Fraudulent Transfers Read online

  Chapter 23

  After lunch, I packed up my gear, gave Veronica a hug and a kiss (and another reminder to be careful when she was in San Francisco), and headed home to Colorado Springs, going south on I-25. I popped the sound track from A Man and a Woman into the cassette player and thought about the theme of this movie--a second chance at love--and how lucky I was to have found Veronica. It was a pleasant drive—until the approach to Monument Hill. There, as often happens this time of year (and can even happen in June and July), a road wet from light rain or snow was suddenly coated with black ice. Several cars had already spun off the road as I came through, but I saw no sign of major damage or injuries. The Colorado Highway Patrol was on the scene so I kept going. I shut off the cassette player, put my SUV in four wheel drive, slowed to twenty-five miles an hour, and limped over the summit and down the south face of the hill. By the time I arrived at the next interchange, which was maybe five hundred feet lower in elevation, the black ice was gone and the road was again merely wet. Traffic quickly began moving at normal (as in too fast for conditions) speed and the remainder of the trip to Colorado Springs was uneventful.

  My first stop when back in town was to pick up Fletcher. Fletcher, as usual after a sleepover with Buttercup, seemed only modestly happy to see me and disappointed that he had to go home. Buttercup’s owners gave Fletcher a B- for behavior, telling me he had generally been a good dog until he decided to chase the family cat, Puff, around the living room and got Buttercup to join him in the chase. This resulted in a broken lamp and a large scratch on Buttercup’s nose. I offered to pay for the lamp and a vet visit for Buttercup but that offer was declined since, on Buttercup’s last stay at my house, she had generated a similar accident when she challenged Fletcher to a tug of war with a rope toy she had brought along for her visit. This produced two broken lamps and a leg muscle strain for Fletcher, which had him limping for several days.

  Cooper had sent me a text message shortly after noon telling me everything was fine at my house and that the fish in the aquarium had been fed, so please don’t feed them again. He said he and Samantha were going to a movie tonight, with Samantha doing the driving. Cooper still had his driving privileges suspended due to his having run into a tree in Monument Valley Park earlier in the year. This occurred when he tried to show Samantha a race car driving technique called trail braking that I, unfortunately, had told him about.

  Sunday produced a blizzard along the Front Range, with heavy snow and thirty mile per hour winds. This caused Fletcher and me to spend a few hours at my office, with me digging out from neglected work and Fletcher, after giving everything a good sniff, sleeping under my desk. Per the terms of our lease with Front Street Bank, dogs are not allowed in our building. I knew, however, that Mike Lawrence regularly brought his Golden retriever, Hazel, to his office on weekends. And since Mike was president of Front Street Bank, I figured a quiet visit by Fletcher on a snowy Sunday was unlikely to result in eviction.

  When I arrived at the office, I found a note on my desk from Stephanie telling me that Judge Cloverton, over Thomas Stringer’s strident objection, had granted my request for an expedited hearing on my motion for a preliminary injunction in the Piranha Partners v. Olivia Marchant case. The hearing was scheduled for a week from tomorrow, Monday, December 19, starting at 1:30 p.m., three hours allowed. Stephanie told me she had already called Marvin Lang and confirmed the date and time of the hearing with him. I therefore sent Marvin an email telling him what my game plan for this hearing would be and how his testimony would fit into the plan. I told him I would call him later in the week to review his testimony. Marvin and I had done this kind of expert witness presentation enough times previously that a detailed rehearsal would not be necessary. He already knew the questions I would ask and how he would be expected to respond. All I would need to do was establish his credentials, ask him what he had been engaged to do, ask him to state the opinion he had come to, and ask him to explain how he arrived at that opinion. He would take care of the rest of the presentation. And, he was a master at scoring points for my team during cross-examination by the other side’s lawyer.

