Fraudulent Transfers Read online

  “Just one more thing Jack. As you already know, Front Street Bank is on the FDIC’s closely watched bank list. Thanks to some real estate development loans we wish we hadn’t made and that went into default, the bank’s capital is below what it needs to be. If we end up having to put $4.8 million back into Turnbull and Williston’s account, that money will come right out of the bank’s capital—and there is then a good chance the FDIC will shut us down. So not to put pressure on you or anything, but the survival of this one hundred and twenty year old bank is now in your hands.”

  Chapter 2

  By the time I arrived home from my meeting with Mike, Hillary and Justin, the sun had long ago set behind Pikes Peak and the temperature had dropped from 50 degrees to 20 degrees. I found Fletcher, my eleven year old/soon to be twelve black Labrador retriever, on the light-colored sofa in the living room, where he--a prolific shedder--knew he wasn’t supposed to be. He gave me a two-on-a-scale-of-ten tail wag, showed no indication of any intent to move and demonstrated no sense of guilt. His top-of-the-line, cedar chip filled, pooch pillow from Orvis was right next to the sofa but looked unused. Fletcher finally moved off the sofa in response to a promise of dinner. There, I did give him an extra helping of Greek yogurt on top of his hypoallergenic (and very expensive) senior dog chow and made my apology for not giving him a walk in the Garden of the Gods, as I had promised earlier in the day. He seemed to accept my apology, with a vague understanding that work occasionally gets in the way of more important things. My sixteen year old neighbor and friend, Cooper, had at least stopped by my house after school, as he usually did, to give Fletcher an ear scratch, throw him a few sticks and let him reclaim territory in my front yard that might have been lost during the day to interlopers. While Fletcher vacuumed up his dinner, I poured myself a tall glass of the house brand of pinot noir from the 1.5 liter, screw top, bottle it comes in and put in a call to Veronica.

  Veronica Stailey and I had met two years ago when we worked together to shut down (mostly by luck) a cyber attack on the U.S. banking system. Veronica is a computer expert working for the Federal Reserve Board and our adventure together began when a Front Street Bank employee who had discovered early signs of the attack was murdered. Veronica and I, both single and veterans of sad and painful divorces, became more than just friends by the time we managed to save the banking system from a disaster with world wide consequences.

  Last summer, Veronica convinced the Fed to relocate her to Denver from Washington, D.C. and she now lives in a rented loft in Lo-Do which, at my recommendation, happens to be a few blocks from Coors Field. We spend as much time together as our respective professional lives permit. The subject of marriage, however, has never been discussed. For Veronica, at age forty-six (if she’s telling the truth) and me, at just turned fifty-seven, even casual thoughts of a new commitment after a failed marriage and years of living alone are still too frightening to be allowed.

  “Hello Jack,” she answered with her wonderful hint of an East Coast accent. “I thought you might be calling. I understand Mike Lawrence talked to you today about the Salamante fraud.”

  “Hi Veronica. Yes. I met with Mike and a couple of his bank officers this afternoon and received at least an initial briefing on the situation. Mike told me the Fed wants you to be on the team that will investigate the fraud. That’s great but, as I’m sure you know, this could all play out to where the Fed tries to place the blame, and legal liability, on Front Street Bank and Front Street Bank tries to place the blame, and legal liability, on the Fed. So this will be a delicate dance.”

  “Right, but I’m hoping we can be successful in going after the common enemy—the crooks—and we’ll never get to the next layer of analysis.”

  “I agree. I’m going to try to track down the lawyer representing Merchants Bank and see if I can get that bank to join in the standstill agreement that Front Street Bank and the Fed have seemingly worked out. I’m also going to call the lawyer representing Messrs. Turnbull and Williston in the morning and try to get her to back off from filing a lawsuit, and ask her to cooperate with us in chasing the common enemy. But we’ll see how that goes. She, based on past experience and like other women lawyers I know, can be hotheaded and stubborn.”

