Fraudulent Transfers Page 15

  “Mr. McConnell?”

  “Thanks Judge. The evidence is clear and convincing that the December 24, 2007 business interest exchange transaction between Mr. and Mrs. Marchant had as its only purpose to let Robert Marchant run the land development business and let Olivia Marchant run the property management business. The real estate market for finished and ready-to-build-on lots was still going strong in December of 2007 and into the early summer of 2008. There was no intent here to hinder, delay or defraud creditors. In other words, there was no fraudulent transfer. It’s undisputed that neither Mrs. Marchant nor Mountain View Property Management, LLC is a guarantor of Piranha Partners’ loan or otherwise obligated to pay this debt. Suing Olivia Marchant and Mountain View Property Management was a shake-down tactic by the plaintiff, without substance in fact or law. And, as the Court has heard, the other collection tactics thus far used by Piranha Partners are even more shocking and outrageous. We have met our burden of showing you that the defendants in this case will, in the end, prevail both as a matter of defense against the claims of the plaintiff based on fraudulent transfer law and on their counterclaims for outrageous conduct and abuse of process. Injunctive relief preventing Piranha Partners from engaging in further collection activity while this case proceeds to a final conclusion is totally appropriate in this circumstance, and something justice requires.”

  “Alright, thank you gentlemen. Things are pretty backed up in this division at the moment and we’re now six days from Christmas but I’ll try to issue a ruling by no later than the end of next week. That is, before the end of the year.”

  “All rise,” John the clerk/bailiff shouted and Judge Cloverton then slipped out the door behind her bench. Stringer, with Costellanie and Wainwright in toe, immediately left the courtroom with no parting words to, or other acknowledgement of the existence of, Mrs. Marchant, Marvin Lang, Roberta, Tracie or me.

  I gave Olivia a hug and shook hands with Marvin, Roberta and Tracie. “Good job everyone. Thanks. I’ll let you know as soon as Judge Cloverton issues her ruling.”

  Olivia gave me a smile and said: “Thanks Mr. McConnell. I can’t tell you how much I—we—appreciate what you’re doing for us.”

  Since clients don’t always say such things to their lawyers, this was a nice way to end the day.

  Chapter 26

  Although I was initially planning to head home after the Piranha Partners/Marchant hearing and give Fletcher a pre-dinner walk around the neighborhood, allowing him to reassert dominion over territory claimed by other neighborhood dogs during the day, I decided I’d better first stop back at my office to be sure no crises were pending. Stephanie assured me all was calm and I could leave without dereliction of duty. When I checked my voicemail, however, I found a message from Ed and, eager to know what he might have to report, I called him back. I again found him walking along a beach somewhere on the east side of Los Angeles.

  “Hello Ed. I can hear the surf pounding in the background, or maybe that’s the traffic on the Pacific Coast Highway.”

  “Hi Jack. It’s the surf. The traffic, as usual, is at a gridlock-induced standstill. Today is another high surf day, this time because of a storm working its way east from Hawaii. As you know, around here they call these storms the Pineapple Express. First comes the wind and high surf and then, if we’re lucky, some much needed rain. There are lots of people on surf boards right now seemingly having a good time trying to take themselves out of the gene pool. As I recall, you used to be one of them when you were growing up in Southern California.”

  “Yes indeed I was but, much to the surprise of my parents, I managed to survive and grow up to be more careful. There were, however, a few close calls. Anything useful to report about our two Federal Reserve Bank of San Francisco mole candidates—William Pollard and Rudolph Suzuki? Veronica is back in San Francisco and ready for further detective work inside the bank.”