  Stephanie had also called Olivia Marchant and confirmed her availability for the hearing. Stephanie told Mrs. Marchant that I wanted her daughter, Roberta, and her granddaughter, Tracie, to be at the hearing if at all possible, although they would not be asked to testify.

  While in the office, I sent an email to Josephine Houghton and Wiley Monfort, with a copy to Mike Lawrence, telling them in sketchy terms that Tomas Padilla had been located in the Bay Area and we were moving forward in our effort to identify the organization behind the Turnbull and Williston fraud. I looked at my calendar and saw we were now twenty-four days into our forty-three day standstill agreement. I was confident Josephine Houghton was watching her calendar as well.

  The storm moved on to Nebraska and Kansas Sunday night, and Monday produced a beautiful deep blue sky day, with yesterday’s snow quickly melting away. I was in the office early in a continuing effort to dig out from neglected work. I managed to put in a three mile jog in Monument Valley Park over the noon hour, and I then confirmed with the office of my primary care physician, Rollie Dumbarton, that I would appear on Tuesday for my annual physical, an event I had managed to postpone for three years now. Rollie was both my doctor and a friend. We play senior softball together and, until I suffered a knife wound to my right shoulder while Veronica and I were busy shutting down the S.O.S. attack on the U.S. banking system, we played pick-up basketball together at the Y. The wound had healed but playing basketball generated serious morning-after stiffness and pain.

  The reason for my three-year procrastination in having my annual physical was in part due to the fact that I knew Rollie would confront me with the need for a colonoscopy. And that, of course, is exactly what happened. After we were done with the examination of my prostate gland (it was still there and not overly enlarged); a discussion of my need for a vitamin D supplement (this is common in older people, he told me); an affirmation on my part that erectile dysfunction was not a problem; a compliment from Rollie to the effect that my cardiovascular system was holding up well for someone my age; and five minutes of complaints by Rollie about government intrusion into healthcare, the discussion of colonoscopies began.

  “Jack, you really need to have a colonoscopy. Fifty thousand people die every year in this country from colon cancer. It often has no symptoms until it’s in stage four, by which time it has metastasized and become a killer.”

  “But Rollie, as between the totally unpleasant preparation requirements and the procedure itself, this knocks two full days out of my life.”

  “Well, colon cancer is going to knock a whole lot more days than that out of your life and may end your life. So think of this as an investment in, say, more days of fishing. In my opinion, as a highly trained and experienced physician, if you’re dead you can’t fish.”

  “Tell me what this is going to cost me, Rollie. I have high deductible insurance—that’s the only insurance someone like me who is self-employed can afford. So I have to pay the doctor who does the procedure and I have to pay the hospital where the procedure is done. The last time I looked into that, neither the hospital nor the doctor would tell me what a colonoscopy would cost. I can’t think of any other purchase I might consider making where the seller won’t tell me the cost before I have to make a decision.”

  “I don’t know what it will cost. This will have been determined by a secret negotiation your health insurance company will have had with the doctor and the hospital. It’s out of my control. All I know is it’s the same process that causes your visits to me to be a total bargain, leaving me with barely enough money to put gas in my car. All I also know is that you’re now at the age where colon cancer becomes a risk and if it isn’t detected early on, while it’s still treatable, it can kill you. I should also remind you that this is the perfect time for you to have this procedure done. The softball season is over. Mostl
y the same thing with fishing. And even before your shoulder injury, you were no good at basketball and no one wanted you on their team. So invest a couple of days during the off season to maybe save your life. How can you argue with that?”

  “Fine, Rollie, I’ll do it but I have no sympathy for you since I know the car you have to put gas in is a nearly new Porsche Carerra which requires premium and gets lousy mileage.”

  “Good. Then that’s settled. Our front desk staff will help you make the arrangements for the colonoscopy and I’ll call you to discuss the results after it’s done. It’s not nearly as unpleasant as people think.”

  “Rollie, how old are you?”

  “Fifty-eight, one year older than you.”

  “So when was the last time you had a colonoscopy?”

