Fraudulent Transfers Read online

  “And what is that?” I asked.

  “I was successful in loading malware into Padilla’s cell phone, which is the reason I needed to be right up next to him at the terminal. My friends at Forensic Filtering introduced me to someone, name and address not disclosed, who sold me a device that could plant a bug into the electronics of a cell phone via a wireless connection. Not even the National Security Agency has this one yet. For this device to work, the target cell phone has to be on, but not connected to a call, and it has to be no farther than eighteen inches from the device.”

  “This is all legal, right?”

  “As much as certain of the other tools in my tool box.”

  “What kind of answer is that?”

  “The best one you’re going to get. You’re into trade secret territory again.”

  “OK, fine. But if the Colorado Supreme Court, which issues my license to practice law—and can take it away again -- ever asks me what I’ve been doing out here in San Francisco for the last couple of days, I’m going to refer the inquiry to you. Putting that aside, what will this malware do?”

  “It’s not perfect. It doesn’t allow you to listen in on calls. What it does do is capture the phone numbers of calls coming into the phone and calls being made using the phone. Another limitation is that this information is not available in real time. It gets stored at a cloud-based website I can only access once every seven days, during a one hour window. The seller of the device, as you might expect, likes to limit his Internet exposure. The soonest this window opens for me is next Tuesday, at 10:00 p.m. Pacific time. Since Padilla was smart enough to use a throw away phone, and use it carefully, in connection with the Turnbull and Williston fraud, we may find a similar situation here, meaning we won’t learn much by knowing phone numbers for calls to and from his phone. But I thought it was worth a try. Calls to or from Padilla’s phone might just get us closer to the outfit behind the Turnbull and Williston cashiers check fraud and who knows what else.”

  “So what happens next?” I asked.

  “Well, we’ve executed this part of the plan, and we can send you back to Colorado. I’m going to hang out in the Bay Area another couple of days to see if I can learn anything more about Bounce, since that’s the organization I think we’re starting to home in on. And I’ll see if Forensic Filtering can help us identify the man Padilla met with today. Then I’ll pack up my motor home and head back to Los Angeles. Some people prefer the supposed sophistication of San Francisco to the down-to-earth atmosphere of Los Angles. Me, I much prefer Los Angeles. Less pretense. Better beaches. Better looking women. I’m going to need some beach time to think about what we do next, assuming we are finally able to identify the enemy. As I now see things, Veronica is going to have to start playing a more important role in how we kick the ball across the goal line and into the net.”

  Ed and I finished our coffee and walked back to the Embarcadero BART terminal, a few blocks away. The train to Millbrae was practically empty compared to the train we took into the City to start our day. We checked out of our hotel shortly before we would have incurred late checkout charges. Ed picked up the bill for our rooms using a credit card issued in the name of one of his many identities, telling me the charge would appear on his invoice to Front Street Bank for services rendered. He then drove me over to the San Francisco airport, a few miles away on the other side of the Bayshore Freeway, in his hotrod Honda. He had already arranged for my trip back home. I would be retracing the route I took coming out, meaning I would be traveling as Jonathan Swisher from San Francisco to Phoenix, on Southwest Airlines, and traveling as Jack McConnell from Phoenix to Denver, on Frontier Airlines. Ed had again paid for the tickets (another expense to be included in his invoice to Front Street Bank) and on this occasion, because we were within twenty-four hours of my departure times, he had also been able to print the boarding passes for my flights. Therefore, I could go directly to security once I reached the airport. After the events of the last two days, I found it much easier to present Jonathan Swisher’s drivers license to the TSA representative at SFO, although I again wondered what the Colorado Supreme Court might think of this.

  The flight from San Francisco to Phoenix left on time at 1:15 p.m. The flight from Phoenix to Denver left twenty minutes late, at 4:20 p.m., putting me back in Denver shortly before 6:30 p.m. After ten minutes of wandering around the west outdoor parking lot at DIA, I finally found my truck, paid the confiscatory charges for two days of parking, and headed to Veronica’s loft in Lo-Do, where she had promised me a nice dinner, a bottle of chardonnay, and a special dessert.

  Chapter 22

  I parked in one of the guest spaces at Veronica’s building, placing an authorization card Veronica had given me on the dashboard of my aging SUV. My truck looked seriously out of place among the Audis, BMWs, Porsches, Mercedes and Land Rovers, and even Veronica’s Subaru, occupying other stalls. I took the elevator up to Veronica’s loft on the fourth floor, rang the bell and was promptly greeted with a long kiss and a hug, much appreciated after a hard day of private investigator work and air travel. Veronica had on a nice fitting pair of jeans and a bulky white sweater that offered just a hint of what I might find underneath. She was wearing wool socks—red--in keeping with the season, but no shoes.

  “Jack, you look tired,” she said. “I thought you liked travel and adventure.”

  “Yes, when it involves fishing. I may be wrong, but I think discount airlines have figured out how to jam yet another few rows of seats into their planes, to the point where there is no longer any real need for seatbelts. Once you’re in your seat, it’s impossible to move, so seatbelts are unnecessary.”