  “Jack, shame on you. That’s condescending, and sexist.”

  “You’re right. I apologize. But, now that I think about it, you’ve been known to be hotheaded and stubborn yourself.”

  “That’s enough. I was planning to come down there this weekend and maybe let you have your way with me but not if you’re going to be rude to me.”

  “Veronica, I was just kidding. But I do remember how you took on the head lady at S.O.S. and how, if you hadn’t been hotheaded and stubborn, the S.O.S. attack on the U.S. banking system might have been a success.” (S.O.S. is the acronym for La Société Ombragée de Savants, French for what roughly translates as the Shadowed Society of Scientists. This is the radical group that was planning the banking system attack.)

  “OK. Nice recovery. I should be down there about 6:00 on Friday. You’re in charge of dinner. Hopefully by then I will have had a chance to dig deeper into the circumstances surrounding the bogus Merchants Bank cashiers check.”

  “I’m thinking I’d like to get Ed, the private investigator you and I worked with on the Cranston will contest case, involved in this investigation as well. As you may recall, he has ways of getting information that he can’t talk about and that are not available to you and me, but can be very productive. Do you suppose the Fed will help pay for his services?”

  “I’ll ask, but don’t hold your breath. I’m not sure the Fed can publicly condone some of Ed’s information gathering tools. Plus, the purse strings are tight around here going into an election year next year. Still, there’s usually a little pot of money lying around in some vaguely described part of our budget that can be tapped when the need arises. Why don’t you talk to Ed and see what he thinks he might be able to do, and what he might have to charge, to help us out.”

  “Will do. And I’ll let you know how I make out with Josephine Houghton, the lawyer for Turnbull and Williston.”

  “Is she cute?”

  “Hmm, no, I don’t think so.”

  “Good. I don’t want you hanging out with some other woman you think is cute, even if she is hotheaded and stubborn.”

  Chapter 3

  First thing the next morning—Wednesday, November 16--I called Josephine Houghton’s office and spoke to her secretary, a man named Tristan.

  “Hey Tristan, Jack McConnell here. Do you suppose Josephine would have twenty minutes today when she could meet with me to talk about the Turnbull and Williston situation? I’m going to be representing Front Street Bank in this matter.”

  “Hello Jack. Oh, I think we can work that out. She seems to have a thirty minute break in her scheduled meeting action this afternoon at 2:30. Will that fit with your schedule?”

  “I’ll make it work. Thanks Tristan. See you then.”

  After a morning of phone calls and a workout at the Y, I arrived at the offices of Ralston Daniels, a few blocks from my office, at 2:25 p.m. Ralston Daniels had decorated its offices in typical big firm fashion—hardwood floors covered with genuine oriental rugs, nice vases on walnut end tables, original art on the walls, a showcase conference room on the west side looking out onto Pikes Peak, etc. Having spent many years in a big firm myself, I knew this kind of décor was intended to appeal to wealthy clients--the type of clients big firms wanted to, and needed to, attract in order to charge the rates they do. McConnell Jones & Knight, on the other hand, tried to keep its overhead down so it could afford to represent clients of more modest means. Our offices had discount store carpeting on the floors and fishing memorabilia on the walls. In a manner reminiscent of Robin Hood, our rates were frequently adjusted to reflect the financial circumstances of our clients, with the effect that we sometimes took from the rich to help the poor.

  Josephine came out to greet me at around
2:40. I would never, of course, tell Veronica this but she was in fact cute—in an anorexic sort of way. She was tall, at maybe five foot ten, and weighing maybe one hundred ten pounds. Athletic. Late 30’s. Dressed in an expensive-looking navy blue pants suit with a beige cashmere turtleneck sweater. Short brown hair, nicely cut and blown. Dark grey piercing eyes. Hard looking, like a pouty fashion model.