  “I’ve been really busy Jack, but I know it has to be done.”

  On Tuesday morning, after my appointment with Rollie, I put in a call to Marvin Lang and we confirmed plans for next week’s preliminary injunction hearing. We would meet at my office at 1:00 p.m. and, together with Olivia Marchant and her daughter and granddaughter, we would walk the two blocks to the courthouse.

  Tuesday afternoon, Mrs. Marchant came to my office to go over the testimony she would be giving at the hearing. I told her the judge may not allow her to testify about the late night phone calls she had received or the poisoning of her dog, since she had no firm evidence to tie these events to Piranha Partners. If Judge Cloverton wouldn’t allow this testimony, I nonetheless had a few trial lawyer tricks in mind that would cause her to know about these occurrences.

  Ed called me mid-morning on Wednesday to report on his activities over the past few days and what he had learned from the cell phone malware he had installed on Tomas Padilla’s phone.

  “Hello Ed. Where are you?”

  “Hi Jack. I’m back in Los Angeles, walking along the beach near Malibu. There’s big surf this morning due to a storm out in the Pacific somewhere so the surfer community has declared a holiday and is out in force. I’m glad I never got into that sport. It looks dangerous.”

  “It can be, but no more so than driving along the Pacific Coast Highway through Malibu. At least where you are there’s a nice sandy bottom under the surf and not a bunch of rocks. It’s the rocky areas that take down surfers. Any news to report?”

  “Yes and no. I spent Saturday and Sunday in San Francisco seeing if any of my professional contacts there had useful information. I was able to confirm that Bounce is in fact trying to ramp up a money laundering operation in the Bay Area involving a network of players that can service clients with criminal activity in Vancouver, Seattle, Portland, San Francisco, Oakland and San Jose. But no one I talked to had any details about how the operation worked. The rumor running around China Town is that Bounce got its start in Vancouver generating cash from illegal gambling. It started doing money laundering in order to move that cash out of Canada for its own account. Then, a couple of years ago, when Canadian law enforcement agencies began a major offensive against illegal gambling in Vancouver, it switched to offering its money laundering services to others.”

  “And what about information from Padilla’s phone?”

  “As I feared, the phone I planted the malware in is a pre-paid, throw it away when you’re done, product, just like the phone he used for his calls with Turnbull and Williston. And all of the numbers for calls coming into his phone, and calls that he made from the phone, involve similar phones, where there is no way to identify the users of the phone. During the last week, there were only a handful of numbers for both incoming and outgoing calls. Three of these had a Vancouver area code and there was only one call involving each of those numbers. However, one of the numbers the malware captured showed up half a dozen times and the calls to and from that number all took place within an area having San Rafael as its northern boundary and Daly City as its southern boundary. When I call this number, the phone rings three times and then there is a recorded message saying the number dialed is unavailable and the call disconnects. That leads me to believe that the phone Padilla has, and the phones whoever he has been connecting with have, are programmed to only accept calls from preapproved numbers. In other words, these phones are linked together in some kind of secure network. In any event, here’s the number involving multiple calls: 415-636-1428. It’s just a guess, but it may be that the person we saw Padilla meet with at the ferry terminal is the person having a networked phone using this number.”

  I then told Ed what Veronica had learned about the MICR encoding system used by the Fed and her conclusion that someone working at the San Francisco Federal Reserve Bank may have supplied the code that went onto the Turnbull and Williston counterfeit check, causing that check to be routed into a suspense account and thereby allowing the fraud to be consummated. I told Ed that Veronica was now in San Francisco, with an office at the Federal Reserve Bank, and that she would be trying to determine who at the bank might have access to the Fed’s weekly MICR code updates. We agreed that Ed would spend his time on the beach thinking about what happens next if and when Veronica was able to identify who within the bank had been giving information to Padilla.

