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Forced collection proceedings against a fraudster like Mr. Bernard Madoff can involve an extraordinary number of prospective plaintiffs with competing interests in the fraudster’s assets.  In Mr. Madoff’s case, some of these plaintiffs competing over assets might even include foreign governmental authorities seeking asset forfeiture because of Mr. Madoff’s money laundering in the United Kingdom or perhaps elsewhere.

Another prospective plaintiff in Mr. Madoff’s case, is Irving H. Picard, Trustee for the liquidation of Mr. Madoff’s assets on behalf of thousands of victims, pursuant to the Securities Investor Protection Act and the Court’s Order.  As "Madoff Trustee Seeks to Recover Assets in Gibraltar" reported, Mr. Picard just made a bankruptcy court filing seeking to retain special counsel to recover property in Gibraltar which belongs to Madoff.

Given all of the foregoing, I asked Swiss counsel to examine some of the complexities in pursuing forced collection proceedings against a fraudster like Mr. Madoff.  My discussion with Swiss counsel was based on the hypothetical that someone similar to Mr. Madoff had hidden assets in banks in Switzerland.  Swiss counsel’s comments are as follows:

"Complex forced collection proceedings may combine several competing recovery actions involving civil, criminal and administrative recovery remedies. To add to the complexity, these actions may be originated in various jurisdictions.

 

To take a concrete example, I am currently representing a client who was the victim of a fraud perpetrated in a far-eastern country. A criminal action against the perpetrator of the fraud was conducted in this country. The proceeds of the crime were transferred by the fraudster to the US where the fraudster managed to escape.

 

The fraudster was arrested at the request of the far-eastern country and sat in jail for three years for extradition purposes. Ultimately, he was extradited to that country and has now been sentenced to several years’ imprisonment.

 

The defrauded client chose to file a complaint for fraud, intentional misrepresentation, active concealment and several other counts including a RICO action against the fraudster in a Californian court.

 

The US attorney sought from a district court, an arrest warrant in rem of several assets in the US and also of funds deposited in a bank in Geneva.

 Continue Reading Forced Collections Against A Fraudster Like Madoff

The victims of a securities fraud, divorcing spouses, post-judgment creditors, etc. can have several remedies available to them if they need to recover assets hidden offshore.  One might even pursue an asset search or recovery in the various offshore tax havens.  This is particularly true when a bank is used as a laundering “link” to hide funds in a money laundering circuit or assets have otherwise been hidden during a financial fraud.

To cite just one example, I have previously filed letters rogatory / legal assistance requests with the Court in Geneva, (“the “Parquet du Procureuer général), because of suspected money laundering at two Swiss banks.  As mentioned at “An Asset Search With Letters Rogatory“, these kinds of legal remedies can sometimes be used to elicit financial information from bank witnesses.

Other forms of relief for those seeking to recover funds hidden offshore, can range from attaching a bank account to alerting a financial intelligence unit.  Local counsel in Geneva has analyzed these legal remedies which are available in Switzerland and in many other jurisdictions across the globe:

“As you probably know, Switzerland does not follow the common law doctrine. We do not adhere to the institution of discovery. The usual tools available to a claimant are therefore the filing of a criminal complaint, which is actually the most efficient way to get past the banking secrecy. Access to the information will be granted only if someone can be indicted. In exceptional circumstances a broader access to the information collected within the frame of the criminal investigation can be granted on a discretionary basis.


Continue Reading An Asset Search In Geneva

One way a debtor may frustrate an asset search or delay forced collection proceedings is to dissipate assets through an excessive divorce settlement.  According to "Tyco gets OK to freeze Kozlowski’s assets" for example, ex-Tyco chief executive Dennis Kozlowski may be using his divorce settlement to delay his creditors.  At In Re: Tyco…

An investigation of a high-risk geographical location can sometimes uncover assets which have been hidden through: nominees; shell companies; cash couriers; wire transfers; credit cards; informal banking systems, etc.  For example, one way the IRS focuses on high-risk locations like tax havens, is to compare the banking information it receives from the Financial Crimes…

I. NOMINEE BANK ACCOUNTS

Beneficial owners can try to use a nominee, (i.e. intermediary/straw owner), to hide money with complete anonymity in a bank account. Through websites like Offshore-Protection.com beneficial owners may purchase a shell company and retain a nominee director for the shell company.  The beneficial owner may then title a bank account in…

People don’t typically think of the common money laundering indicia when searching for hidden assets the subject of a: divorce; bankruptcy; commercial collection or other legal proceeding.  Such indicia can be effectively used as part of an asset search / recovery effort even in situations where there is no money laundering.  In the United States,…

An asset search covering a number of countries is sometimes necessary if monies the subject of a divorce, bankruptcy, or debt collection proceeding are hidden in a money laundering circuit. This can be true because “[l]arge-scale money laundering schemes invariably contain cross-border elements,” as mentioned by the Financial Action Task Force’s webpage.

Domestic…

When fraudulent transfers are used to hide assets the subject of a debt collection, divorce, or bankruptcy case, the Court looks for badges of fraud.  As explained in Wall Street Associates v. Brodsky, 257 A.D.2d 526, 529 (1st Dept 1999), the badges of  fraud for fraudulent asset transfers or conveyances are:

  • A Close Relationship

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