On October 8th & 9th in Abuja, Nigeria I will lecture about asset recovery & tracking assets.  I will present 2 lectures to law enforcement agents who work in West Africa. The lectures are called “Whistleblowers, Secret Bank Accounts & Recovering Hidden Assets” & “Asset Recovery Case Studies & Discussion.” I am presenting the lectures during an asset recovery workshop held by The Inter Governmental Action Group Against Money Laundering In West Africa (GIABA).

I. Whistleblowers, Secret Bank Accounts & Recovering Hidden Assets

At this lecture I analyze how vast sums of money can be hidden in a wide variety of cases.  I talk about cases as diverse as narcotrafficking; terrorist financing; public corruption; tax fraud; securities fraud; & divorce.  I also discuss the tools for finding assets hidden offshore.  During the lecture I emphasize how law enforcement agents can employ whistleblowers to try to detect hidden assets. I additionally cover:

II. Asset Recovery Case Studies & Discussion

At “Case Studies & Discussion” I go over how criminals hide their illicit assets offshore.  I also talk about how law enforcement agents try to track illicit assets through: (1) mutual legal assistance treaty (“MLAT”) requests & (2) asset forfeiture laws.

III. My Coursebooks For The Lectures

To review the coursebooks I am giving to those attending my October 8th & 9th lectures, click on these images:

 

 

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Copyright 2018 Fred L. Abrams

An Asset Search For Tax FraudA scheme to hide assets may start out with the primary goal of placing assets beyond your reach. The scheme may then develop the secondary goal of hiding assets from tax authorities/committing a tax fraud. To increase your chances of a successful asset search, you should therefore look for indicators of tax fraud. A good list of the indicators is published by the IRS at IRM 25.1.2.3, Fraud Handbook – Indicators of Fraud.

Just one indicator listed at the Fraud Handbook is “deposits into bank accounts under nominee names.” This means secretly depositing money into bank accounts titled in the names of  intermediaries (i.e. nominees).  “Red Flags & The IRS Search For Attorney Memmott’s Assets” analyzes the tax fraud case against the now-disbarred California attorney Orion Memmott. Prosecutors accused Mr. Memmott of hiding assets from the IRS by titling real estate & bank accounts in the names of nominees.

In USA v. Beverely, Docket No 17−cr−60093, prosecutors similarly accused Timothy J. Beverley of hiding assets from the IRS.  Prosecutors claimed Mr. Beverley of Pompano Beach, Florida failed to report to the IRS $2.2 million he allegedly stole from his employer.  Page 4 ¶14 (b) of Mr. Beverley’s superseding indictment said Mr. Beverley hid his stolen money in bank accounts titled in the names of nominees. Mr. Beverley supposedly committed the theft & alleged tax fraud while on supervised release from his earlier money laundering case.  In the laundering case, prosecutors accused Mr. Beverley of hiding the illicit proceeds of a bank fraud. Mr. Beverley apparently hid the proceeds of the bank fraud by washing them through bank accounts belonging to the NASCAR team Mr. Beverley once owned—Tyler Jet Motorsports.

Copyright 2018 Fred L. Abrams

Searching for an adversary’s hidden assets can be like tracking a shell-game-operator.  In USA v. Khalili for instance, Mr. Dan Farhad Khalili was accused of hiding assets & undeclared revenue from the IRS for 15 years at 5 offshore banks. The offshore banks were located in Switzerland & Israel. Although on 4/27/11 Mr. Khalili applied for the IRS’ Voluntary Disclosure Program, the IRS found him ineligible for it. Mr. Khalili ultimately pleaded guilty to failing to file U.S. Department of Treasury Reports of Foreign Bank & Financial Accounts. On 4/25/17 Mr. Khalili was sentenced to 1 year & 1 day of prison. When you search for assets hidden through sophisticated schemes similar to the one Mr. Khalili was accused of, it may help to keep 3 goals in mind. These goals are to detect the paper trails, look for compartmentalization & seek transparency.

I. Detect The Paper Trails

One way your adversary may hide the paper trail of an offshore bank account is to open an offshore post office box. Your adversary could then have the offshore bank send monthly bank account statements & other documents to the offshore post office box. By maintaining these banking documents offshore, your adversary reduces the risk that you; domestic tax authorities; or anyone else; will detect the secret offshore bank account.

II. Look For Compartmentalization

A former intelligence officer I knew kept 1 cellular phone for incoming calls & another for outgoing calls. By compartmentalizing incoming & outgoing calls, the former intelligence officer was trying to hamper any investigation of his telephone toll records. Your adversary may compartmentalize his/her financial activities in a scheme to hide assets from you. For more information read my post “Compartmentalization & An Asset Search.”

