws and laundering assets between banks in the U.S. and the U.K.   By using readily available asset protection services, determined criminals like Mr. Madoff can try to hide their assets in anticipation of a divorce, bankruptcy, or other legal matters.

An August 1, 2006 report on offshore tax haven abuses by the U.S. Senate Permanent Subcommittee on Investigations additionally recognizes that assets could be hidden with the help of  “lawyers, brokers, bankers, offshore service providers, and others“.  As U.S.A. Today indicated at its February 23, 2007 article, “Corporate owners hide assets, identities“, domestic shell companies can similarly be established in states like Nevada, Wyoming, and Delaware, in order to hide assets.

Depending on the circumstances, an asset search might also involve issues related to U.S. privacy or U.S. bank secrecy laws.  If assets have been fraudulently hidden, then criminal law violations may too have occurred, as suggested by “An Asset Search, Tax Fraud & Divorce“.  Besides seeking a criminal prosecution in such a situation, there could be a broad range of available legal remedies for recovering hidden assets and / or gathering legally sufficient evidence about them.

Copyright 2007-2015 Fred L. Abrams

A financial transfer through multiple jurisdictions which lacks any economic benefit, may especially be a red flag that assets have been hidden.  Although a variety of people sometimes use multiple jurisdictions to hide assets, this "Asset Search News Roundup" is about the front and / or shell companies reportedly used by the Fabio Enrique Ochoa Vasco drug trafficking network in Mexico, Colombia and the Caribbean.

According to a U.S. Treasury Department press release from yesterday, the Ochoa Vasco financial network includes the fifteen companies identified in the chart below.  Information about some other narco-traffickers can be found at: "Interdicting The Assets Of Mexico’s Narco-Traffickers".

   

Click On Chart To Enlarge

Chart: Office Of Foreign Assets Control, U.S. Treasury

Copyright 2009 Fred L. Abrams

Like diamonds, art can be used as a portable valuable commodity to illicitly transfer value to another jurisdiction.  The following seven Egyptian artifacts were for instance, stolen from the Bijbels Museum in Amsterdam on July 29, 2007 and then ultimately transferred to a New York City auction house:

The seven artifacts depicted above were however, recovered by U.S. Immigration and Customs Enforcement (“ICE”), according to a May 27 press release.  ICE recovered them by working with the New York office of the Art Loss Register.  ICE similarly worked with the Art Loss Register to interdict a Pompeii wall panel fresco on June 1.  In another case resolved by ICE on June 1, Corinthian pottery was recovered.  The fresco and pottery had been separately stolen in Italy and were then transferred to New York City.  Both items are respectively pictured below:

 

Images: U.S. Immigration and Customs Enforcement

Copyright 2009 Fred L. Abrams

My post "Asset Search & Fraud Investigation" mentions an August 1, 2006 report on offshore tax haven abuses. Pages six to seven of that 2006 report claimed that Quellos Group LLC hid $2 billion in capital gains from the IRS.  After the report was issued, Quellos was acquired by BlackRock Inc. on October 1, 2007.

I discuss Quellos in this "Asset Search News Roundup" because a Seattle federal grand jury has just indicted ex-Quellos chief Jeffrey I. Greenstein, attorney Charles Wilk, (who has a Master’s Degree in tax law), and tax attorney Matthew Krane.  As the New York Times and a June 4 Department of Justice press release explained, the indictment in U.S.A. v. Krane, et. al., Docket No. 2:08-cr-00296, arises out of a supposed tax fraud. 

If the allegations of the June 4, 2009 superseding indictment in Krane are true, then Mr. Greenstein, Mr. Wilk and Mr. Krane may have hidden assets by exploiting foreign bank secrecy laws .  The three might have also hidden assets by using multiple jurisdictions and a shell company.  These and some other asset concealment methods, are listed in "Asset Search Indicia For Divorce, Debt Collection & Bankruptcy".

