PETERSON—ONGOING INVESTIGATION “HOUSE OF CARDS”—NOT FOR CIRCULATION. Below this was a line in much smaller type:
Document #6 of 12. Return to Document Library, Federal Bureau of Investigation, 26 Federal Plaza, New York, NY.
It was a nice touch of bureaucratic optimism.
I scanned the loose pages—lists of friends, employees, and contacts at other firms and the various subsidiary companies in the Von Becker empire. I put them aside and started on the government report.
In my experience, the federal Justice Department was plodding, verbose, and lacking in finesse or subtlety. But very thorough. If they had been landscapers, they’d have used steamrollers. The report had all of those attributes.
There was a twenty-three-page introduction, which held only three vital pieces of information. First, William Von Becker had been running a classic Ponzi scheme for at least the past ten years, and likely for many years before. This was not news, but the case was clearly laid out. Von Becker reported consistent paper profits to his investors without ever actually investing the money they entrusted to him. When a client asked for a payout, he got it. The payouts came from new investor money. Meanwhile, Von Becker used the funds on hand to maintain a lavish lifestyle and to provide philanthropy to a range of causes.
Carlo Ponzi had not bothered with the philanthropy.
Second, the number of transactions within the funds—money moving in and out, sometimes for as quickly as a day or two—was circumstantial evidence of money laundering. Millions, sometimes fifty or a hundred at a clip, would come in from one account. A day or so later, a similar amount, less a small haircut, would be wired out—to an entirely different account. Most of the transfers were for foreign clients, but they still fell under the reporting umbrella. Some official body should have taken notice—the Fed, the SEC, or Homeland Security. But no one had shown any interest until after the fact. The report, having been produced by the FBI and the SEC, blamed everyone else for this failure to oversee.
I scanned the pages detailing these transactions. It was the smallest evidentiary section, but the amounts involved dwarfed everything else by billions. And it was here that the third and final important point was revealed. As Virgil had said, when you crunched all the numbers, there was about three billion unaccounted for. It would take me days to run through it all on my own, but I saw the pattern right away.
There was someone I knew who could help. I dialed the number in Vermont.
“Spud, what are you up to?” Fred “Spud” Krebs had been a lowly trading assistant on Wall Street until he was laid off last year after helping me with an investigation. When it came to wading through mountains of trade reports, he was the go-to guy.
“Hello, Jason. I’m leaving the end of the month. Two months backpacking around Europe. Then it’s back here to start law school in the fall. So what’s up?”
“Do you have time for a small project before you go? Usual rates?” Last time I had paid him a thousand dollars and a bonus for what had turned out to be a few minutes’ work.
“What have you got?” He was hooked.
I explained what I wanted and arranged to overnight the materials to him.
“You’ll have it by ten. Call me with any questions.”
I copied the pages I wanted him to see, boxed them up, and ran them down to the mailroom. I had just got back when my cell phone buzzed and began to hop around the table. The caller ID read “Pops.” My father.
“Hey, what are you doing?” I said, enormously glad as ever to talk with him.
“I’m talking to my son, I think. What are you doing?”
“Looking for a missing three billion dollars.”
“I’ll check all my old suit pockets.”
“Still taking the Kid on Sunday?”
“Yeah, I was thinking we take a ride out to Riverhead, out on the Island. They’ve got a nice aquarium. I think he’ll love
Document #6 of 12. Return to Document Library, Federal Bureau of Investigation, 26 Federal Plaza, New York, NY.
It was a nice touch of bureaucratic optimism.
I scanned the loose pages—lists of friends, employees, and contacts at other firms and the various subsidiary companies in the Von Becker empire. I put them aside and started on the government report.
In my experience, the federal Justice Department was plodding, verbose, and lacking in finesse or subtlety. But very thorough. If they had been landscapers, they’d have used steamrollers. The report had all of those attributes.
There was a twenty-three-page introduction, which held only three vital pieces of information. First, William Von Becker had been running a classic Ponzi scheme for at least the past ten years, and likely for many years before. This was not news, but the case was clearly laid out. Von Becker reported consistent paper profits to his investors without ever actually investing the money they entrusted to him. When a client asked for a payout, he got it. The payouts came from new investor money. Meanwhile, Von Becker used the funds on hand to maintain a lavish lifestyle and to provide philanthropy to a range of causes.
Carlo Ponzi had not bothered with the philanthropy.
Second, the number of transactions within the funds—money moving in and out, sometimes for as quickly as a day or two—was circumstantial evidence of money laundering. Millions, sometimes fifty or a hundred at a clip, would come in from one account. A day or so later, a similar amount, less a small haircut, would be wired out—to an entirely different account. Most of the transfers were for foreign clients, but they still fell under the reporting umbrella. Some official body should have taken notice—the Fed, the SEC, or Homeland Security. But no one had shown any interest until after the fact. The report, having been produced by the FBI and the SEC, blamed everyone else for this failure to oversee.
I scanned the pages detailing these transactions. It was the smallest evidentiary section, but the amounts involved dwarfed everything else by billions. And it was here that the third and final important point was revealed. As Virgil had said, when you crunched all the numbers, there was about three billion unaccounted for. It would take me days to run through it all on my own, but I saw the pattern right away.
There was someone I knew who could help. I dialed the number in Vermont.
“Spud, what are you up to?” Fred “Spud” Krebs had been a lowly trading assistant on Wall Street until he was laid off last year after helping me with an investigation. When it came to wading through mountains of trade reports, he was the go-to guy.
“Hello, Jason. I’m leaving the end of the month. Two months backpacking around Europe. Then it’s back here to start law school in the fall. So what’s up?”
“Do you have time for a small project before you go? Usual rates?” Last time I had paid him a thousand dollars and a bonus for what had turned out to be a few minutes’ work.
“What have you got?” He was hooked.
I explained what I wanted and arranged to overnight the materials to him.
“You’ll have it by ten. Call me with any questions.”
I copied the pages I wanted him to see, boxed them up, and ran them down to the mailroom. I had just got back when my cell phone buzzed and began to hop around the table. The caller ID read “Pops.” My father.
“Hey, what are you doing?” I said, enormously glad as ever to talk with him.
“I’m talking to my son, I think. What are you doing?”
“Looking for a missing three billion dollars.”
“I’ll check all my old suit pockets.”
“Still taking the Kid on Sunday?”
“Yeah, I was thinking we take a ride out to Riverhead, out on the Island. They’ve got a nice aquarium. I think he’ll love
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