III. Seek Transparency

By eliminating paper trails & compartmentalizing, your adversary can make his/her financial activities nontransparent. Your adversary can also make financial activities nontransparent via: fraudulent asset transfers; bulk-cash smuggling; art assets & cultural heritage property; diamonds or other portable valuable commodities; etc. These common concealment methods are outlined at “Red Flags For An Asset Search.”

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Copyright 2017 Fred L. Abrams

In the criminal case against Robert Bandfield, the IRS & SEC searched for assets laundered offshore. These assets were the proceeds of stock pump & dump schemes.  The illicit proceeds of the pump & dump schemes were more than $250 million. The $250 million was believed to be hidden by money laundering carried out by Mr. Robert Bandfield & his co-conspirators.

According to a 2/6/17 press release, Mr. Bandfield was the “architect of [an] offshore fraud haven.” Mr. Bandfield seems to have owned 2 nominee incorporation services, which established & sold shell companies. The 2 nominee incorporation services formed offshore shell companies believed to have helped launder the $250 million.

Red flags Mr. Bandfield & his co-conspirators allegedly hid the $250 million included their suspected misuse of:

After Mr. Bandfield’s 9/5/14 indictment by a grand jury sitting in Brooklyn, N.Y., Mr. Bandfiled was arrested on 9/9/14 at the airport in Miami, Florida. The indictment charged Mr. Bandfield & others with conspiracy to commit securities fraud; conspiracy to defraud the U.S. via tax fraud; & money laundering conspiracy. On 2/6/17 Mr. Bandfield was sentenced to 72 months imprisonment.  The sentence was based on Mr. Bandfield’s guilty plea to the money laundering conspiracy charged by his second superseding indictment available here.

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Copyright 2017-2018 Fred L. Abrams

Like the IRS & SEC you can sometimes search for assets by using whistleblower tips, my October 3rd program explains.

A) PROGRAM DESCRIPTION

At the New York County Lawyers’ Association on October 3, 2017 from 5:30 PM to 9:00 PM, I will be the program chair of “Whistleblowers, Secret Swiss Bank Accounts & Recovering Hidden Assets.” Attendee registration is available at the website available here or by calling the New York County Lawyers’ Association at (212) 267-6646. During the October 3rd program, I highlight the use of whistleblower tips to recover hidden assets.  I show how to search for assets which can be hidden by high net worth divorcing spouses; corporations; Ponzi schemers; tax fraudsters; etc.  I talk about tools you can use to recover assets hidden in Switzerland and other places across the globe. The October 3rd program also focuses on the Internal Revenue Service & Securities Exchange Commission whistleblower programs which can provide qualifying tipsters with the largest payouts compared to any other reward programs in the world.

Jack BlumWashington, D.C. attorney Jack Blum is well-known internationally for his representation of whistleblowers. In addition to others he has represented,  Mr. Blum will talk about Mr. Hervé Falciani, the whistleblower the media dubbed “the [Edward] Snowden of Swiss banking.”  Mr. Falciani allegedly stole Swiss bank account information from HSBC in Geneva and as a whistleblower turned the information over to French authorities. This alleged HSBC bank account information eventually fell into the hands of the International Consortium Of Investigative Journalists, which published part of it at their webpages known as the Swiss Leaks project.  Furthermore, Mr. Blum appeared on the CBS/60 Minutes television show to discuss the foregoing.  He will similarly discuss these matters at the October 3rd program and analyze: the IRS whistleblower program; problems whistleblowers face in the real world; and the difficulty lawyers may encounter in dealing with whistleblowers either as clients or tipsters.

ThomasLabaton & Sucharow partner Jordan A. Thomas will also speak at the October 3rd program.  Mr. Thomas will discuss the Securities Exchange Commission’s whistleblower program, as he is one of the world’s leading experts on it. He will review the advantages and disadvantages of the different whistleblower programs; and the ethical concerns gatekeepers like attorneys, accountants, officers and directors have, in reporting illegal behavior in both the civil and criminal contexts.  As more fully set forth below, Mr. Thomas: is a former assistant director in the Commission’s Enforcement Division; had a leadership role in developing the Commission’s whistleblower program; and was assigned to many of the Commission’s highest-profile matters such as those involving Enron, Fannie Mae, UBS & Citigroup.