  “Tell me what you’ve been up to,” Veronica said, as we moved into the kitchen and she poured me a glass of wine.

  “I can’t tell you everything. Attorney client privilege and all. But I can tell you that Ed and I actually saw Tomas Padilla at the San Francisco ferry terminal. He met a guy getting off the ferry coming from Tiburon, and they exchanged an envelope. And, based on our conversations with a couple of marketing types for money laundering operations active in the Bay Area, it appears likely that Padilla is working for or with another such operation, known in the trade as Bounce. Bounce, it seems, is trying to move into the Bay Area from Vancouver, to the irritation of at least one of the long time players on this stage. That outfit is known in the trade as Tide.”

  “Do they really use these names?”

  “Only when talking with other insiders and potential customers.”

  “That seems kind of silly.”

  “Well, money laundering is apparently a very competitive business and I think these organizations like being associated with a strong brand.”

  “Whatever. How would you like me to cook your line-caught, fresh from Alaska, king salmon?”

  “That sounds great. Can you lightly poach it, in olive oil, with a little lemon? That’s my favorite way to cook salmon. The last time I saw king salmon from Alaska at a grocery store in Colorado Springs, it was out of my price range.”

  “This was on special at the local fish market down the street for only $25 a pound. Walking back from the store, I figured that would be $1,000 for a forty pound fish. I then decided this fishing addiction of yours, which regularly takes you away from gainful employment as a lawyer, might not be such a bad thing.”

  “Veronica, the biggest fish I ever caught in Colorado was a ten pound brown trout, out of the South Platte River. And I put him back. If you want me to support you by catching salmon, I would have to go back to fishing school to learn how and we would have to move to Alaska where, in the winter, there are only about six hours of daylight and it rains a lot. But tell me what you’ve been up to this week while I was in California helping Ed with his plan.”

  “Let’s save that for tomorrow morning. Tonight, I want us to enjoy dinner, and dessert, without work getting in the way.”

  Dinner, in addition to the salmon, which was melt in your mouth wonde
rful, consisted of a salad, a fresh baguette from the imitation French bakery next to the fish store, and another glass (actually two) of chardonnay. The chardonnay was the real thing, coming from the Chablis region of Burgundy. It was a hard-to-find wine Georgette had introduced us to and that she served at her restaurant when it was available.

  After dinner, I offered to help clean up the kitchen but Veronica shooed me away and told me to go to bed, with a request that I not fall asleep until she could join me for dessert. I failed in this request and fell asleep as soon at I hit the pillow. But Veronica remedied the situation by taking my left hand and putting it on her right breast. She otherwise brought me back to life with some strategically placed touching, resulting in a nice snuggle during which she did most of the work.

  “There,” she said when we were done. “Something for you to remember me by the next time you’re off on an adventure, or I’m out of town looking out for the well-being of our country’s banking system.”

  In the morning, over coffee (for me) and tea (for Veronica), and chocolate croissants from the imitation French bakery down the street (no real French bakery would sell such a thing), we returned to the matter of Veronica’s activities during the past week.

  “I’ve been busy setting up visits to some of the banks that need help with their computer security systems. As I told you before, many smaller banks are way behind the times when it comes to security and I’ve been assigned the job of trying to improve their systems. And I’ve also been studying how the Turnbull and Williston counterfeit cashiers check ended up being diverted into a suspense account where it sat around for several days, rather than going right to Merchants Bank where it would have been immediately detected as fraudulent. As we already knew, the magnetic ink encoding on the Turnbull and Williston check contained electronic instructions for the diversion of the check into the suspense account. What I’ve learned that’s new is that this coding is changed on a weekly basis and is known to only a small group of people working at the Fed.”

  “So where does that take us?”

  “I think it supports another of our theories to the effect that there is someone working at the Fed who gave the MICR encoding information to Padilla. A former employee might know how the coding system works generally, but only a current employee would have known what the coding would be at the time this check was going to be deposited at a bank and entered into the check collection system.”

  “Is there any way to tell where this person works?”

  “There are twelve federal reserve banks and probably three or four people at each of those banks would have had access to this information. But, since the paying bank on the bogus check was shown as Merchants Bank, and the suspense account where the check ended up ties to Merchants Bank, and Merchants Bank’s connection to the check collection system is through the Federal Reserve Bank of San Francisco, and we now have Padilla hanging out in San Francisco, it makes sense that the first place to look would be the Fed’s San Francisco bank. That bank, by the way, is on Market Street, just a few blocks from the ferry terminal where you saw Padilla and the other guy.”

  “That’s great detective work Veronica. Ed will be proud of you. And, now that I think about it, he told me just before I left San Francisco that from this point on you might be playing a larger role in his plan. So maybe he saw this coming.”