Copyright 2009 Fred L. Abrams

Covered this week is news about a former small-town Florida sheriff who pleaded guilty to hiding illicit assets / stolen public monies.  The fact that tax authorities from across the globe are working together to uncover those concealing assets in abusive offshore tax avoidance schemes, is also discussed.

 Copyright 2009 Fred L. Abrams

Identity theft can play a role in white-collar crimes ranging from money laundering to tax fraud.  Perhaps most interesting are the schemes which share identity theft and money laundering as common elements, like the one mentioned at "A Tax Fraud & Identity Theft From Miami".  Identity theft and money laundering are similarly alleged to have occurred in the case of U.S.A. v. Renee Gill Pratt, et. al. Criminal No. 2:08-cr-00140. 

The May 22, 2009 superseding indictment in Pratt, alleges that former Louisiana state representative and New Orleans city councilwoman Renee Gill Pratt participated in a RICO criminal enterprise which misappropriated government funds and concealed assets.  Said superceding indictment contains a total of thirty-four counts alleging money laundering, aggravated identity theft and other crimes, as mentioned by an FBI press release.

Identity theft is of course, not just limited to cases involving money laundering.  In U.S.A. vs. Torrella et. al. 3:07-cr-05775 for example, data brokers Emilio and Brandy Torrella pleaded guilty on May 20, 2008 to violating 18 U.S.C. §1028A (aggravated identity theft), among other things.  As my post "Pretexting During An Asset Search" explained, the Torrellas were accused with private detectives, of illegally obtaining confidential information from the I.R.S., Social Security Administration, pharmacies, medical offices and various state labor departments. 

The Torrellas had violated people’s privacy rights and committed aggravated identity theft by making pretext calls, (i.e. eliciting information by using false identities / false pretenses in telephone calls).  They are now scheduled for sentencing before the Court on July 10, 2009. 

    

Copyright 2009 Fred L. Abrams  

I first mentioned abusive offshore tax avoidance schemes in my July 28, 2007 post "Asset Search vs. Offshore Asset Protection".  Issues related to these same schemes are the subject of this "Asset Search News Roundup":

+The March 26, 2009 "Statement from IRS Commissioner Doug Shulman on Offshore Income", indicates the federal government’s apparent willingness to provide relief to U.S. taxpayers involved in abusive offshore tax avoidance schemes.  The Commissioner’s Statement suggests that a U.S. taxpayer who makes a voluntary disclosure about assets hidden offshore, could be eligible for immunity from criminal prosecution.  Said Statement was also discussed in the Forbes.com article, "IRS Offers Deal To Offshore Evaders".

 

++A U.S. Department of Justice press release explains that Florida yacht broker Robert Moran is scheduled for sentencing on June 26, 2009 for his concealment of assets via an offshore tax fraud scheme.  According to his plea agreement, Mr. Moran hid assets through his nominee Panamanian corporation which maintained a foreign bank account at UBS Switzerland.  Mr. Moran specifically pleaded guilty to filing a false tax return in violation of 26 U.S.C. § 7206 (1), (perjury on a return / false statements).  26 U.S.C. § 7206 is just one of several federal statutes which may be related to a tax fraud investigation, as mentioned at "An Asset Search, Tax Fraud & Divorce".

 

++The May 22, 2009 article "A New Front In War On Offshore Tax Evasion?" describes the use of a John Doe summons by the Internal Revenue Service against credit card processor First Data Corporation.  John Doe summonses are provided for by 26 U.S.C. §7602 and can be used to investigate U.S. taxpayers suspected of hiding assets offshore.  The John Doe summons specifically aimed at First Data Corporation was authorized by the federal court’s April 15, 2009 Order.  The April 15 Order had been partly based on the thirty-four page supporting declaration of an Internal Revenue Agent with expertise in offshore investigations.

