Fraudulent Transfers Read online

  “Alright. Thanks Jack. Again I’m sorry. I wish you were here. I’m still shaking. I don’t think I’m cut out for detective work.”

  “You’re doing great. I’ll call you tomorrow, after I track down Ed.”

  Chapter 27

  As soon as I was off the phone with Veronica, I gave Ed a call on his encryption-enhanced cell phone. I left a message telling him I was heading home and to call me there. He called twenty minutes later, just as I was getting ready to give Fletcher his dinner. When Fletcher heard the phone ring and saw me pick it up, with his food bowl still on the counter, he gave me his best Labrador retriever scowl and stopped wagging his tail.

  “Hi Ed. Hold on a minute. I need to give Fletcher his dinner or he may bite my leg.”

  After Fletcher’s dinner was served and his tail was wagging again, I continued. “Sorry about that. This dog is used to having his way around here. But listen, I think we’ve identified our inside-the-Fed contact Padilla has been using. It’s William Pollard.” I told Ed how Veronica and I had used the phone number he had retrieved from Tomas Padilla’s cell phone to link Pollard to Padilla and, we assumed, to Bounce and the Turnbull and Williston fraud and no doubt big time money laundering activity.

  “Good work, Jack. You’re again showing signs of private investigator aptitude.”

  “Thanks, I guess. But I’m more convinced than ever that this is a dangerous line of work, and probably not covered by workers compensation insurance.” I then told Ed about Veronica’s failed attempt to remotely access Pollard’s computer in the closet in his office and his coming into the office while she was there, and shouldn’t have been.

  “I doubt that was enough to cause him to think he’s under investigation or that Veronica is in San Francisco with an agenda other than improving small bank security. In any event, based on what I’ve decided I’m going to do next, I’m not sure it would matter. In fact, I think having Pollard worried about his connection with Padilla and associates might be a good thing. Did Veronica give you a description of Pollard?”

  “Yes. I should have mentioned that. Roughly the same build as Padilla. Five foot ten or thereabouts. A bit overweight. Maybe a hundred ninety pounds. As you already learned, he’s in his late forties. Brown hair, medium length, starting to turn grey around the temples. No glasses. Nicely dressed. She emailed me a picture of him that she found in the personnel manual for the San Francisco bank. I’ll forward that to you.”

  “Good. That will help.”

  At that point, Ed proceeded to tell me what was next on his agenda. He would be flying back to San Francisco in the morning, Thursday, and he would call me once he was deployed and his operation was underway.

  I called Veronica Thursday morning at her hotel and briefly described to her what Ed had come up with as the next step in his plan. After yesterday’s close call with Pollard, she had decided—wisely, I thought--that it would be best if she didn’t show up at the San Francisco bank for the rest of the week. It was now December 22, Christmas was coming up on Sunday and lots of people were taking Thursday and Friday off as part of a long holiday weekend. Veronica said she was going to drive down to Monterey on Friday, spend the weekend there and on Monday meet with a couple of small banks in that area whose computer systems had been identified as weak on security.

  After my call with Veronica, I sent a short email to Josephine Haughton telling her we were making progress in our investigation of the Turnbull and Williston fraud, and that I would have more news for her in the near future. I forwarded a copy of that email to Wiley Monfort and Mike Lawrence to keep them up to date. I confirmed in my email to Josephine that I knew the expiration of our standstill agreement was now eight days away.

  Ed hadn’t told me everything he had in mind for his return to San Francisco but he did tell me it would involve a confrontation with Pollard. That was enough to keep me on edge throughout the day and made doing useful legal work for clients difficult. I instead tried to study the online instructions we had been given for our new cloud-based computer system. When that proved unproductive and beyond my level of comprehension, I read the latest edition of Trout magazine and cruised the Internet looking for reports of flow levels and temperatures at the various tail water rivers along the Front Range offering winter fishing opportunities. After a trip to the Y for a weight workout (the weights won again) and a late lunch, I headed home in anticipation of a call from Ed. The call finally came at 6:20 p.m. my time, 5:20 p.m. his time, just as I was starting on my second glass of the house merlot.

