Fraudulent Transfers Read online

  Chapter 13

  Thursday’s highlight was a mid-morning call from Veronica telling me all was well in Vermont and she was on her way to Washington, D.C. to attend a day and a half of staff meetings at Fed headquarters. The meetings, she said, would be over at noon on Saturday followed, however, by a lunch being hosted by the Fed’s current chairman. Since next year was an election year, attendance at this lunch was mandatory for anyone hoping to have a career at the Fed. Veronica said she was booked on a flight from Dulles to DIA, leaving Washington at 3:30 p.m. on Saturday and arriving in Denver shortly before 6:00 p.m. She gave me the flight number and I told her I would meet her at the airport. Veronica reported that her father’s melanoma remained in remission and he was back to teaching physics full time at Middlebury College. Her mother, after a lengthy discussion (debate?) with one of the doctors at the Dartmouth-Hitchcock Medical Center where her father had been treated, had finally, although reluctantly, backed off from her theory that large dosages of laxatives were necessary to continue his remission. Veronica also said her mother’s art gallery was actually making money due to the fact that it had exclusive rights to market the work of a couple of young New England artists who had caught the attention of an art critic writing for the New York Times.

  When I came home Thursday evening, I found Cooper, bundled up in a down parka from my closet, sitting on the front porch with Fletcher, who looked like he needed his own down parka.

  “Hi Coop,” I said, after I parked my truck in the driveway and walked up the front steps to the porch. “Aren’t you guys cold?”

  “Hi Jack. No, we’re fine. I had a beer from your refrigerator and I gave Fletcher a dog treat, to ward off the cold. Plus, the sun just set behind Pikes Peak a few minutes ago. Before the sun set, it was, like, nice out here.”

  “Well come on in and sit for a bit, but then you’re going to need to go home. And when you do, don’t breathe near your parents. Even though I know they like me, I’m not sure they approve of my giving you beer. So what’s up? Also, quit saying ‘like’ all the time. That’s a terrible speech habit that seems to have infected the brains of everyone younger than thirty.”

  “I’ll try. But you know habits are, like, hard to break. Anyway, I came over ‘cuz I wanted to talk to you about college. I’m going to be a senior next year and I’ll have to decide what to do with myself. A bunch of kids I know decided not to go to college after they graduated. They’ve got good jobs and are now driving around in cool cars and having a great time. The kids I know who went to college are all complaining about the homework they have to do and the money they’re having to borrow. So I’m thinking maybe I should learn to be a car mechanic or something and forget about college.”

  “Cooper, you need to go to college. The statistics are overwhelmingly clear that people with a college degree, during the course of their working lives, on average, make much more money that people with only a high school education unless, say, they’re a high draft pick in the NBA. Plus, college is fun and a good place to grow up a bit before you charge off to attack life in some reasonably organized way. I’m sure, since you’re almost seventeen, that you think you know everything there is to know, but I would suggest that you don’t. You need more miles on your odometer before you start making important life decisions. I didn’t decide to become a lawyer until I’d tried to make a living as a race car driver, a martial arts instructor and a professional surfer, none of which panned out but all of which helped me grow up and taught me something about what life is all about. As for the cost of college, with scholarships and some part time work, and help from your parents and, I hope, from me, you won’t have to borrow yourself into a debt hole you can never dig out of. Speaking of scholarships, by the way, how are your grades holding up?”

  “Good, actually. I’m, like, third in my class of six hundred students. Samantha has talked me into study dates so, after school, we’ve been going to the public library where we crank out our homework, and then walk home together. This wasn’t my idea of a date, but now I think it’s great.”

  “Perfect. With that kind of performance as a high school student, you’ll have colleges chasing after you. It’s not just the jocks these days who get the attention of college admissions officers. They’re looking for students who will leave an intellectual footprint on the planet after they graduate, and bring fame and glory--and donations--to their alma mater.”

  “OK. That’s good to know. But I still want to learn about auto mechanics.”

  “Well listen, these days the people who design, build and repair automobiles are highly trained, highly skilled, electrical, mechanical and software engineers. If it’s automobiles that fire you up, even though you’ve only had a drivers license for ten months, a college education with an emphasis in one of these engineering disciplines is the ticket to getting where you want to go.”

  “Thanks Jack. I guess I’d better go home. And you’d better feed Fletcher or he’s going to start eating your shoes again.”

  “Give me your beer can.”

  “Oh yeah, I forgot. I’ll, like, see you soon.”

  Chapter 14

  On Friday morning, I was tempted to call Ed to see if he had any news for me. But I backed off, knowing he would call me when the time was right.

  We started our partner meeting a few minutes late, at 4:15 p.m. I ran out to our local wine shop down the street and brought back a couple of bottles of nicer than usual Oregon pinot noir on the theory that this would be a tax deductible expense--and we needed extra inspiration.