  “I’ve also been ramping up a bit on money laundering since it looks like we may be into something bigger than a mere $4.8 million fraud on a minor league stock brokerage firm in Colorado Springs. The U.S., and many other countries, have been trying to shut down money laundering for decades. Money laundering supports criminal activity. So, the theory goes, if money laundering could be curtailed, there would be less illegal drug sales, less illegal gambling, less tax evasion, less prostitution, less illegal arms sales to terrorists and less just about everything else that falls into the box of big time organized crime. The Fed, to a limited extent, is involved in the effort to stamp out money laundering but the main U.S. player on this stage is the Financial Crimes Enforcement Network, an agency of the Department of the Treasury.”

  “And has this effort been successful?”

  “Oh, there’s an occasional catch and prosecution, but on the whole, money laundering continues to thrive. As you probably saw when you and Ed were in San Francisco, the organizations that do money laundering are extremely sophisticated and agile. They have a knack for staying ahead of, and out of the path of, regulatory agencies’ efforts to shut them down. The classic play, still used, is to introduce cash acquired from criminal activity into the banking system by having multiple shell companies making deposits at banks that are below the $10,000 threshold where banks have to report the deposits. These companies present themselves as legitimate businesses that naturally have a high component of cash sales. Medical marijuana businesses are now starting to loom large in that regard here in Colorado. A new money laundering trick has been to set up bogus estates. These estates open bank accounts and then make cash deposits into the accounts. Once the money gets into the banking system, it can be consolidated and moved through brokerage firms, hedge funds, private equity companies, real estate investment trusts and all manner of other enterprises, and eventually transferred out of the country to off shore locations using wire transfers. U.S. banks are supposed to be on the lookout for suspicious transactions of this nature, but these transactions are almost always well disguised and involve multiple transfers, all of which look legitimate, through a series of separate banks.”

  “I would have thought technology would have come up with ways to detect money laundering.”

  “To some extent it has, but it’s also created new tools for the launderers to use. One of those is Internet currency, with the latest example being Bitcoin. Cash from organized crime moves easily into that totally unregulated payments system without detection and can then be transferred around and converted to the currency of another country, friendly to criminals.”

  “That’s fascinating and scary. But back to our immediate enterprise—trying to keep Front Street Bank--and the Fed and Merchants Bank--from being sued by Turnbull and Williston. What else is on the agenda?”

  “I’ve been able to get myself assigned to the Federal Reserve Bank of San Francisco for a couple of weeks. This works out perfectly since several of the banks I need to be consulting with about security issues are in northern California, from Monterey on one end to Fort Bragg on the other. I’ll be heading out there on Tuesday of next week and I’ve already arranged to have an office at the Federal Reserve Bank I can use while on this assignment.”

  “Does the head guy with the Fed in San Francisco know about the Turnbull and Williston fraud and its possible tie to money laundering, and that you’ll be working on another project while you’re out there that has nothing to do with helping smaller banks with computer security issues but might involve a rogue employee in his bank?”

  “No. The head guy at the San Francisco bank is its president, who is also a member of the Board of Governors of the Fed, and he’s one of the people who would have access to the weekly MICR encoding updates. Sam Donaldson with the Fed legal department in Washington knows about my second agenda on this trip, but he’s the only one, other than you. We’re still trying to stay out of sight of the normal regulatory environment in the hope that this will help us avoid detection by the bad guys.”

  “Are you sure this is safe? It seems to me we’re starting to get close to the nest of some big time criminals here who might know how to play rough.”

  “Jack, the biggest risk I’ll be taking is the cab ride to the airport on Tuesday.”

  “In my experience, at least, that’s a significant risk. In any event, your timing here is good in another sense. I didn’t tell you this before, but Ed has managed to plant some kind of malware in Padilla’s cell phone that will allow him to capture the phone numbers of calls coming into the phone and calls made using the phone. He’ll be able to retrieve that
information late on Tuesday, shortly after you’ll be settling into your temporary office at the San Francisco bank. I’ll let you know right away if Ed learns anything useful from Padilla’s phone calls.”

  After our morning coffee, tea and chocolate croissants, and a quiet hour spent reading the Saturday Denver Post, Veronica and I went for a long walk around her Lo-Do neighborhood, including a walk past Coors Field. It was strange to be there in the off season, with the stadium having no pulse and no one around offering us peanuts at half the price charged inside. We then went back down Blake Street and wandered around the new construction adjacent to Union Station, enjoying the public art that has been installed as part of this massive urban renewal project. Although I still prefer the smaller and quieter nature of Colorado Springs, it was interesting to see what big city economics could produce by way of stores, restaurants, offices, open space, upscale prostitution, homelessness, etc.

  We ended our walk with lunch at a little mom and pop restaurant two blocks from Union Station that had somehow survived the redevelopment work and competition from the big chain sports bar restaurants now moving into the area. One of the owners (mom) told us the transition of the neighborhood from blue collar basic to high dollar glitz had been difficult for her business but it had survived, thanks in large part to a benevolent landlord who had owned the building where her restaurant is located for twenty-plus years, had no mortgage on the property, liked having lunch there, and wanted the restaurant to stay in business.