  “Hi Jack. I’m at the ferry terminal and Pollard is here, by himself. We’ll be boarding the 5:25 boat to Tiburon shortly. I’ll leave my phone on so you can hear what’s happening. In case that doesn’t work for any reason, I’ll be recording my conversation with Pollard. Go ahead and put your phone on mute. I’m not sure how long this is going to take. In all events, I’ll call you after I’m done with Pollard.”

  For the next twelve minutes, all I heard were sounds from the boat, safety announcements from the boat’s captain and the muffled voices of passengers. Then:

  “Hello Mr. Pollard.”

  “Excuse me. Do I know you?”

  “No you don’t. But I know you and lots of things about you. You can call me Ed. I’m a private investigator and I work for some people back in Colorado who are out $4.8 million thanks to a counterfeit cashiers check fraud that you helped orchestrate. Hold on a second here and I’ll provide you with some credentials.”

  I next heard Ed dialing a call on another cell phone and then I heard three muted rings.

  “You received that phone in your briefcase from a man you know as Pedro Alvarado. His real name is Tomas Padilla. He’s also used the name Jarad Salamante. There has been a federal warrant out for his arrest for several years now because of an embezzlement he pulled off while an employee of Bank of America in San Clemente. Until recently, he’s been hiding out in Canada. Padilla currently works for a money laundering operation active from Vancouver to San Jose known in the trade as Bounce. You have been giving him confidential information from the Fed that has allowed him, and Bounce, to commit various criminal acts, including the counterfeit cashiers check fraud I just mentioned. There, you told him what had to be included in the MICR encoding on a bogus cashiers check in order for it to get hung up in a Fed suspense account long enough for the depositary bank to think it had good funds in its customer’s account. Do you want to hear more?”

  After a pause. “No. I think that’s enough. I’d like a drink. Do you mind?”

  “Not at all. Under the circumstances, that might be a good idea. We have several things to talk about.”

  I then heard shuffling sounds which I assumed came from Ed and Pollard making their way to the onboard bar, where Pollard ordered a Jack Daniels double and Ed ordered a coke. “I have an expense account,” Ed said. “I’ll pay.” More shuffling sounds as Ed and Pollard returned to their seats.

  “Look—Ed. This is not a good place to talk. Every once in awhile, there’s someone on this ferry whose job it is to watch over me. So how about we read newspapers or something until we get to Tiburon. And then we can continue this conversation.”

  “Right,” Ed said. “I brought along a copy of the New York Times for that very purpose.”

  “When you get off the boat,” Pollard continued, “head east along the Tiburon seawall until you get to the maritime museum. It’s maybe a third of a mile from the pier where we dock. I’ll follow you and meet you there, on the east side of the museum, at the small parking lot.”

  After that, all I heard for the next ten minutes was the whirring noise of the boat’s motors, pages of newspapers being turned, and occasional snippets of conversation coming from other passengers. Then I heard the captain announcing that the boat was arriving in Tiburon and advising the passengers to stay seated until the boat was safely tied up at the dock.

  A few minutes later Ed came on the phone. “Jack, are you still there?” I told him I wa
s. “OK, we’re on our game plan. I’m alone now walking along the Tiburon seawall, by myself. Pollard should be a short way behind me. I have the sense that Pollard wants to tell all. He’s oozing stress. I’m headed for the maritime museum, as he instructed, and again I’ll leave my phone on so you can listen in on our conversation. By the way, it’s really beautiful here. The sky is clear and the stars are out and I have an unobstructed view of the lights of San Francisco across the Bay, with Alcatraz lit up in the middle of the Bay. It’s high tide and the waves are lapping gently against the seawall.”

  “That sounds wonderful Ed, but don’t morph into a tourist on me. And try not to get yourself killed. This seems like a perfect place for a murder. Just throw the body over the seawall and let the tide take it out into the Bay to be eaten by fish. I’m putting my phone back on mute.”