Photo Charles Bott

Charles Bott QC, Head of Carmelite Chambers in the United Kingdom, is a recognized authority on financial crime and its regulation.  Subject to his availability, Mr. Bott may travel to New York to speak at the October 3rd program. He has appeared in more than 80 serious fraud trials including some of the leading cases of recent years and advised many other clients under investigation.  Mr. Bott specializes in cases of serious fraud, money laundering and revenue evasion; and in the United Kingdom, he is regularly instructed in serious criminal cases and regulatory cases of all kinds.

Continue Reading Whistleblowers, Secret Swiss Bank Accounts & Recovering Hidden Assets

Back to Back Loan Image

Money Laundering, Marital Assets & Divorce was my first Asset Search Blog post highlighting back-to-back loans (i.e. a fully collateralized loan in which the borrower and the lender are one and the same). That post mentioned a divorcing husband who hid millions from his wife and the IRS, by claiming he was indebted because of an arm’s length business loan. The husband’s claim about owing money to an arm’s length lender was false, as the loan was back-to-back. In other words, the husband hid millions by secretly arranging to be both the borrower and lender of the loan; and by pretending to be in debt.

Federal prosecutors similarly discussed back–to-back loans in their tax fraud case against Los Angeles, California businessman Masud Sarshar. According to prosecutors, Mr. Sarshar hid tens of millions of dollars from the IRS by using two back-to-back loans and offshore bank accounts in Israel and Hong Kong. Mr. Sarshar supposedly maintained the offshore bank accounts in the names of intermediaries (i.e. nominees). Prosecutors also said an Israeli banker delivered offshore bank account statements to Mr. Sarshar by smuggling them into the U.S. on a USB drive hidden in a necklace.

To avoid being flagged as an American by the offshore banks, Mr. Sarshar is believed to have used Israeli and Iranian passports to open his offshore accounts. When Mr. Sarshar mentioned his offshore accounts during conversations with his Israeli bankers, Mr. Sarshar also reportedly spoke in code. On 3/13/17 Mr. Sarshar was sentenced to 24 months in prison for conspiring to defraud the U.S. and for seeking to impair/impede administration of internal revenue laws. Mr. Sarshar’s 8/1/16 plea agreement can be read here.

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Copyright 2017 Fred L. Abrams

3 HInts About Asset Searches

A divorcing spouse; judgment creditor; bankruptcy creditor; or a beneficiary under a trust or will; may face an adversary hiding assets through nominees (i.e. intermediaries). See cf., Fourth Inv. LP v. United States, 720 F.3d 1058, 1070 (9th Cir. 2013) (six-part test for nominee ownership applied to tax lien case). An adversary can hide real estate, automobiles, jewelry; and offshore bank accounts by titling them in the names of nominees. Nominees are easily accessed through nominee incorporation services like the one at the “Anonymous Panama Corporation” webpage.

The “Anonymous Panama Corporation” webpage can be used to form a Panamanian shell company with “nominee directors.” The initial fee for this service is $1200. The webpage suggests that one can “save taxes or protect…assets” by forming a Panamanian shell company:

[Y]our personal information will not be available in any government records, but [sic] still maintain complete control over your corporation. The Nominee Directors will not have control over your corporation and can be replaced at any time.

This type of corporation is a good choice if your objective is to save taxes or protect your assets. The actual owner of this corporation is not registered in public records.

Shell companies are not the only things that can be utilized as nominees. Lawyers; accountants; bankers; financial advisors; paramours; family members and trusts can be nominees. In the criminal prosecution called USA v. James S. Faller II, Case #: 13−cr−00029, the Court discussed how a nominee trust could be part of a scheme to hide assets from the IRS. Pages 13-14 of the Court’s 4/30/15 Memorandum Opinion and Order highlighted Mr. Faller’s alleged misuse of nominees.

Mr. Faller from Russell Springs, Kentucky, relied on “nominee names” to evade taxes, an IRS Special Agent’s affidavit claimed at ¶68. Prosecutors argued Mr. Faller evaded taxes by titling his home and bank account in the name of a trust believed to be Mr. Faller’s nominee. Mr. Faller was convicted of tax fraud and on 1/29/16 Mr. Faller was sentenced to 36 months’ imprisonment. Although Mr. Faller appealed his conviction, the U.S. Court of Appeals upheld the conviction at a 1/10/17 Opinion.

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Copyright 2017 Fred L. Abrams

Laundry List Post:ImageGovernmental authorities follow money trails in order to interdict assets hidden by narco-traffickers; money launderers; Ponzi schemers; tax fraudsters & other determined criminals. During your asset search, you can similarly follow a money trail to track assets which have been hidden from you. You might detect a money trail by scrutinizing data related to the person or business entity suspected of hiding assets.