  “OK guys,” I started out. “Here’s the agenda. First, as usual, we confess our sins, meaning we describe the clients we have let in the door who need help but may not be able to pay for it. And then we need to look at our finances, since we’re getting near the end of the year and we’ll soon be making decisions about staff bonuses. And finally, as new business, we need to decide what to do about our office server. As you know if you’ve read Stephanie’s memo, our server can’t keep up with what we’re asking it to do now, and this is only going to get worse as the courts and our clients push us farther into the paperless, digital world.”

  I began the confession of sins part of the meeting by telling Bruce and Jennifer about the Olivia Marchant fraudulent transfer case. Bruce then told us he was representing a husband and wife, with four kids, whose credit had been ruined and whose home was in foreclosure thanks to a payment posting error by the company servicing their mortgage loan. That company had gone broke and was now out of business, leaving legal chaos in its wake. Jennifer told us she was helping an Air Force veteran who had recently returned from Afghanistan and been given a disability discharge after losing the lower half of his left leg in a roadside bombing attack. He was trying to start a new business as an aircraft mechanic working on small private planes, a skill he’d learned in the Air Force.

  On a more positive note from an income and expense point of view, I told Bruce and Jennifer about the Turnbull and Williston matter, concerning which Front Street Bank would most likely be paying our fees on a timely basis. Bruce said he had a new litigation case representing a well-established corporate client that was being sued on what appeared to be a groundless claim of gender discrimination. Jennifer told us she was working on a declaration of covenants for a large new patio home project now under construction in the northeast part of the city. The developer was well capitalized and the project was ahead of schedule on presales.

  When it came time to look at our overall financial picture, Jennifer, our by-default chief financial officer, reported that, through November 30, revenue was down and expenses were up when compared to the previous year. This led to our usual discussion about what to do to correct the situation. We could: (1) raise billing rates: (2) let go some of our loyal and experienced staff; (3) stop taking on projects for people who might not be able to pay; (4) reduce the contributions we make to local charities we think are important to the well being of our community; or (5) work harder. I
n keeping with tradition, none of these options was acceptable, so we agreed to move on to the issue of the server. Before that, however, Bruce made Jennifer and me listen to his well-practiced lament about the cost of having two kids in college and other costs (notably kitchen and bathroom remodeling) being imposed on him by an immutable force—his wife. Jennifer and I listened politely, offered sympathy, and finally told Bruce we had to get on with other business.

  Concerning the server, Bruce started the discussion with: “I can’t believe this is happening. That server is less than six years old and we still owe $10,000 on the loan we took out to buy it. Nathan, the guy who sells us previous generation computer hardware using threats of cataclysmic systems failures to convince us to buy, told us we could get a decade’s worth of use out of it. But Stephanie is now telling us it’s an oversized paperweight. And Byron, the guy who tags along with Nathan and sells us software he says we need to make the hardware Nathan sells us work, is now saying we’ll have to install new software in all our computers to accommodate cloud computing. What a racket this is.”

  Jennifer: “Bruce, we have no choice. As you know better than me, all state and federal courts in Colorado, and just about everywhere else in the country, have now been fully converted to electronic filing systems. Court clerks and judges and their staff are pretty much prohibited from having paper in their offices. Discovery is all handled electronically, with large file uploads and downloads being required. And the same thing is happening on the transactional side of this business. I’m regularly having to move hundred page documents back and forth, using sophisticated redlining software to highlight changes being made to the documents. We’ve got to be able to play on this field or we’ll be out of business.”

  Me: “I’m afraid Jennifer is right. I think we should tell Stephanie to donate our current server to a charitable organization that can use it and take the tax deduction that comes with the donation. Then, we pay off our loan and get on board with a cloud computing contract. We pay Byron whatever it takes to convert us to cloud computing and find someone to train us to live in this brave new world.”

  Bruce, after further modest grumbling, finally agreed, allowing us to devote the rest of our meeting to finishing the wine and enjoying the company of respected professional colleagues and business partners.

  Chapter 15

  Ed called me Friday evening at home at around 7:30, just as I was again thinking I needed to call him.

  “Hi Jack. I thought I’d better give you a report on what I’ve been up to. I don’t have a lot of information yet, but some of the dots are beginning to connect.”

  “Great. Tell me what we know.”

  “Let me start with the address Mr. X used in his account application with Turnbull and Williston, and that he also used when he sent the FedEx shipment containing the bogus cashiers check. The address is a rented mail drop at a location in Redwood City. There’s no office or residence there or anything else connected to Mr. X. It’s just a bunch of mail boxes in a building owned by a company that rents out addresses to people wanting not to be found. The name used was Jarad Salamante.”

  “What about his email account?”

  “That was created the day before Mr. X first contacted Turnbull and Williston. It was, as we know, used for the emails between Mr. X and Turnbull and Williston setting up the brokerage account. The name used to set up the account was again Jarad Salamante. Except for spam sent to the account, there was no other activity. The account was closed the day after Front Street Bank sent the wire transfer to the bank in Miami that Turnbull and Williston had ordered. The emails using this account were sent from and received at a community computer terminal at a cyber café in South San Francisco.”