  The next voice I heard was Pollard’s. “OK, I think it’s safe to talk. I often walk along the seawall at the end of the day to unwind and sometimes I think I’m being followed. But I didn’t see anybody around this evening. Listen, Ed, or whatever your real name is, I know you’re in the driver’s seat here but can you tell me a little more about why we’re having this conversation? I’m pretty confused at this point.”

  “Sure. And my name really is Ed. Let me start with this. It’s confession time. I have enough information at my disposal to put you in prison for the rest of your life for violations of the Money Laundering Control Act, the Annunzio-Wylie Anti-Money Laundering Act, the Money Laundering Suppression Act, the Money Laundering and Financial Crimes Act, the Intelligence Reform and Terrorism Prevention Act and the Bank Secrecy Act, to name a few. But that’s not my objective. I’ve been hired to put $4.8 million back into the hands of my clients--to undo the counterfeit cashiers check fraud you helped perpetrate. The primary purpose of this conversation is to encourage your cooperation in that regard, with the expectation that your cooperation will, in the end, be to your benefit as well. You’re obviously not a born-again criminal type, so why don’t we start by having you tell me what’s going on in your life that’s caused us to be here?”

  “Let’s keep walking along the seawall, if you don’t mind. It helps to calm me down. I guess you’re right that, at this point, I have no choice but to tell all, and frankly it feels good to do so. I’m tired of living under a cloud of deceit and being followed around by people I don’t know, don’t like and don’t trust. Whatever’s going to happen to me, I want to get it over with.”

  There was a ten second pause and then Pollard continued. “This story begins with the death of my mother, two years ago. My father was a Silicone Valley pioneer who made a fair amount of money. When he died, four years ago, he set up a trust to support my mother until her death and then the money in the trust came to my two sisters and me in equal shares. My share was a tick under $6 million. I used $2.5 million of that to buy the house I have here in Tiburon. And then--I seem to have developed a gambling addiction. I started hanging out on weekends at casinos up and down the west coast owned by Indian tribes, with an occasional trip to Vegas. After a year of heavy betting—mostly craps and roulette--I was invited by a guy I met in Vegas to join a secretive group of big time gamblers based in Vancouver. Most of these people—mostly men but there were a few women--were Oriental and they had come to Vancouver from Hong Kong shortly before the Communist Chinese took over ownership of Hong Kong. They had lots of money and they met on weekends at a private club near the Vancouver Airport, in Richmond. They also established a sophisticated online gambling operation, encrypted and protected with passwords and other security devices. I made a few trips to Vancouver to gamble in person with this group but the online setup allowed me to gamble right from the comfort of my home office, at night, night after night, after my wife had gone to bed. Just me and my dog, Molly, in my office, gambling away my inheritance.”

  At this point, Pollard’s voice started to crack and he stopped talking. After another ten second pause, Ed said gently, “Go on please.”

  “Right. Sorry. This is harder than I thought. Anyway, minimum bets required with this group were $50,000. This was incredibly exciting and in the first few months, I was way ahead. I had turned a $3 million investment into $30 million. Looking back on it, this was probably a setup. They knew I had come down with the gambling addiction disease and could be pulled into the net.”

  Another pause. “And?” Ed asked.

  “It took less than ten days for me to go from being $30 million ahead to being in the red by $3 million. At that point, I was immediately shut out from further participation in the gambling and shortly after that I was paid a visit by two not very nice people—thugs is probably the right way to describe them—right along the seawall here who told me I had twenty days to come up with the money or bad things would start to happen to me, my wife, my son, my dog. Shortly after that, I was paid a visit by a professionally dressed and very articulate and attractive Chinese woman, probably in her early thirties, who told me she represented one of the members of the Vancouver group who would help me solve my problem by loaning me the $3 million I needed to pay off my gambling debt. I would need to sign a promissory note to a U.S. company this person controlled—Triangle Capital--and I would need to put a deed of trust on my house to secure the debt. The interest rate would be six percent over prime, meaning ten percent, adjusting monthly. Interest only for twelve months and after that amortizing over fifteen years. Based on my income at the Fed, I knew I couldn’t get a loan for $3 million from anywhere else so I had no choice but to go along with this offer. Can we sit down for a couple of minutes? I’m getting tired. Sleep is hard to come by these days.”

