Fraudulent Transfers Read online

  “Thanks, Stephanie,” I said, “for helping to get this week off to cheery start.”

  “You’re welcome, Jack. Any time.”

  Chapter 8

  Monday afternoon, following a trip to the Y to move some weights around (the weights won), I received a call from Ed.

  “Hello Ed. How’s the tournament going.”

  “Hi Jack. Not so good. Late yesterday afternoon, I decided to bet the farm holding three of a kind. But a woman at our table, whose television name is Ms. Meteor but who the other competitors, behind her back, refer to as Shark Face, matched and called my bet. She also was holding three of a kind. However, her three of a kind were eights and mine were sevens. So I was out of the game.”

  “Where are you now?”

  “I’m still in Las Vega, using up my last free night of food and lodging. But I’ll be heading off to San Francisco in the morning. As you know, a good part of the work I do can be done from anywhere. All I need is an Internet connection and a computer. But every once in awhile, a case requires boots on the ground. The Turnbull and Williston situation is looking like one of those, and San Francisco looks like the best place to be for boots on the ground.”

  “Any news to report to date?”

  “Yes, actually, and that’s why I called. Since I got myself knocked out of the poker tournament, I’ve had a little time to work on this project. And what I can tell you at this point is that the man who dealt with Turnbull and Willston—let’s call him Mr. X—is, no surprise, not Jarad Salamante. The real Jarad Salamante died in a traffic accident six days before Mr. X showed up at Turnbull and Willston. Mr. X simply stole Jarad Salamante’s identity.”

  “I thought all manner of protections were in place these days to prevent that.”

  “No, Jack, identity theft is as rampant and easy as ever. A classic play is to read the obituaries of a major city newspaper and then hack into the dead person’s credit file at one of the big three credit reporting agencies. Those outfits monitor deaths using the Social Security Administration’s listings, but it takes several days—sometimes weeks—for Social Security’s system to catch up on deaths. So there’s a nice little window of opportunity for identity thieves to use obituaries as a starting point. The obituaries usually give you a date and place of birth, and any cyber criminal worth a damn will then be able to track down a Social Security number and hack into a credit file, where there will be a wealth of information. There will likely be lots of information lying around social media Internet sites as well. The identity thief will move quickly to have a false drivers license and passport prepared, with the thief’s picture inserted in the document. Our Mr. X did all of that when he took over Jarad Salamante’s identity.”

  “What do we know about the real Jarad Salamante?”

  “As Mr. X represented to Turnbull and Williston when they did their limited attempt at checking him out, Salamante in fact worked for a Silicon Valley startup that went public a couple of years ago after handing out stock options to some of its employees, including Salamante. He was a software engineer and had been with the company for fifteen years, starting from when it was a back of the garage operation put together by a couple of graduates from the business school at Stanford. The company is called Xcelerations, Inc. It developed and now markets proprietary software that allows advertisers to buy ads on Internet websites. You tell Xcelerations the demographics of the market you’re trying to reach, the amount you want to spend, and the content of your ad, and Xcelerations does the rest. It places the ads on multiple websites meeting its customer’s demographic requirements, gets priority space, tracks hits to the site, and handles all of the billing and payments. There are other companies that have tried to duplicate this business model and compete, but Xcelerations still has the best product out there and is the best known brand because it was the first entry into the market.”

  “Did Mr. X get his hands on any of the stock options or other assets of Salamante?”

  “I don’t think so. This would have generated notice of his identity theft pretty quickly. His goal was not to loot Salamante’s estate but rather to have an identity he could use to pull off the counterfeit cashiers check fraud. He wanted Salamante’s credit report and other information to look normal and routine, which it did when Turnbull and Williston did its cursory investigation of its new customer.”

  “That’s all interesting but it doesn’t tell us much about the true identity of Mr. X or who he works for.”

  “Yes and no. As we develop more information, things may start to tie together. This may not be the first time Mr. X stole the identity of someone who died and then used that identity to engage in bad acts. And, we now know he was operating in the Bay Area. So at least we have a business plan and a geographic location that we can begin to investigate.”

  “What happens next?”

  “It’s time for me to dig into the files of Turnbull and Williston and talk to those guys in detail about their dealings with Mr. X. Is there any chance you could set up a call later this week? On that call, I’d like to have Turnbull and Williston and their lawyer, you, Mike Lawrence and Veronica participate. We can conference in Veronica, but I’d like the rest of you to be assembled together. The best place for that would probably be at the offices of Turnbull and Williston’s lawyer. If you can give me a date and time, and a phone number for where you will be assembled, and for Veronica, I’ll set up the call with a service I use that will encrypt the connection.”

  “I’m on it. Enjoy your last night on scholarship in Las Vegas. I assume you have an exciting evening planned.”

  “Right. A room service dinner, Monday night football on the television and early to bed.”