You can collect this data in some situations, by issuing subpoenas; using compelled consent forms; or through additional legal tools. Below is the “Financial Investigations Checklist” & it includes a laundry list of items which contain data.¹ You may be able to collect some of the items the list mentions: bank account records; telephone records; utility company records; credit card statements & many others. Data at these kinds of items could conceivably help you follow a money trail to assets hidden from you.

(To Read The Financial Investigations Checklist, Click On The Following Image)


Financial Investigations Checklist

 

¹Financial Investigations Checklist, Courtesy of The United States Department of Justice.

First image: Picsfive/Shutterstock.com

Copyright 2016 Fred L. Abrams

Trade-Based Laundering Photo

If your adversary is using a business entity to conceal assets from you, one thing to look for is trade-based money laundering. A June 2006 report by the Financial Action Task Force explains that trade-based laundering schemes can include: the over or under-invoicing of goods or services; the over or under-shipping of goods; falsely describing goods or services; or multiple invoicing.¹ You can search for assets hidden via trade-based laundering by spotting the red flags. Page 24 of the June 2006 report describes the red flags and some of them are:

  • a disparity between a shipped commodity’s bill of lading and its invoice.
  • a disparity between a commodity’s value as recorded on its invoice and fair market value.
  • the shipping of goods although there is no profit/economic benefit.
  • a shipment with a nexus to shell companies.
  • letters of credit related to a shipment that have been amended or extended repeatedly.
  • the type of shipped commodity is inconsistent with the importer’s/exporter’s ordinary business activities.
  • shipping to or from a high-risk geographical location (i.e. a jurisdiction especially vulnerable to money laundering).

Pages 9-20 of the June 2006 report also provide 12 case studies showing how trade-based money laundering can be used to conceal one’s assets. The August 24, 2007 plea agreement of Gene Haas might describe another case of trade-based money laundering. Mr. Haas entered this plea agreement after his arrest on June 19, 2006 for suspected tax fraud. Attachment A at the plea agreement says the Enmark Aerospace and Supermill companies had provided Mr. Haas with invoices for fictitious purchases.

According to Attachment A, Mr. Haas paid Enmark & Supermill millions of dollars pursuant to these invoices; and Mr. Haas then took business deductions for “cost of goods sold.” Attachment A also indicates that Enmark and Supermill eventually returned the millions, (less a 2% kick back fee), to Mr. Haas through Mr. Haas’ intermediary, CNC Associates, Inc. Stated differently, it seems that Enmark, Supermill and CNC Associates could have been employed as laundering links in a money laundering circuit. After Mr. Haas’ plea agreement, Mr. Haas was sentenced on November 5, 2007 to two years in prison for violating 18 U.S.C § 371. Mr. Haas additionally paid a $5 million dollar fine and over $70 million dollars in back taxes owed for 2000 and 2001.

¹ See p.4 at “Trade-Based Money Laundering,” Copyright © FATF/OECD. All rights reserved.

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Copyright 2007-2016 Fred L. Abrams

Your Search For Assets Hidden Offshore

When naming offshore havens for opening secret bank accounts, people usually mention Switzerland, the Cayman Islands, Liechtenstein, etc.  Meanwhile, bank accounts in almost any country can be put to work to hide & place assets out of reach. “Using Multiple Jurisdictions To Launder Money” discussed a suspected scheme to bribe judges in Italy.  According to prosecutors, illicit proceeds from this offshore scheme were hidden in bank accounts located in the U.S. & elsewhere. “Money Laundering, Marital Assets & Divorce” outlines another scheme which relied on cross-border elements to conceal assets. The scheme involved a divorcing spouse in the U.S. who hid undeclared revenue in a Swiss bank & then “washed” it through a bank in Germany.¹

As the above essentially suggests, tracking assets offshore can become a critically important part of your asset search. How do you search for assets hidden offshore? One way is by employing legal tools. The following article discusses the tools federal prosecutors may use to collect evidence from witnesses residing offshore.² Two of the tools the article mentions are compelled consent forms & letters rogatory.  These two tools are not just for use by prosecutors. They are sometimes used by divorcing spouses, judgment creditors & others searching for offshore bank accounts/assets hidden offshore:

Click On The Image To Read The Entire Article

¹The fact pattern supplied at “Money Laundering, Marital Assets & Divorce,” has been changed & sanitized for privacy reasons.

²“Obtaining Foreign Evidence Outside of The Mutual Legal Assistance Treaty Process,” U.S. Attorneys’ Bulletin March 2007, is supplied courtesy of the Executive Office for United States Attorneys.

Image of offshore banking & tax haven concept: ChameleonsEye/Shutterstock.com

Copyright 2016 Fred L. Abrams