  We were now twenty-seven days into the standstill period, meaning we had sixteen days left to get the missing money back into the Turnbull and Williston account in order to avoid a messy, expensive and high risk four party lawsuit.

  Chapter 24

  Veronica called me at the office Thursday morning. I had started to call her earlier but decided it was best to let her settle into her temporary assignment in San Francisco, knowing she would call me in due course, and when she had news to report.

  “Hi Veronica. Where are you?”

  “Hello Jack. I’m actually in Fort Bragg, where it’s raining like crazy, and cold and windy. But rain is good here since all of northern California is still in a big drought, doing damage to at least two things dear to your heart—wine and fish. I have three banks in this area I need to meet with and try to coach into improving their security systems. So I’ll be here through Monday and then heading back to San Francisco.”

  “There are some nice public headlands on the north end of Fort Bragg. If it ever stops raining, you should check that out. This time of year, there’s big surf rolling in and waves crashing into the rocks and you can occasionally see grey whales cruising by on their way to the whale resort they go to in Mexico for the winter. Have you had any time to work on your second agenda?”

  “Yes, actually. By wandering around and casually talking to people at the San Francisco Federal Reserve Bank, I’ve been able to narrow down the list of people who have access to weekly changes in the way checks are routed through the Fed check collection system based on their MICR encoding. As I told you before, one of those people is the president of the bank, but he was back in Washington for a meeting of the Fed’s board of governors during the time the Turnbull and Williston fraud was taking place, and he was also in Washington last week when you and Ed saw Padilla meet someone at the ferry terminal. That leaves two other people, both of whom, based on the photos you took of backsides, are roughly the same height and weight as the person in your photos. One of these guys, William Pollard, is a vice president in the bank’s operations and administrative services department. The other one, Rudolph Suzuki, is a vice president in the information and technology department. They both live in the North Bay area and both frequently, but not always, commute using the Tiburon ferry. As expensive as that is, it’s cheaper than driving across the Golden Gate Bridge and paying tolls and for parking in downtown San Francisco. And it’s more pleasant than riding a bus. Both of these guys were at the bank the day you saw Padilla meet someone at the ferry terminal. There was a senior management staff meeting that afternoon and they both attended the meeting.”

  “I’ll pass those names on to Ed and see if he can come up with anything. I have one little idea for checking these guys out we can talk about next week when you’re back in San Francisco. Stay safe. I
miss you.”

  “Thanks Jack. I’ll be fine out here. I miss you too. It would be nice to have you under the covers with me on a cold and rainy night in Fort Bragg, California.”

  I next put in a call to Ed on his secure connection cell phone. He didn’t answer, so I left him a message telling him Veronica had identified two employees at the San Francisco bank as possible insiders feeding information to Tomas Padilla--a William Pollard and a Rudolph Suzuki.

  I then headed to a meeting with Stephanie, Jennifer and Bruce to further discuss the matter of cloud computing and what we needed to do to make the transition; avoid losing all our clients’ (and our own) confidential information; find a non-profit organization that could use our current server; strip data out of the server to be sure nothing was compromised; retire our loan taken out to buy the server; train our staff and ourselves in using the new system; find the money to pay for these things; etc. All in all, a depressing agenda, forced on us by Stephanie’s continuing assurances that our current computer system was a train wreck waiting to happen. After several minutes of collective sighing, we gave Stephanie authority to proceed with the project, coupled with a plea that she not let this interfere with her real job as a legal secretary. The fewer disruptions in our lives, the better.

  I spent Friday morning getting other work under control so I could devote myself to the Piranha Partners v. Marchant hearing on Monday and have some time after that to help Veronica and Ed with the Williston and Turnbull investigation. Getting work “under control” is a vague concept in the practice of law, but it generally revolves around not missing court deadlines, assuring clients their matter is a top (and possibly the only) priority at the firm, and finding quiet time to think about difficult legal questions and drill down on issues requiring research and analysis. All of this is commonly referred by lawyers as a “juggling act.”