ACFE STAFF

In the October episode of Fraud Talk, asset recovery lawyer Martin Kenney, CFE, shares stories from his decades-long career in finding money lost to fraud and corruption.

Below is an excerpt from the full transcript of the discussion, which you can download in PDF form or listen to at the bottom of this post.

Mandy: What advice do you have for our listeners or fraud examiners who are maybe new to this field or working to recover assets, have been doing it for a short amount of time, but faced with those challenges of the statistics you're up against after the fraud has been committed? What would you say to them?

Martin: One, whether the fraud is small or large, you still need to spend a little time on gathering and understanding of the facts, always aspiring to have a 360-degree view of the facts. When a fraud case first comes to you and you don't know anything about it, it's like being in a dark room with no light. You have to feel your way around, spatially see, “How big is the room and where do I start?”

Well, the first thing is to sit the victim down or his representative or her representative, like a lawyer. If the case comes to a fraud examiner, from a lawyer or from a victim directly, you’ve got to sit them down and interview them, and gather the basic documents of the fraud.

Many fraud recovery cases are solved by reading the papers available to us. As I like to say to young fraud lawyers, we have to start by reading the papers at our feet because most cases are solved by simply absorbing and looking critically at the available material. Almost all fraud cases involve money and banking. The first thing is to know, “Where did the victims send their money, to which bank and which company, name or account holder?” We start with that.

Number two, if it's a small fraud… I got a call in 2003 from a victim of a Ponzi scheme.

He was in San Francisco. He said that he'd lost $500,000, which was his life savings. I explained to him that that's a tough case for me to work on because our model is effective but very expensive and requires critical mass, so I can't really work. My own model is such that I can't help in a case unless it's worth $50 million or more, in terms of losses today. Although we can still give advice and give some coaching, which we do frequently, in smaller dollar value cases, say in the $10 million-plus range. I said to this victim who'd lost a half a million dollars, all his life savings, so to him this was dire, this was absolutely critical that he figure out what could be done to recover.

I said, "Okay, well, do you have $5,000?" He said, "Yes, I have that. I can send that to you." That will give us enough scope to be able to give you some sound advice. For a $5,000 retainer — of course, we spent more than that, but it just got the case going — we discovered quickly that there were another 650 victims. We helped our client to create a website for victims. That attracted victims to him, and he was able to build a team of about 30 people who chipped in, each chipped in small amounts, and that was enough for me to figure out where some money was from the fraud.

What I did was I looked at all of the payments made by the victims that we represented, about 30 people, and we discovered that all their money is being wire transferred to a bank offshore, I guess it was in St. Lucia. The bank was called Bank Caribe, as I recall. That bank was in liquidation and I knew the liquidator.

I ran into him at a conference in Miami, and I said, "Are you the liquidator of this bank offshore?"

"Yes."

"Did you freeze any money when you were appointed as liquidator?"

"Yes."

"How much did you freeze?"

"About $15 million."

"Of that 15 million, are you holding any for this company that stole money from my 30 clients?"

"Oh yes, about $4 million."

There you go. We were able to recover $4 million quickly, and that funded a wild campaign that took us to Singapore, ports all over America, Jamaica, Belize, the Bahamas, the BVI, many places. We took houses and boats and docks and bank accounts, and we stripped the fraudster family clean of every penny they had, through the use of that one technique of pulling victims together into a little group and doing a hop-skip-and-jump routine into an initial recovery, which then funded the rest of the recoveries and the whole case went forward over a number of years thereafter.

Mandy: That's great advice for some of our listeners I know who often deal with the challenge of budget and resources even.

Martin: I guess the moral of that story is you have to start somewhere. Start small and see if you can build up from there, and hit some low-hanging fruit and then use that to fund. Now today we have also options. We have hedge funds that will invest with victims to pay our professional fees in meritorious cases that have a good chance of recovery. Once you build up a file, you can always help the client raise some litigation funding today, investigation funding for these cases. So what looks like the possibility may not be if you just apply yourself a little bit to the facts.

You can find all episodes of Fraud Talk at ACFE.com/podcast or wherever you listen to podcasts.