  “And what about the cell phone?”

  “This was a use-and-throw-away phone purchased at a Wal-Mart in Daly City on October 1, the day Mr. X first contacted Turnbull and Williston. The phone came with a two month pre-paid contract with T-Mobile providing U.S. and Canada service. After two months, the phone goes dead. Payment was in cash. The calls made using the phone included the calls between Mr. X and Turnbull and Williston, a couple of calls to an automated number at BC Ferries in Canada giving the ferry schedule between the Tsawwassen ferry terminal south of Vancouver and Victoria, on Vancouver Island, and four calls to an automated number in Vancouver that gives NHL hockey scores. Finally, there were three calls to Sonny’s Pizza Palace, a mile or so north of AT&T Park.

  The phone wasn’t used again after the wire transfer from Front Street Bank to the Miami bank, completing the fraud, had been sent on November 9.”

  “How do you know this stuff?” I asked.

  “Jack, you may recall from prior engagements that there are certain parts of my business I can’t discuss with you. Think of them—loosely--as trade secrets. We’re into that territory here.”

  “OK, I should have known that. I suppose we can at least conclude at this point that Mr. X has some kind of interest in British Columbia, and that maybe he’s a hockey fan. And that he likes pizza. Anything else useful from the cell phone account?”

  “Just one other thing. All of the calls were made from approximately the same location in South San Francisco, not far from AT&T Park. We know this because they went through the same cell phone tower, which only serves a limited area. Stitching all of this together, it seems clear, as we previously had speculated, that Mr. X was hanging out in and around San Francisco during the time the fraud was taking place.”

  “Anything else?”

  “Yes, and this, I think, is the best part. A few years ago I helped a couple of guys I know start a company called Forensic Filtering, Incorporated—FFI. FFI is now doing a brisk business selling data searches to federal, state and local government agencies, including all of the U.S. military branches. These guys needed to learn more about how to think like a private investigator, so I helped them do that. They were graduates of MIT and had met while working at the FBI in an effort to adapt technology to criminal investigations being done by that agency. Mostly because of cumbersome government procurement procedures and other bureaucratic bumbling, this project—called Virtual Case File--was a failure. The project cost taxpayers $170 million over five years and came up with pretty much nothing. It was then abandoned. However, the Justice Department picked up the baton and tried to develop a similar system it called Sentinel. The budget for Sentinel was apparently $450 million and its utility is in doubt. Anyway, my guys figured out how to cheaply and efficiently bring together all kinds of data bases from law enforcement agencies from all across the country, and even internationally, and consolidate them into a single data base that can be searched in great detail. It’s something like the systems lawyers use to search court decisions and statutes, only much more powerful. A better analogy might be the system that keeps track of every pitch ever thrown in major league baseball, allowing you to find out, say, how many doubles a particular player hit during a day game on a Thursday with a ten mile an hour wind out of the west, a runner on third, a two-ball-two-strike count, and the pitch being a slider low in the strike zone. It’s an amazing system. But, to get to the point here, one of the things this system can do is voice recognition searches. You give it a sample of the voice in question and it searches its data base for a match. The FFI guys, in appreciation for the help I gave them back when they started their company, occasionally let me plug into their system and that’s what I did with Mr. X. We used the recorded phone conversations between Mr. X and Turnbull and Williston to come up with a twenty second sample of Mr. X’s voice and then we searched the FFI data base for a match.”

  “Wow. So do we have a home run hour here that justifies a home run fee for Ed who can no longer live on poker tournament earnings?”

  “We came up with six potential matches, but we were able to narrow that down pretty quickly to three. That’s because two of the six are in prison, and have been for several years. A third has only an East Coast presence and he has been under clo
se surveillance by the FBI for the past six months, with no activity that fits onto our landscape.”

  “And what about the final three?”

  “Before I drill down farther on them, there are a couple of other things I want to do. As we know, the FedEx shipment from Mr. X to Turnbull and Williston containing the counterfeit cashier’s check was made from a FedEx retail office in Redwood City. That office has video surveillance. Thanks to a friend at the Redwood City police department, I have an off-the-record appointment tomorrow to view the video taken at the time this shipment was made. Possibly, we can catch a picture of Mr. X. Then, I’m planning a trip to Sonny’s Pizza Palace for an early dinner. Maybe somebody there will remember Mr. X. I’ll report back to you after I’ve made these stops and let you know where that leaves us.”

  “Thanks Ed. I won’t pass any of this on to the other interested parties until you’ve taken the next steps. I’ll be in the office tomorrow morning and then heading to Denver to pick up Veronica at the airport. I’ll be at her place in Denver Saturday night and part of Sunday, so call me on my cell if you have anything new to report.”

  “Will do. And I agree you shouldn’t share what I’ve told you just yet with the others. We may still not be able to identify Mr. X and, even if we do, that may not tell us who he’s been working for or where we go next to try to get the money back.”