  “Sure. The bench over here is out of the wind. Let’s go there.”

  “Anyway, to continue, although the house is in my name, in California, as you probably know, a non-owner spouse has to join in a deed of trust for it to be valid. So I needed to tell my wife, Pamela, most of what I just told you—that I had gambled away my inheritance and then some, and now needed to put our home at risk of foreclosure in order to get out of this mess. That was the straw that broke the camel’s back on our marriage and, although Pamela signed the deed of trust, she moved out and promptly filed for divorce.”

  “Help me understand the chronology here. When did your default on the gambling debt occur?”

  “Nine months ago. In March. The divorce was final two months ago, in October.”

  “Go on.”

  “I cashed out life insurance policies and borrowed against my retirement account to make the first few months’ payments on the loan but then, in July, I could only make a partial payment. That’s when I first received a visit from Pedro Alvarado, the man you say is really named Tomas Padilla. He met me at the ferry terminal on my way into the City. He told me he worked for some people who knew the people at Triangle Capital and the people he knew could help me cover my mortgage payments. All I would need to do in return was to provide him from time to time with some information about the Fed’s payments systems. Nothing big. Just some information that goes into the routing of checks in the Fed’s check clearing operation, wire transfers using FedWire and transactions over FedACH. That’s our automated clearing house system. There’s another privately owned ACH system called The Electronic Payments Network. The two systems are separate but they work together to handle ACH transactions across the country. Anyway, once again I found myself trapped. If my loan to Triangle Capital went into default and my house was foreclosed on, I would for sure lose my job at the Fed. Personal financial screw ups by senior management are not tolerated and are grounds for dismissal for cause, meaning loss of my job, health insurance and pension income, and never being able to get a job again in banking. I told Alvarado I needed to think about his offer and we agreed to meet again the next day, at the ferry terminal, which became our regular meeting place. At that second meeting, I told him I’d give his proposal a try and see how it went. I asked him what information I needed to give him to get my mortgage cu
rrent through the August payment. He said he needed to know the FedWire logon name, PIN and password that would allow a small independent bank in Houston--Valley Commercial Bank--to receive, and then forward on to a bank in Nevis, a large wire transfer on August 4. I told him to meet me that evening at the ferry terminal at 5:20 p.m. and I would give him the information, which I did. On August 5, I received an email confirmation from Triangle Capital that the balance of my July payment, and my August payment, had been made and my loan was current. Let’s start walking again, back toward the ferry terminal where I can get a bus to take me home. The busses stop running in half an hour.”

  “OK, and what happened after that?”

  “I didn’t see Alvarado again until the end of August. He met me at the ferry terminal on my way into work. This time, he wanted information we use to move large batched ACH transactions from an account at a bank in one Federal Reserve District to an account at a bank in another Federal Reserve District. Again there are log on names, PIN’s and passwords that are changed on a regular basis. I gave him that information at the end of the day and two days later I received confirmation from Triangle Capital that my September mortgage payment had been received.”

  “Next?”

  “At the end of October, he wanted the MICR encoding information that was apparently used for the counterfeit cashiers check fraud you have mentioned. I didn’t know what he was going to do with the information I gave him. I just told him what had to be in the MICR line to route a check to a Fed suspense account where improperly coded checks end up, and where it often takes several days before a routing error is resolved. I then received an email telling me my October and November mortgage payments had been made and my loan was current. As you can see, this was falling into a pattern. I was desperately trying to find a way out of this trap but short of suicide, and that’s been on my list of options, nothing seemed possible. I couldn’t just sell the house because it’s worth $300,000 less than what I owe Triangle Capital, and I’m supposed to pay Pamela $500,000 when the house gets sold. And my sisters and I aren’t on speaking terms so I couldn’t ask them to make me a loan to bail me out. If I told them why I needed the money, they’d have me arrested.”