In Grosz v. The Museum of Modern Art, the plaintiffs allege that The Museum of Modern Art (MoMA") acquired three Holocaust-era paintings which had been stolen from expressionist and Dadist painter George Grosz.  These particular paintings have been possessed by MoMA since the 1940’s or 1950’s and are: "Republican Automatons", "Self-Portrait with a Model" and "Portrait of the Poet" a.k.a. The Poet Max Herrmann-Neisse.  The collective value of these paintings could be as much as $10 million, according to "German painter’s heirs suing MoMA". 

The complaint in Grosz alleges that George Grosz was the first artist designated as an ‘enemy of the state’ by the Nazis. (Complaint at p. 3 7).  Subsequent to their confiscation, some of his paintings had even been displayed in Munich at the Nazi’s infamous 1937 "Degenerate Art" exhibition.  The complaint also essentially claims that George Grosz had been the victim of both Nazi persecution and unscrupulous art dealers who had laundered the title of  "Republican Automatons", "Self-Portrait with a Model" and "Portrait of the Poet". (Id., at p. 6  13)  (paintings’ true beneficial ownership obscured by sham transfers, "multilayered" deceptions, etc.).

The complaint for example, alleges that Dutch art dealer Carel van Lier, had stolen Grosz’s "Self-Portrait with a Model" and "Republican Automatons" and had "sanitize[d]" (i.e. laundered) their title via a 1938 sham transfer to himself.  (Id., at p. 28 138 & p. 6 12).  The complaint similarly claims that "Portrait of a Poet" was stolen by the Nazis and then "flipped" to MoMA via N.Y. art dealer Curt Valentin.  (Id., at p.17 ¶76).  Allegations at page 13 ¶¶54 & 55 of the complaint also suggest that Mr. Valentin was possibly used by MoMA’s then vice president and director Alfred H. Barr, Jr., as the nominee purchaser of Nazi-looted art at Galerie Fischer in Lucerne, Switzerland in 1939. 

MoMA is next expected to file its response to the Grosz complaint by June 4, 2009.  As my post "Holocaust-Era Art Restitution Revisited" however recently indicated, Mr. Valentin had in fact transferred Nazi-looted art to MoMA.  A June 30, 1942 letter from MoMA to U.S. authorities additionally suggests that MoMA had an especially good relationship with Mr. Valentin.  In this letter, MoMA / Aflred H. Barr, Jr. asserted that Mr. Valentin was loyal to the U.S. and "devoted to democratic ideals": 

  

For An Enlargement, Click Here

Copyright 2009 Fred L. Abrams

(Last Edited October 10, 2009)

California financier Danny Pang, former small-town Florida Sheriff Morris and a 29-year-old Mexican national, all share in common the fact that they are accused of hiding assets.  As this "Asset Search News Roundup" explains, these individuals are suspected of hiding assets by either smurfing, money laundering, or smuggling cash.

Mr. Pang meanwhile, has separately had his assets frozen and is the subject of the civil complaint described by a Securities and Exchange Commission press release.  As a Reuters’ article and Wall Street Journal blog post both report, Mr. Pang is accused of  defrauding investors out of hundreds of millions during a Ponzi-like scheme.

 

  • An April 28, 2009 press release describes how U.S. Customs and Border Protection agents interdicted the nearly $400,000 dollars depicted below.  Said monies were discovered close to the U.S.-Mexican border at the San Clemente checkpoint in the rear panels of a Volkswagen Gulf.  The Volkswagen had been driven by a 29-year-old Mexican national suspected of bulk cash smuggling in violation of 31 U.S.C. §5332.  The issue of bulk cash smuggling is also raised by my post: "Smuggling Cash Across Iraq’s Border". 

  

Image: U.S. Customs and Border Protection

  Copyright 2009 Fred L. Abrams

"Germany Rejects Call for End to Restitution of Nazi-Looted Art" raises the issue of Holocaust-era art restitution.  The upcoming "Holocaust Era Assets Conference" in Prague on June 26-30 2009, will of course also deal with the very same thing. 