  “I have a little information for you that may be helpful. Suzuki got a degree in computer science from MIT twenty years ago. After MIT, he went to work for Bank of America at its headquarters in Charlotte, North Carolina. He left there after five years and came to work for the Federal Reserve Bank of Kansas City, in its information technology department. The Fed moved him to the Federal Reserve Bank of San Francisco four years ago to help that bank upgrade its computer systems. He’s married and has two kids, both of whom are in college at small private schools, one in Iowa and one in Minnesota. His wife is a nurse at a hospital in Corte Madera, so it’s a two income family. He lives in San Rafael in what is probably a $1 million home—modest by Bay Area standards. There’s an $800,000 mortgage on the property, which translates into $5,000 or so a month in housing expense. San Rafael, as you probably know, is some fifteen miles to the north up Highway 101 from the Golden Gate Bridge. Corte Madera is five miles south of San Rafael. Suzuki and his wife both have good credit scores, in the low 800’s.”

  “What about Pollard?”

  “Pollard graduated from Stanford twenty-five years ago, majoring in economics. After graduation, he got a job with a mid-size regional bank in Sacramento. He stayed there for seven years and ended up as a senior vice president in charge of deposit account operations. He then went to work for the San Francisco Federal Reserve Bank and has been there ever since—some eighteen years now. He’s forty-eight years old, recently went through a divorce, and has one kid, gainfully employed with Microsoft in the Seattle area. He lives in Tiburon in what is probably a $2.7 million house, meaning a small fixer upper in that community. He somehow managed to buy that house for cash—at least there was no recorded mortgage—two years ago. Then eight months ago, he put a $3 million mortgage on the property. This may have had something to do with his divorce but I haven’t found anything that ties these events together. He also has a low 800’s credit score. That’s all I’ve been able to dig up so far.”

  “That’s useful information, Ed. Why don’t you lay low for the moment and let’s see what Veronica can do from her position inside the bank. Assuming we in fact find someone there who’s feeding information to Padilla and, through him, to Bounce, you can be thinking about what happens next.”

  “That’s what these walks on the beach are all about, in addition to checking out the latest in female beach fashion.”

  “Well don’t mention your time spent doing female beach fashion research in your billing statements to Front Street Bank. I can assure you, based on personal experience, that Mike Lawrence is not going to pay for that.”

  Fletcher and I finally did have a nice walk around the neighborhood, although I noticed he was occasionally dragging his left rear leg, something I hadn’t seen him do before. This condition improved when we turned around and headed back home for dinner.

  After Fletcher and I dined, I sent Veronica a text message asking her to call me in the morning. I also looked at my calendar and noted we were now thirty-two days into the standstill agreement, meaning we had eleven days left before the litigation bullets started to fly.

  Veronica called Tuesday morning shortly after 10:00 a.m. my time, 9:00 a.m. her time.

  “Hi Jack. I’m back at my temporary office at the San Francisco bank. How did your hearing go yesterday?”

  “Hi Veronica. You never know about these things, but I think the hearing went well. Marvin Lang was, as usual, a great expert witness and Olivia Marchant told her story with dignity and credibility. Our judge, of course, knows almost nothing about the areas of law this case involves but I’m hoping she’ll do her homework and ramp up at least to a level where she can make a reasoned and informed decision. We should know about that late next week. How was your trip to Fort Bragg?”

  “I think I got the attention of the banks I visited and they now understand the weaknesses in their computer systems and what they need to do to shore up those systems. During my meetings with each of the bank’s senior management staff, I started off by hacking into their system with my laptop and, while they were watching, moved money out
of their personal accounts. After that, they paid close attention to what I had to say. And Jack, the weather finally cleared up the last day I was there and I went out to the headlands you told me about on the north end of town and I saw the whales—or at least the spray they were generating when they surfaced from a dive. I’d say they were only two hundred yards out from where I was, and there must have been a dozen of them. What wonderful amazing creatures. It’s hard to believe they go all the way from Alaska to Mexico and back again every year--and that people not so very long ago killed them and turned them into lamp oil. But, back to business. Was Ed able to learn anything about Suzuki and Pollard?”