  After I hung up with Ed, I put in calls to Mike Lawrence, Wiley Monfort and Veronica, all of whom took my calls. I passed on to them the information Ed had just given me. I then called Josephine Houghton who, of course, was busy in a meeting and couldn’t talk to me. I therefore spoke with her secretary, Tristan, and he went to work setting up the telephonic meeting Ed had requested. He cycled back to me late in the day telling me everything was arranged for Wednesday afternoon at 3:00 p.m., after the markets had closed and Messrs. Turnbull and Williston could be available. I sent him a list of the information Ed would be wanting from Turnbull and Williston’s files and thanked him for his help.

  Chapter 9

  On Wednesday, Mike Lawrence and I headed over to Josephine Houghton’s office shortly before 3:00 p.m. When we arrived, Josephine was in one of the firm’s conference rooms with her clients, Neal Turnbull and Randy Williston. After a short wait, she invited us into the room. Mike had already met Turnbull and Williston, but I had not, so Josephine introduced us. They were, as expected, demonstrating irritation at every opportunity that they had to be present at this meeting and that the $4.8 million had not yet been redeposited to their account. Josephine and Mike had not previously met, so I introduced Mike to her. She was cordial but professionally crisp, as she no doubt thought her clients expected her to be. This was generally her style in any event.

  Ed called in at 3:03 with Veronica already on the line. I introduced Ed and Veronica to the others, intentionally skipping over Ed’s last name. Neither Turnbull nor Williston seemed to notice or care, perhaps because Josephine had already told them Ed went about his business on a first name basis only.

  Ed started off by confirming what everyone by now knew about Mr. X and the real Jarad Salamante. He then began with questions directed to Turnbull and Williston.

  “Mr. Turnbull or Mr. Williston, when and how did Mr. X first contact your firm?”

  Williston took the lead in answering this question and the others that followed. “It was on Tuesday, October 4, in the early afternoon. He called our office and asked to speak to me. I took the call. He told me what you already know. He was a software engineer in California but between jobs. He had cashed in some stock options for his former company’s stock when the lockup period expired. He had a job offer i
n Colorado Springs he was probably going to accept. He wanted to open a trading account with a local firm here where he could make some investments and get some advice. He had checked us out with sources he said he had in Colorado Springs and he wanted his new account to be with us.”

  “Did he tell you the name of the company in Colorado Springs that had made him the job offer?”

  “I asked him that and he said the offer was still confidential, so he couldn’t tell me the name of the company just yet.”

  “Did he tell you the name of the company he had left and whose stock options he had exercised?”

  “Yes. I didn’t make a note of that but I believe it was the same company you said the real Jarad Salamante had been working for.”

  “Xcelerations?”

  “That sounds right.”

  “Did he have an accent of any sort?”

  “Yes. He sounded Hispanic to me, but he spoke very good English and was articulate. I had no problem understanding him. He came off as being very professional and business-like.”

  “Did you talk about how much he had to invest and what he had in mind by way of investments?”

  “Yes. He said the initial amount he would place into the account would be approximately $580,000 but there would be another $4.8 million shortly thereafter, when some additional options were exercised. He said he wanted to invest the first $580,000 in a few exchange traded funds and a couple of individual stocks. He hadn’t decided yet about the bigger amount to follow.”

  “Anything else?”

  “We agreed I would email him the forms we needed him to sign in order to open the account, and he gave me an email address. He asked for, and I included with the other forms I sent him, wire transfer instructions for our account at Front Street Bank.”

  “How long did the call last?”

  “Five minutes and forty-two seconds. Our phone system keeps track of that automatically.”

  “Can you tell me the number from which the call came?”

  “Area code 415-229-5545. The paperwork we got back showed this as Mr. Salamante’s cell phone, and it was the only number he gave us.”

  “Was this call recorded?”

  “Yes. We record all of our telephone calls. This is customary in our business, since we take trade orders over the telephone.”

  “I would like a copy of the recorded conversation, and all other telephone conversations your firm had with Mr. X. Jack, can you and Ms. Haughton coordinate that? And can I get a copy of all of the paperwork Mr. X sent back?”

  Josephine said: “I’ll take care of that and get the items over to Jack.”

  Ed again: “I assume he provided you with a representation that, based on income and net worth, he was an accredited investor?”

  “Yes.”

  “Is that anything you have to verify?”

  “No. We can accept what our client tells us.”

  “OK, so what happens next?”

  “We received back the new account paperwork the next day via email attachment. That was Wednesday, October 5. Then on Thursday, October 6, we received a wire transfer of just over $580,000 into our customer trading account at Front Street Bank, the same account into which the later cashiers check was deposited.”

  “Mike or Veronica, what do we know about that transaction?”

  Mike answered. “The originating bank was outside the U.S. The wire came through an intermediary bank in Florida, First National Bank of Tampa. That bank couldn’t give me any information from which to identify the originating bank. First National Bank of Tampa could only tell me that it received an in-bound wire transfer from a non-U.S. bank with instructions to wire transfer the funds back out to the Turnbull and Williston account at Front Street Bank.”

  I asked the next questions. “Isn’t that unusual, that you can’t identify the originator of a wire transfer?”