New York’s Museum of Modern Art meanwhile, filed a complaint along with The Solomon R. Guggenheim Museum over other Holocaust-era artwork, in Schoeps v. The Museum of Modern Art, et. al., Index No. 1-07-CV-11074. In Schoeps, the museums asserted their complaint for declaratory relief against the heir of the original owner of  the two Picassos, “Boy Leading a Horse” & “Le Moulin de la Galette”.  Based on the complaint, this particular heir had no valid claim to the Picassos, which the museums respectively possessed.  This was allegedly true because a February 8, 1935 German will mentioned that the Picassos’ original owner had given the PIcassos as a wedding gift to his wife in 1927. 

Mr. Schoeps contrarily asserted via his amended counterclaim attached hereto at part 1, part 2 & part 3, that the original Jewish owner had never actually made a 1927 gift of the Picassos.  The amended counterclaim alleged that the Nazi-era provenance of the Picassos was highly suspect.  As an heir of the Picasso’s original owner, Mr. Schoeps argued that he was entitled to restitution of the Picassos.  As a museum press release and Bloomberg.com however mentioned, the case was settled and Mr. Schoeps agreed to permit the two museums to keep the Picassos.

(Last edited October  21, 2010)

 Copyright 2009-2010 Fred L. Abrams

This "Asset Search News Roundup" is about the five directors of Aurelia Finance facing a Swiss criminal prosecution because of an alleged investment of $800 million in a Madoff feeder fund; the criminal conviction of / prospective asset forfeiture against the owner of Numero Uno supermarkets; and the billion dollars missing in the R. Allen Stanford case.

  

  • As a consequence of  today’s ruling by a Swiss magistrate, a criminal prosecution can now proceed against five directors of wealth manager Aurelia Finance.  Aurelia Finance allegedly lost $800 million in client monies by investing in a Madoff feeder fund, as more fully set forth in the article "Swiss judge allows charges in Madoff losses case".  That article also mentions that these directors of Aurelia Finance have had their assets frozen.   
  • George Torres was found guilty in California of fifty-five felony counts on April 21 according to a press release and his eleven Numero Uno supermarkets and other assets, are subject to asset forfeiture.  As is also described by the Los Angeles Times, Mr. Torres now faces up to life in prison for racketeering, solicitation of murder, bribery and other crimes.
  • Based on a Bloomberg.Com article, U.S. court-appointed receiver Ralph Janvey reported  that as much as $1 billion can not be located in connection with R. Allen Stanford’s suspected Ponzi scheme.  I last mentioned Mr. Janvey as part of my March 25, 2009 post.                      

Copyright 2009 Fred L. Abrams

Narco-traffickers who conduct their illicit activities across the U.S.-Mexican border may fall under the Foreign Narcotics Kingpin Designation Act (21 U.S.C. § 1901-1908, 8 U.S.C. § 1182) and Executive Order 12978 of October 21, 1995.  Assets are frozen under the Foreign Narcotics Kingpin Designation Act (“the Kingpin Act”), if they are subject to U.S. jurisdiction and belong to persons or entities designated as Specially Designated Narcotics Traffickers on the “Specially Designated Nationals and Blocked Persons” list.

This list was just changed on April 15, 2009 to reflect the Kingpin Act designation of the Mexican: Sinaloa drug cartel, Familia Michoacana and “Los Zetas”.  The Amezcua Contreras Organization of Mexico is also on the Specially Designated Nationals and Blocked Persons list and was put there as early as December 2000.  According to an October 2, 2008 press release, the Amezcua Contreras Organization supplied precursor materials for methamphetamine production

Like those discussed by the October 2nd press release, Zhenli Ye Gon was accused of providing precursor materials for the manufacture of methamphetamine.  As mentioned by my post “Forfeiture & The DEA’s Asset Search“, Ye Gon had been arrested in Maryland on July 23, 2007 on methamphetamine drug and money laundering charges.  He had hidden $207 million in his Mexico City residence until law enforcement interdicted it on March 20, 2007.  The discovery of these monies was the “[l]argest cash drug seizure the world has ever seen”, according to p. 166, Drug Enforcement Administration, 2003-2008.  Said $207 million is pictured below:

  Copyright 2009 Fred L. Abrams

Declaration systems are discussed in this "Asset Search News Roundup" because they can be used at border crossings to detect / search for illicit assets concealed by cash couriers or others.  The Financial Action Task Force’s "IX Special  Recommendation" even mentions that countries should use declaration systems against cash couriers to detect the physical cross-border movement of currency or bearer negotiable instruments. 