 

Copyright 2009 Fred L. Abrams

During an asset search, subpoenas or other court-related discovery can be used to access an adversary’s e-mail.  This access to electronically stored information like e-mail, may be authorized by Fed. R. Civ. P. 26 (a) (1) (A) (ii) & (b) (2) (B) and additional discovery rules, as is more fully set forth in my post "Computer Forensics & An Asset Search".  Besides using discovery rules to elicit evidence about an adversary’s e-mail account, e-mail is sometimes accessed in other ways. 

The divorcing wife in Gurevich v. Gurevich, Slip. Op. 29191(Sup. Ct. Kings County, May 5, 2009), had for example, somehow accessed her estranged husband’s e-mail stored in his e-mail account.  According to the wife, her husband’s e-mails implicated him in a scheme to hide his income via his former business associates and an accountant.  The wife also claimed that she had only gained access to the e-mail by using an authorized password provided by her husband. 

The husband meanwhile, alleged that the divorcing wife had acquired his e-mails through eavesdropping in violation of N.Y. Penal Law §250.05.  The Court however, ultimately found that the e-mails in Gurevich, had not been obtained via eavesdropping.  This was true because the wife did not intercept the stored e-mails while they had been in transit, as is contemplated by  N.Y. Penal Law §250.05. The Court therefore, ruled that N.Y. Civ. Prac. L & R. §4506, (which bars the use of evidence obtained from illegal eavesdropping), did not apply.

Separate from whether "stored" e-mails are subject to N.Y. Penal Law §250.05 and N.Y. Civ. Prac. L & R. § 4506, is the general issue of computer hacking.  If an adversary’s e-mail account is hacked as part of an asset search or otherwise, there could be a violation of 18 U.S.C. §1030 (Fraud and related activity in connection with computers), under some fact-patterns.  Examples of indictments alleging 18 U.S.C. §1030 violations can be found at my post "Computer Intrusions That Violate Privacy Laws".

(Edited January 1, 2010)

(Copyright 2009 Fred L. Abrams

The U.S. Securities and Exchange Commission could soon file a civil complaint against Countrywide co-founder Angelo Mozilo; the United Arab Emirates is reportedly boosting its anti-money laundering efforts; and the Estate of Dr. Max Stern recovers Nazi-looted art; are all mentioned in this "Asset Search News Roundup".

  1. Countrywide’s Angelo Mozilo may soon face civil proceedings for insider trading according to "SEC proposes suit versus Countrywide founder Mozilo".  Meanwhile, two Securities and Exchange Commission lawyers are under scrutiny for suspected insider trading and may face criminal charges, according to the Reuters’ article "SEC lawyers probed for insider trading".

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  2. Reuters also reported on May 14, 2009 that there are some new anti-money laundering / counter-terrorist financing efforts being pursued in the United Arab Emirates.  The May 14 Reuters’ article indicates among other things, that the United Arab Emirates requires the registration of hawala brokers.  Hawala however, can be abused by those hiding assets, as described by "Hiding Assets In Informal Banking Systems".

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  3. A May 6, 2009 press release, explains that U.S. Immigration and Customs Enforcement ("ICE"), turned over the 16th century Italian Baroque painting of "St. Jerome" to the executors and university beneficiaries of the Estate of Dr. Max Stern. The May 6, 2009 turnover occurred after art dealer Richard L. Feigen contacted authorities because he discovered that the "St. Jerome" painting displayed in his living room, was actually Nazi-looted art. 

    Publicity about the earlier recovery of the Holocaust-era painting "Portrait of a Musician Playing a Bagpipe", (on behalf of the Estate of Dr. Stern), had apparently caused Mr. Feigen to question the provenance for "St. Jerome".  Mr. Feigen contacted authorities when he specifically learned that "St. Jerome" had originally belonged to the late Dr. Stern.  Due to Nazi persecution, Dr. Stern’s painting had been forcibly sold in 1937 at Lempertz Auction House of Cologne, Germany.  The "St. Jerome" and "Bagpiper" paintings are respectively pictured below:

      

Copyright 2009 Fred L. Abrams