  I passed on to Veronica what Ed had told me in yesterday’s phone call. I then described to her a plan I had come up with to see if Suzuki or Pollard was working for Padilla and Bounce. This required her to set up a meeting with each of them, on the pretense that she wanted their input on how best to get the smaller banks in the 12th Federal Reserve District to improve the security of their computer systems.

  “OK Jack. I’ll try to set up those meetings and I’ll cycle back to you with the start times.”

  Veronica called me back shortly before noon and said she had a meeting scheduled with Suzuki for the next day at 3:30 p.m. my time. Her meeting with Pollard would then follow at 4:15 p.m. my time.

  As we had agreed, shortly before 3:30 p.m. the next day—Wednesday, December 21—the first official day of winter--Veronica called me on her cell phone, told me she was going into the meeting with Suzuki, and told me she would leave her cell phone on in her jacket pocket so I could listen in on the conversation. She reminded me I needed to have my phone on mute to be sure no sound coming from my phone would be heard coming from her phone.

  “Hello Rudolph,” Veronica began. “Thanks for agreeing to meet with me on short notice. Is this still a good time?”

  “Yes, of course, Veronica. Please sit down. Coffee? Water? Soft drink?”

  “No. But thanks for the offer. I’m going to try to be brief here. I know you’re busy. As I think you’ve been told, I’m out here on a special assignment from Fed headquarters in Washington to try to get the smaller banks in this district to improve the security of their computer systems. When I’m done here, I’ll be moving on to the 11th District to do the same thing. We know many of the smaller banks in the country being served by the Fed are behind the times and are vulnerable to hacking. I was just up in Fort Bragg and met with three banks there where, while the senior management staff watched, I was able to get into, and control, the bank’s computer system using a remote access technology application—a RAT. My main question to you goes like this. Where have you seen the greatest weaknesses in the computer systems of smaller banks in this district?”

  That was my cue. I took out the throw-away-when-done/no-owner-registration cell phone I had purchased for the occasion and dialed the most frequently used number Ed had captured from Padilla’s phone. The call I made rang three times and then disconnected. However, I heard nothing in the nature of a cell phone ring coming through Veronica’s phone. A swing and a miss on my plan.

  “Where I’ve seen a problem,” Suzuki said in response to Veronica’s question, “is with smaller banks that don’t connect directly to the Fed’s payments systems for checks, wire transfers or automated clearing house transactions. These banks use another bank—a correspondent bank--to gain access to our systems. The link between the smaller bank and the correspondent bank is where the weakness lies. I think that’s where you’ll want to focus at least some of your effort.”

  Veronica and Suzuki continued with their conversation, at a technical level I could not understand, for another fifteen minutes or so and then Veronica expressed her thanks for Suzuki’s input, gave him her card with email, text, fax and telephone contact information and exited Suzuki’s office. Once outside his office and in a place where no one could overhear our conversation, Veronica came back on the phone.

  “Jack, are you still there? Did you make the call?”

  “Yes, I’m still here and yes I made the call. There were three rings and the call disconnected. But I didn’t hear anything coming through on your phone. Did you hear the rings when you were in Suzuki’s office?”

  “No. Nothing. If he’s our guy, it could, of course, be that he doesn’t carry the phone we’re fishing for around with him. Do you still want to try the same experiment with Pollard?”

  “Sure. Why not? I have eighty bucks tied up in this prepaid throwaway phone so I might as well get my money’s worth.”

  “Alright. I’ll call you when I’m going into my meeting with Pollard.”

  As with Suzuki, as soon as Veronica asked Pollard where he thought the small bank security problem might lie, I placed a call on my throw-away phone and this time—score! I heard three faint rings coming through on Veronica’s phone before the call I made disconnected. Pollard ignored the rings, kept talking in response to Veronica’s question, and made no effort to explain the rings. There was, however, a short mid-sentence pause and, I thought, something of a stumble in his speech.

