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

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.

Peter Madoff’s $4 million dollar co-op and the effort to recover assets from Peregrine Financial Group, Inc.

  1. The NYC Park Avenue co-op which belonged to Bernard Madoff’s younger brother Peter, has just been listed for sale.  The $4 million dollar co-op is being sold as part of the asset forfeiture agreement connected to Peter Madoff’s June 29th guilty plea on securities fraud, tax fraud conspiracy and additional charges.
  2. As set forth at a press release, the U.S. Commodity Futures Trading Commission filed a July 10, 2012 civil complaint in U.S Commodity Futures Trading Commission v. Peregrine Financial Group, Inc., et. al., Index No. 12-cv-05383.  A July 17th order then appointed a temporary receiver in the case, with authority over assets beneficially owned by Peregrine’s founder, Russell R. Wasendorf, Sr.  To help recover assets, the order authorizes the receiver to hire former employees of Wasendorf Sr. or his companies.  Pages 5-6  ¶ I of the order indicates that these employees include a chief financial officer, a head pilot and the manager of My Verona, LLC, which is a restaurant:

Copyright 2012 Fred L. Abrams

Secreting Ponzi scheme proceeds and the conviction of three former money managers:

  1. Secreting Assets Without A Border Trace” highlights methods determined criminals employ to conceal their assets from domestic authorities and everyone else.  It supplies the fact pattern of a securities fraudster who conceivably could have concealed Ponzi scheme proceeds by utilizing offshore jurisdictions, a foreign bank account and portable valuable commodities like diamonds.
  2. Former money managers Jason Bo-Alan Beckman, Gerald Joseph Durand and Patrick Kiley were recently convicted of money laundering and additional criminal charges connected to Trevor Cook’s Ponzi scheme.  These three were previously mentioned at the September 20, 2009 article “Money Laundering By Minneapolis Money Managers?

Copyright 2012 Fred L. Abrams

At the New York City Bar Association, 42 West 44th Street New York, NY 10036, from 6:00 PM– 9:00 PM on September 27, 2012, Fred Abrams and distinguished lawyers Jack Blum and Jordan A. Thomas, will present “The Ins & Outs Of Recovering Assets Via Whistleblowers & Other Tipsters”.  This program first analyzes how vast sums of money can be hidden in cases as diverse as tax and securities fraud and divorce.

It then describes ways whistleblowers or other tipsters may help sniff out these monies and discusses: the problems whistleblowers face in the real world, the advantages and disadvantages of the different whistleblower programs, and the difficulty lawyers face in dealing with whistleblowers either as clients or as tipsters.

The program also focuses on the ethical concerns gatekeepers like attorneys, accountants, officers and directors have, in reporting illegal behavior in both the civil and criminal contexts.  Registration for this program is available through the City Bar Center for CLE, at Tel: (212) 382-6663 or register online at www.nycbar.org.

 

 

Copyright Fred L. Abrams 2012

The New York Post and Bloomberg wrote last month about the appeal pending in Cohen v. S.A.C. Trading Corp., et. al., (11-1390-cv). The Cohen appeal is over the trial court’s March 30, 2011 dismissal of Patricia Cohen’s Second Amended Complaint.  The Second Amended Complaint accused Ms. Cohen’s ex-husband, (billionaire hedge fund manager Steven Cohen), of tax fraud, money laundering, securities fraud and other alleged crimes.

This complaint also pleaded civil RICO, common law fraud, breach of fiduciary duty and unjust enrichment claims because Mr. Cohen had purportedly hidden marital assets from Ms. Cohen during their 1990 divorce.  The gravamen of the complaint was that Mr. Cohen supposedly defrauded Ms. Cohen out of marital assets which she was arguably entitled to recover.

According to the complaint, Mr. Cohen had invested $8,745,169 dollars in co-op apartment conversions, with former attorney Brett K. Lurie.  By January 1987, Mr. Lurie had allegedly repaid Mr. Cohen $5.5 million of the $8,745,169 dollars.  The complaint claims the $5.5 million was a marital asset hidden by Mr. Cohen and omitted from his 1988 Statement of Financial Condition.  This financial statement identified the $8,745,169 dollar investment with Mr. Lurie as a “non-liquid asset”:

(To Read The Entire Financial Statement, Click On The Highlighted Excerpt)

Continue Reading The Asset Recovery Case Of Cohen v. S.A.C. Trading Corp.

