INTERNATIONAL insurance fraud case

Summary:

The world is smaller now and fraud is an international problem, often involving moving money from one country to another. This case is an example of a fraud perpetrated by an outsider, rather than an employee.

 

A large insurance carrier in Venezuela, with 45 percent of the country's insurance market, had been the victim of a $7 million dollar wire fraud. We were able to locate the perpetrator of the fraud and help the company recoup much of the stolen funds.


The Story:

An attorney in Caracas, Venezuela, referred to us by a California Federal Public Defenders Office, contacted Nic Smith. The attorney explained that the Dresdner Bank in Hamburg, Germany had received a facsimile letter from the company in Caracas, Venezuela, instructing the bank to transfer $7 million dollars to an account at the Seylan Bank in Colombo, Sri Lanka. The credited account was in the name of the company's "Overseas" subsidiary. But no such subsidiary actually existed. The fax was a forgery, written on the company's letterhead, with forged signatures. (The bank's lack of due diligence in processing this "letter of instruction," is part of another case.)

 

We asked the attorney for a general power of attorney so that Nic could work on the company's behalf in Sri Lanka. Nic then found a contact in Colombo, not an investigator, but a well-placed accountant, Ravi, who understood the local politics, the legal environment and knew people in the business sectors. In Sri Lanka, there is actually no such profession as "private investigator." The closest thing they have is a "civil bailiff" who attempts to recover property specified in a writ of attachment. That made for some interesting dialogue with everyone Nic met there. They all had the image of Magnum P.I or similar characters from American movies and television.

 

The first order of business when Nic arrived in Colombo was to secure local counsel. We went with a Singhalese firm, FJ&G de Saram that had 100 years of experience on the island.

 

At the same time, Nic needed to find out if there was any money left in the bank account that the funds had been wired to. Even though he had powers of attorney from his client and could rely on Ravi's knowledge of the workings of the bank, Nic was aware that getting the bank to cooperate might not be easy. So, prior to leaving the U.S., he had called the FBI's anti-terrorism task force. He asked the agent if the FBI would be interested in a case of a theft of $7 million by wire fraud and the subsequent withdrawal of millions in cash. The FBI said that it would indeed be of interest to them. By informing the Central Bank that the FBI anti-terrorism taskforce was potentially interested in the matter, Nic secured the bank's full cooperation. He soon established that the money had been "flipped" into another account and there was still $3 million dollars in that account. By a quick trip to the Sri Lankan equivalent of the local recorder's office, he learned the name of the individual who had registered the fictitious business name of fake "Overseas Company" - Abdul Ghani Ameen. Our Sri Lankan attorneys then immediately filed a complaint for fraud and for a temporary restraining order against Seylan Bank and Abdul Ghani Ameen. When the TRO was served on the bank, the $3 million that the thieves hadn't withdrawn was safe for the time being.

 

The next order of business was to find Ameen and question him - a simple statement, but a tall order.

 

Nic first went to the CID (Criminal Investigation Division) of the Sri Lanka Police Authority, which is the "equivalent" of the FBI in the U.S. Nic filed a criminal complaint on behalf of the client, and tried to explain the elements of the crime to the Inspector. The CID had difficulty making a decision as to whether or not a crime had been committed that required their involvement. After much haranguing they finally took the complaint and an Inspector of Police was nominally appointed as the "agent in charge." The Sri Lankan police establishment is rife with corruption, and this was an obstacle throughout this case.

 

Because of the complexity of the crime, Nic doubted that Ameen had either the wherewithal or financial resources to have orchestrated this alone. Over the next several weeks, Nic discovered a business association that Ameen had with a man named Suresh Mirchandani, a local textile merchant who owned a large import-export business and was closely allied with the political party of the President of Sri Lanka. Nic learned that Mirchandani had been involved in a prior fraud on the People's Bank of Sri Lanka, a case marginally linked to the President of Sri Lanka. Mirchandani had also been involved in a fraud using a forged facsimile letter against another Venezuelan company in 2001, in which the funds were wired to the Republic of Mauritius, an island nation off the southeastern coast of Africa, east of Madagascar. That separate case is pending. 

Nic flew to Mauritius and interviewed the former director of operations for a firm that Mirchandani had operated there, the vehicle by which he perpetrated the fraud on the other Venezuelan company. Returning to Sri Lanka, he turned this information over to the CID there.

 

Nic attempted to locate Ameen in Sri Lanka, but ultimately discovered that he had fled to Pakistan on one of several passports he possessed.

 

Our focus returned to Mirchandani. By examining his long distance telephone calls, we learned that two calls had been placed from his offices to Dresden Bank a few days after the initial fraudulent fax had been sent. This evidence was a lynch pin in the case. 

The next problem we faced was how to overcome the reluctance of the Sri Lankan CID to proceed against Mirchandani. Nic soon learned that Mirchandani employed a former CID Inspector as his "Chief of Security." He had been privy to the complaint filed with the CID and had used his security man to dissuade the CID, through bribes, from actively pursuing the investigation.

 

Through Ravi and others, Nic learned that one of the Deputy Directors of Police had a brother who was well regarded in the Sri Lankan community as a man of integrity and honor. Nic consulted with him privately, and he agreed to speak with his brother, the Deputy Director of the CID, and ask him to move the investigation forward. Within a few weeks, a fire was lit under the CID. Nic helped them determine which property would yield the most beneficial information, and they executed search warrants on Mirchandani's business offices. Among other things, they discovered a rubber stamp with the name of the fake "Overseas Company" imprinted on it - another lynchpin piece of evidence. The hard drives of the business computers were seized, and they also proved to be a treasure trove of information and evidence.

 

Based on information gathered, the CID then arrested and interrogated Mirchandani's business manager, Mr. Thowfeek. Thowfeek implicated Mirchandani, who was subsequently arrested.

 

Through subsequent court processes, the $3 million still in the Ceylon bank was recovered. The matter of the remaining US $4 million remains open but during the course of the investigation, we gathered information about Mirchandani's considerable real estate holdings (all in "straw man" title), and promising leads of bank accounts in Panama are currently being pursued. These should be sufficient resources to cover the balance of the stolen funds.

 

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