An important part of a declaration system at a border crossing can be the use of forms which require travelers to disclose their possession of currency or monetary instruments.  At its borders, Singapore requires some travelers to execute an NP727 form / "Physical Currency and Bearer Negotiable Instruments Report", as is more fully set forth by the Singapore Police.  Travelers crossing at U.S. borders similarly fill out FinCEN Form 105 / "Report of International Transportation of Currency or Monetary Instruments".  A traveler making a U.S. border crossing fills out this form to report that $10,000 or more in currency, (or monetary instruments), is being transported. 

A case involving a FinCEN Form 105 just arose at New York City’s JFK Airport about a week ago.  A traveler had arrived at the airport from Korea and then used his FinCEN Form 105 to indicate that he was carrying more than $10,000 dollars.  At a secondary baggage exam by U.S. Customs and Border Protection it was apparent that the traveler actually possessed two supposed $100,000 U.S. Gold Certificates like the one pictured at the Bureau of Engraving and Printing’s website.

              

Although $100,000 dollar Depression-era gold certificates had once been used by Federal Reserve Banks, they were never publicly circulated. The traveler’s two $100,000 Gold Certificates were therefore deemed counterfeit and seized by U.S. Customs and Border Protection.  Afterward, they were ultimately turned over to the U.S. Secret Service for further investigation.  As mentioned by an April 7, 2009 press release, the traveler lacked criminal intent and has not been criminally charged. 


Copyright 2009 Fred L. Abrams

My post "An Asset Search In Geneva" describes different ways one might search for or recover assets even when they are hidden in an offshore jurisdiction such as Switzerland.  Just as in the case of  assets hidden in a Swiss bank, a letter rogatory / legal assistance request could be used to elicit evidence about assets in a bank in the Netherlands. The attached copy of a legal assistance request, (changed for privacy reasons and filed in the District Court of Amsterdam), is one example. 

Along with using letters rogatory / legal assistance requests, an individual might also try to freeze assets concealed in the Netherlands.  Given the worldwide focus on Bernard Madoff’s Ponzi scheme, I asked local counsel in the Netherlands, the following hypothetical: How would a defrauded Madoff investor try to freeze Madoff assets, if any were hidden in the Netherlands?  Local counsel then explained that pursuant to Dutch civil law, an investor might freeze Madoff assets on the ground that there had been a contract with Mr. Madoff. 

If a defrauded investor had executed a New York contract to invest with Mr. Madoff, that investor could file the "main" legal action against Mr. Madoff, in New York.  Said investor might next bring a related legal action in the Netherlands to freeze any Madoff assets secreted there.  If an investor had however, made a contract with Mr. Madoff in the Netherlands, (or contracted with a resident of the Netherlands), then the "main" legal action to freeze assets, might be filed in the Netherlands.

Reproduced below are comments about the foregoing issues from various e-mails written by local counsel in the Netherlands:

 

"[I]t is in this case also possible to block / freeze assets in Holland according to Dutch (civil) law.  Theoretically an individual victim could start a procedure stating that he/she has a claim on the basis of the committed fraud by [Bernard Madoff]. A defrauded investor could also block / freeze assets found in Amsterdam; according to Dutch law.

 

[O]n the main procedure American/English [law] will be applicable such depending on the place where the contract was signed or the other party lives.  To start the main procedure in Holland (according to Dutch law) is only possible if the contract sees to a Dutch situation or if one of the parties lives in Holland.


It’s also possible that other parties intervene in this procedure; If other ‘interested parties’ intervene in a Dutch procedure it can affect the position of the [original] parties, because if the claim of the intervening parties is accepted by the Court, the value of the blocked assets has to be divided between all the parties."