  “Hi Jack. Sorry to keep you waiting. I was on a call with another lawyer who doesn’t know when to hang up. Let’s go to a conference room down the hall. Coffee? Soft drink?”

  “Hello Josephine. Thanks for taking time to meet with me on short notice. No need for a beverage. I’ll try to be brief. I know you have another meeting at 3:00.”

  And, after we were seated, I tried to get right to the point. “I’m here to ask you to hold off filing a lawsuit in the Turnbull and Williston matter, and to cooperate with Front Street Bank and the Fed and, hopefully, Merchants Bank in an effort to track down the bad guys and get the missing money back from them.”

  “Jack, I’ve got a really pissed off client on my hands. Front Street Bank put an extra three days of hold on this deposit and then, in effect, told my client that the deposit was good by lifting the hold. And Front Street Bank is in a much better position than my client to tell when a cashiers check is bogus—a counterfeit. This kind of fraud has apparently been around for awhile and a customer of a bank—especially a customer with millions of dollars on deposit—ought to be able to count on its bank to detect a phony cashiers check. I have to believe the members of a jury, most of whom would themselves have had a bad experience once or twice with a bank, would agree.”

  “Well, you’ve got to weigh all of that against the fact that your client’s relationship with the bank is strictly controlled by a contract that says the bank can charge back any deposit item that turns out to be no good at any time and for any reason. That’s summary judgment material and your client would never get its case to a jury.”

  “And it’s my position an implied term of that contract is that a bank owes its customer a duty of good faith and fair dealing—which means being awake and alert and having in place procedures to detect counterfeit cashiers checks. That gets me over summary judgment and back to my jury of unhappy bank customers.”

  “But then on our side of the debate is the fact that, in financial fraud cases, the party that ends up taking the final hit is almost always the party that first dealt with the crook, and had the first opportunity to sniff out the fraud. It was Turnbull and Williston, in pursuit of a nicely profitable new client, who let the fox into the henhouse and provided Mr. Salamante, or whoever he really is, with the credibility he needed to pull off his fraud.”

  “And while we’re pointing fingers, Jack, what about the Fed and Merchants Bank? What the hell happened on that side of all this? I would have thought, in a modern rational world, that the Fed would also have in place procedures to detect counterfeit cashiers checks. And why didn’t Merchants Bank call Front Street Bank right away when this check showed up on its doorstep and report that the check was bogus?”

  “Here we have more common enemies, which is all the more reason to get everyone cooperating and not slugging it out in a money-burning lawsuit. I doubt your client likes spending money on legal fees any more than mine. In any event, I don’t have all the answers yet, but it looks like the crooks were able to manipulate the computer coding on this check in such a way that it dumped into a suspense account for problem items rather than being presented immediately to Merchants Bank for payment. Merchants Bank claims it has no duty to review items in the suspense account unless the Fed alerts it to activity in that account. The Fed, on the other hand, says Merchants Bank did have a duty to review the suspense account on a daily basis and on its own initiative. Also, Merchants Banks has told the Fed that, since this wasn’t a real cashiers check—just a piece of paper made to look like a cashiers check—the Fed’s normal operating procedures, whatever they are, don’t apply. So, the Fed and Merchants Bank, in addition to blaming everything on your client and mine, are blaming each other. At this point, the Fed and Front Street Bank have agreed to a standstill/joint cooperation agreement and I’m going to try to get Merchants Bank to join in that agreement. We want your client to join as well.”

  “How long are we talking about? And what’s the game plan to find the crooks, who seem to be smarter than everyone else on this stage, and get back the money?”

  “I’m asking for sixty days. The Fed and Front Street Bank will lead the investigation. I’m planning to bring in a private investigator I’ve worked with on other bank fraud matters. He’s mostly based in Los Angeles but he actually lives in a motor home—a bus--and moves around a lot. His name is Ed and we never discuss his past or how he finds information no one else can seem to find, but he’s really good. To have any hope of success, Ed would need access to all of the information he can get from Messrs. Turnbull and Williston, and their files.”