  Veronica gave the answer. “Unfortunately, no, when the originator of a wire transfer is outside the U.S., its identity can remain undisclosed. The originator would have settled with First National Bank of Tampa, the correspondent, using an international clearing house, the records of which are kept confidential. The U.S. bank regulatory agencies and the FBI and the Justice Department have all been trying to get this system changed for years, but to no avail. Front Street Bank would then settle with First National Bank of Tampa through the FedWire system. On a wire transfer, the funds become collected funds immediately on receipt by the depositary bank.”

  Ed again. “And next?”

  “Front Street Bank confirmed to us that the $580,000 was in our account sometime that same afternoon. The following Monday—it’s now October 10--we received a call from Salamante—Mr. X—giving us instructions on the investments he wanted to make. That call was handled by one of our employees at the trading desk of our firm. But again the call was recorded and we’ll get you a copy of the recording.”

  “Do you remember what investments he made?”

  “Yes. He bought $200,000 of Vanguard’s all stock market except U.S. exchange traded index fund, the symbol for which is VXUS. He bought $300,000 of Vanguard’s all bond market exchange traded fund, the symbol for which is BND. He bought $40,000 of Newmont Mining, NEM, and he bought $30,000 of Wells Fargo Corporation, WFC. He left $10,000 in a Fidelity money market account we set up for him as a place to hold cash-equivalents.”

  Ed: “Jack and Ms. Haughton, I’ll need copies of the trade confirmation statements.”

  Josephine: “This is information a brokerage firm is not allowed to disclose to a third party. However, under the circumstances we have here, where we know a crime has been committed involving a federally insured bank, we’ll provide this information, but with the understanding that Front Street Bank will indemnify Turnbull and Williston for any claim that might be brought against it as a consequence of this disclosure.”

  Me: “Yes, Josephine, that’s our agreement and, as you know, we included this in the written standstill agreement that has now been signed by all of the parties involved in this situation.”

  Josephine: “I just wanted that made clear. If anything bad happens because of this disclosure, Front Street Bank will take care of it.”

  Me: “Right,” although I could see Mike Lawrence wasn’t happy about this.

  Ed: “And next?”

  Williston: “On Wednesday, November 2, we received the bogus cashier’s check via FedEx with a typed note, signed ‘Jarad Salamante’, instructing us to deposit the funds into our trading account pending further instructions. The check was payable to Salamante and indorsed to Turnbull and Williston. I took that check right over to Front Street Bank and gave it to Hillary Johnstone and told her to deposit it in our account. Then six days later, on Tuesday, November 8, mid-morning, we received the call from Mr. X telling us his plans had changed and he was accepting a job in the Miami area. In that call, he instructed us to liquidate his earlier investments and wire transfer all of his funds to the bank in Miami. You know that part of the story. He actually made $20,000 on his initial investments, so that first $580,000 and change had become $600,000 and change.”

  Ed: “Did you by any chance save the FedEx envelope that contained the cashiers check?”

  Williston: “No, but our FedEx delivery guy was able to get us a printout of the transaction history. The shipment was made at a FedEx retail office in Mountain View, California. Mr. X gave FedEx the same address and phone number he gave us when he opened his account with us. That address is on Via Americana in Redwood City.”

  Ed: “That’s great. I’ll want a copy of the FedEx printout. Anything else?”

  Williston: “No. By now, the hold Front Street Bank had placed on the cashiers check deposit had expired and so, on Wednesday November 9, we ordered the wire transfer out of our account as Mr. X had instructed us to do. We never heard from Salamante again. The next thing we heard about this transaction was the following Monday, November 14, when Mr. Lawrence called and told us he would be bouncing checks writte
n on our trading account unless we put $4.8 million back in that account.”

  Ed: “That’s all I have at the moment. Thanks everyone for your cooperation. I’ll keep you informed, through Jack, of anything useful we uncover.”

  Josephine: “So what exactly are you going to do with the information we are giving you?”

  Ed: “Investigate.”

  Josephine, wanting the last word: “Let me remind everyone that we are already six days into the forty-three day standstill period we agreed to. The clock is ticking.”

  And on that helpful note, we ended the call and the meeting, and Mike and I walked back to Mike’s office at the bank.

  “So McConnell, what do you think? Not much to go on here is there.”

  “You’re probably right, but I’ve seen Ed do good work with less information than this. Let’s go have a drink and talk about another mystery—the Broncos’ pass defense.”

  Chapter 10

  The next day was Thanksgiving. Veronica was flying back to Vermont to spend Thanksgiving with her parents so Fletcher and I were, as usual at Thanksgiving, on our own. We took a hike into Cheeseman Canyon, where the South Platte River comes out of Cheeseman Reservoir on its way to Denver, to see how the water was looking and scout for winter fishing spots. It was cold and I didn’t bring my fishing gear. But once we made it to the river, I decided that had been a mistake. Despite the cold, there was a midge hatch in progress and I could see nice-sized trout feeding on the emerger form of these insects in the slower water.

  Back home by the fire, I gave Fletcher some ground turkey with his senior dog chow and treated myself to a turkey pot pie, along with a glass (three actually) of a nice and reasonably priced red wine from Burgundy that Georgette had recommended. I then curled up with Fletcher on the sofa (since it was Thanksgiving, I gave him permission to be there) and read the latest edition of Southwest Fly Fishing magazine.