 

Copyright 2009 Fred L. Abrams

The administrative complaint In The Matter of Fairfield Greenwich Advisors LLC and Fairfield Greenwich (Bermuda) Ltd., Docket 2009-0028, filed today in Massachusetts, is the topic of this "Asset Search Roundup".  As a review of today’s complaint reveals, Fairfield Greenwich Advisors LLC and Fairfield Greenwich (Bermuda) Ltd. are accused of being a feeder fund or conduit for the wrongful transfer of investor’s monies into Bernard Madoff’s Ponzi scheme.  The 110 page complaint filed by the Enforcement Section, Massachusetts Securities Division can be viewed, (without its exhibits), at: Complaint Part "1" and Complaint Part "2".

William Galvin, Secretary of the Commonwealth of Massachusetts discussed this same complaint during his interview this morning, as is depicted in the CNBC "Fairfield Greenwich Fraud" video.  In Secretary Galvin’s interview / video, he describes some of the specific allegations of the complaint.  Perhaps most important about "the Fairfield Greenwich Fraud" video was Secretary Galvin’s comment in it, that an asset recovery for Madoff investors "may require an international effort." 

A comprehensive effort to recover assets from a fraudster like Mr. Madoff will in my opinion, involve a variety of international legal issues.  In Mr. Madoff’s case there could be issues involving global asset forfeiture; mutual legal assistance treaties; letters rogatory or tax information exchange agreements.  Such issues could be highly relevant to an asset recovery effort targeting Mr. Madoff, since Mr. Madoff’s Ponzi scheme had cross-border elements.  Mr. Madoff’s Ponzi scheme for example, used bank accounts in New York and London to launder assets, as I mentioned in my "Asset Search News Roundup: March 17, 2009".  Meanwhile, "Madoff Trustee Locates Assets of $75 Million" reports that Mr. Madoff possesses $75 million in Gibraltar — which could be yet another cross-border element part of Mr. Madoff’s Ponzi scheme.   

Copyright 2009 Fred L. Abrams

Image: Steve Hillebrand / U.S. Fish and Wildlife Service

Investors who profited because of Allen B. Stanford’s suspected securities fraud / Ponzi scheme may face clawback lawsuits under the Bankruptcy Code, according to Bloomberg.Com’s "Stanford Receiver May Need a Decade to Pay Victims".  Investors who collected profits from Bernard Madoff’s Ponzi scheme could too face clawback because of litigation by Madoff trustee Irving Picard.

The articles "Madoff Victims May Have to Return Profits, Principal" and "Lessons For Madoff Investors From The Bayou Fund Ponzi Scheme" both mention the idea that Madoff investors could be subject to clawback under In re: Bayou Group LLC, et. al. 396 B.R. 810 (Bkrtcy S.D.N.Y. 2008) via its October 16, 2008 Decision.  Among other things, the October 16 Decision permitted clawback from some investors in a securities fraud, by applying 11 U.S.C. § 548 (a) (1) (A) and local N.Y. law regarding fraudulent transfers. 

The October 16 Decision viewed funds paid-out to investors before a Ponzi scheme was discovered, as presumptively fraudulent transfers. The Decision placed the burden on these particular investors to show that their funds were received in good faith and for value, as more fully set forth in the K & L Gates article: "The Madoff Dissolution: A Consideration of the Bayou Precedent and Possible Next Steps". 

Furthermore, "Madoff’s Investors Redemptions: Subject to Clawback", more recently asserted that Mr. Madoff’s guilty plea might especially expose investors to clawback litigation as Mr. Madoff’s plea demonstrates his actual intent to commit fraud.  This means that a clawback claim against an investor could be strengthened, as actual intent is one of the factors addressed by the Bayou Court’s October 16 Decision.

Finally, (as I mentioned at my September 4, 2009 "Asset Search News" Roundup"), the clawback complaints reproduced below have been filed by Madoff trustee Irving Picard against some former Madoff investors:

(Click On Each Image To View The Clawback Complaints)

 

Copyright 2009 Fred L. Abrams

(Edited October 11, 2009)

My last post "Forced Collections Against A Fraudster Like Madoff" mentioned the problem of numerous plaintiffs competing to recover assets from someone like Mr. Madoff.  This issue of "competing interests" during forced collections, is the subject of this "Asset Search News Roundup":

Copyright 2009 Fred L. Abrams