  “And now you run me right into a client confidentiality problem. Stock brokers can’t disclose information about their clients without a court order to do so.”

  “Josephine, where there’s been a big buck crime involving a federally insured depositary institution in the form of a national bank, I don’t think you need to worry about client confidentiality when the client is the perpetrator of the crime.”

  “I guess that makes sense,” Josephine said, and at this point, and for the first time in our meeting, she attempted a smile. But she wasn’t very good at it. “I’ll check with my client and get back to you. I suppose it’s clear from this conversation that Front Street Bank won’t be putting the missing money back in my client’s account this afternoon, or any time soon.”

  “Correct.” Josephine then took me back to the lobby and disappeared down the hall to her office. No handshake. No goodbye. Just a nod toward the exit door and the elevators.

  Chapter 4

  The next morning at around 10:00 a.m. MST, I put in a call to Ed. Ed’s real name is Winfred Siegel Wyzowski, III, but not many people know that. I know it only because the first time I used him to help me with a case, I wanted to be sure he actually had a private investigator’s license, which he does. It’s from Louisiana, where the requirements for a background check are minimal and very few meaningful questions are asked on the application form. “Ed” is how he’s known in the trade and, as I told Josephine, the source of his training and experience is not something you discuss with him.

  Ed had first helped me with a complicated bank embezzlement case maybe ten years ago. He was recommended to me--informally and off the record--by the Federal Deposit Insurance Corporation. In that case, Ed did great work, uncovering a clever and well hidden conspiracy among tellers to steal cash out of teller drawers at branches of the bank they worked for located in four different states.

  Then, I hired Ed a few years later to help me in a case against a stock brokerage firm. That firm had a customer it let give investment advice to its clients. The guy was using insider information about the quantity of frozen hog carcasses in warehouses in the Midwest to make pork belly futures investments and recommend those same investments to clients of the brokerage firm. Ed uncovered the fact that he was an ex-con who had been convicted of stealing frozen meat from these same warehouses. He still had buddies in the warehouses and they were giving him the confidential information he was using. He had a great investment track record until his sources went silent, and then the brokerage firm’s clients lost a ton of money. They demanded a refund of what they had lost but the brokerage firm refused to pay, so we had to sue. In the end, with Ed’s help, we recovered all the investors’ losses and the brokerage firm had to pay all the costs and attorneys fees the investors incurred in pursuing their claim.

  Most recently, Ed had helped me with a will contest case that sprang up when a crusty old rancher in rural Gunnison County Colorado with an $18 million estate wrote a will disinheriting his two children but, after his death in a susp
icious agricultural accident, the original of the will couldn’t be found. This allowed the children to make a claim to the estate under laws of intestacy. I represented the personal representative named in the missing will who, in opposition to the children, sought to enforce the terms of the will by probating a copy of the will. Ed--and Veronica—worked with me to try to find the missing will or at least explain its absence, investigate the rancher’s death, and choose the jury that would decide the case. After the jurors deadlocked and the judge dismissed them (in part because a raging wildfire had broken out in the area between Gunnison and Crested Butte), the case was resolved by a settlement my client felt was in keeping with the last wishes of the dead rancher.

  Ed, knowing it was me thanks to caller ID (and who knows what other technology), answered my call on the third ring. “Hello Jack. I didn’t think I’d be hearing from you for awhile after the Cranston will contest case ended. What’s up?”

  “Good afternoon Ed. How are you? Where are you?”

  “I’m in my motor home cruising along an out-of-the-way but very scenic highway in southwestern Nevada on my way to Las Vegas. I’ve been invited back for another televised poker tournament, which starts on Sunday. ESPN2. My stage name this time around will be Billy Henderson or, for purposes of interesting the television audience, Billy The Kid. Free board and room for three days and nights, a starting stake of $50 thousand and a chance to win $2 million. I couldn’t pass that up.”