  Veronica continued her conversation with Pollard for another ten minutes. Again I couldn’t understand the technical information exchanged but it seemed to me that Pollard, like Suzuki, had useful thoughts about security weaknesses at smaller banks in the Fed’s 12th District. At the end of the conversation, Veronica thanked Pollard for his time and left his office. When she was in a safe place to talk, she came back on the phone.

  “Jack, it worked!” she said excitedly. “Did you hear the rings?”

  “Yes I did. I think we’ve found our guy.”

  “One other thing. While I was in Pollard’s office, I was able to detect on my laptop another computer running somewhere nearby—not a part of the Fed’s network. That computer was connected to the Internet via a portable cell phone wi-fi device. I want to get back in Pollard’s office and see if I can take a look inside that computer.”

  “Veronica, I don’t think that’s such a great idea. You have to remember we now know Pollard seems to be connected in some way to a big time crime organization. That organization could be capable of seriously bad acts if it finds someone peaking under its tent.”

  “It’s nice of you to worry about me, but I’ll be fine. Pollard doesn’t seem to be an ax murder type.”

  “It’s not Pollard I worry about. It’s the people he’s dealing with.”

  “I’ll be careful. I’ll call you later if I see a chance to get back in his office.” And with that, Veronica hung up, giving me no further opportunity to comment on her apparent intention to take my relatively safe little plan to a higher, and more dangerous, level.

  Veronica called again on her cell phone at shortly before 6:00 p.m. my time, 5:00 p.m. San Francisco time.

  “OK Jack, I’m going into Pollard’s office. His secretary has gone for the day and he’s supposed to be in a meeting on another floor with some of the people he supervises. So the coast should be clear. I’m heading toward a closet on the west wall where I think the computer I picked up on earlier is located. I’m getting the same signal I did before. I’m sitting down in a chair near the closet and I’m booting up the remote access software I’ve got in my laptop. This will take maybe fifteen seconds.”

  At this point, all I could hear was Veronica breathing and clicks on the keyboard of her laptop.

  “There. I’m booted up. Now let’s see what I can do. Oh my God Jack. Someone is coming. Mute your phone.”

  The next thing I heard was Pollard’s voice—using a tone I would describe as surprise. “Veronica, is there something I can help you with? I thought this office was locked.”

  “Oh hi Bill,” Veronica said using a tone I would describe as, well, shaky. “No, the door was open and I couldn’t find your secretary. I’m looking for a little spiral notebook I thought I had with me when we met earlier. I use that to make notes to myself to do things and I can’t seem to find it so I thought maybe I dropped it in your offic
e. But I don’t see it anywhere. If it shows up, will you call me?”

  “Sure. What color was it?”

  “Tan. It was tan, with a spiral binding on the top.”

  “I’ll call you if I find it and I’ll ask my secretary in the morning if she might have picked it up.”

  “Right. Thanks Bill. Bye.”

  I next heard a door close—presumably the door to Pollard’s office—and I then heard Veronica walking and breathing for maybe two minutes before she came back on the phone.

  “Damn. Jack, I’m sorry. That didn’t quite go as planned. I probably compromised our whole effort with that little stunt. If Pollard starts asking questions, it’s not going to take him long to connect me to you and you to Front Street Bank and Front Street Bank to the Turnbull and Williston fraud and then--what is it you say?--the prairie dogs will be back in their holes hiding from the coyote, never to be seen or heard from again.”

  “Veronica, we’ll be OK. I thought your explanation as to why you were in his office sounded believable. But did he see you sitting on the chair with your laptop fired up?”

  “No. Fortunately, I had just enough time to get off the chair and close the cover of my laptop before he came in the room.”

  “Good. That helps. Listen, get yourself out of there and back to your hotel. Have a glass or two of nice California pinot noir, order room service for dinner, and lock your door. I’m going to call Ed and tell him we think we’ve identified the source of the information leak, and see what he wants to do next.”