Todays “Asset Search News Roundup” mentions whistleblower programs:

  1. An Asset Search Via Whistleblowers & Other Tipsters comments on IRS and SEC efforts to sniff out fraudulently concealed assets with the help of reward programs.  Forbes’ March 2nd article IRS Whistleblowers See Little Reward, also describes these programs.  The article compares one to the other and too discusses whistleblowing via “qui tam” lawsuits under the False Claims Act.
  2. The IRS has just revised its whistleblower program rule at 26 CFR Part 301 §7623–1, Rewards and awards for information relating to violations of internal revenue laws.  This revision clarified the definition of “proceeds of amounts collected” and “collected proceeds”, as mentioned by §7623-1 (a).  The revised rule was published in the February 22, 2012 Federal Register, available by clicking here.

Copyright 2012 Fred L. Abrams

At “Hockey bid a factor in Beckman’s Ponzi trial”, the StarTribune analyzes the Second Superseding Indictment filed in the criminal prosecution against Jason Bo Beckman, Gerald Durand and Patrick Kiley.  This StarTribune article explains the three are accused of money laundering and other alleged crimes arising out of Trevor Cook’s securities fraud which was one of the biggest Ponzi schemes in Minnesota history.  The article too reveals that the Second Superseding Indictment differs from two earlier ones.

This was true because the Second Superseding Indictment appears to accuse Mr. Beckman of using Ponzi scheme proceeds as part of an alleged attempt to buy an ownership interest in the National Hockey League’s Minnesota Wild team.  There is however, another difference between the Second Superseding Indictment and the previous indictments in this matter.  Unlike the earlier indictments, Counts 24-25 at pp. 34-36 of the Second Superseding Indictment, basically accuse Mr. Durand of using a nominee’s bank account at Wells Fargo to secretly convert nearly $22,000 in Swiss francs to U.S. dollars.

This supposed currency conversion had conceivably caused Wells Fargo to unknowingly file Currency Transaction Reports with material omissions in them, about who participated in said conversion.  Although suspected crimes related to Currency Transaction Reports are typically charged under 31 U.S.C. §§ 5322 &/or 5324, Counts 24-25 of the Second Superseding Indictment allege that Mr. Durand concealed material facts and / or made false statements to the Federal Government in violation of 28 U.S.C. §1001.

Continue Reading Prosecutors Add To Indictment Connected To Ponzi Scheme Case

A February 3rd civil complaint filed against Forex dealer Peregrine Financial Group, (“PFG”), alleges “PFG ignored or failed to discern a myriad of objective red flags of fraud…” Complaint at pp. 5-6 ¶12.  The complaint asserted a $48 million dollar claim under Minnesota’s fraudulent conveyance law and it was filed by Receiver R.J. Zayed, who is trying to collect assets dissipated by Ponzi schemer Trevor Cook.

Describing the complaint, a StarTribune.com article explained that Trevor Cook admitted to defrauding more than 700 investors out of $194 million.  According to p. 35 ¶102 of the complaint, PFG participated in fraud with Ponzi schemer Trevor Cook.  Page 13 ¶33 of the complaint alleged that Cook opened, (or caused to be opened), at least 26 trading accounts at PFG.  The complaint also stated at page 31 ¶90, “PFG permitted itself to be used to funnel funds” and that Cook had supposedly used PFG to wash funds through a commission account.

In certain respects Receiver Zayed’s complaint against PFG, resembles Madoff Trustee Irving Picard’s December 5, 2010 amended complaint suing HSBC.  Similar to Receiver Zayed’s complaint, Trustee Picard’s amended complaint asserted at p.155 ¶550 & p.157 ¶ 557, that some defendants ignored “myriad red flags“.  The first paragraph of the amended complaint claimed that Madoff monies “were funneled by and through the HSBC defendants” and also alleged that these defendants “aided, enabled and sustained the massive Ponzi scheme masterminded by Madoff…

As mentioned by “Using Red Flags To Recover Ponzi Proceeds“, Trustee Picard’s amended complaint was filed pursuant to New York’s fraudulent conveyance law, bankruptcy law, securities law and the common law.  The Court’s July 28, 2011 decision ultimately determined that Trustee Picard lacked standing to bring common law claims and dismissed the same.  An article discussing this dismissal is Madoff Trustee’s Job Just Became Much Tougher.

 

Copyright 2012 Fred L. Abrams