Follow the Money
(Crain’s Chicago Business, 22 September 2008)
A few years ago, Rick Rein got a call from a Chicago-area bank that had lost $1 million to a con artist who cashed a fake check that looked so authentic it easily passed through the bank’s computer system.
The fraudster wired the money to an obscure bank in Florida, then out of the country before the bank realized a month later the check was phony.
Mr. Rein, then a lawyer with Schwartz Cooper in Chicago, immediately filed an action in Florida state court to gain access to the Florida bank’s records. He also requested the court gag the bank so it wouldn’t inform the account owner.
The records showed the money had been wired to a bank in the Bahamas. Mr. Rein prepared the pleadings and hired Bahamian lawyers to get a local court to freeze the fund. The con artist was never caught.
“I don’t even know who he was,” says Mr. Rein, 52, now a lawyer at Dykema Gossett PLLC in Chicago. “We found the money, so it didn’t matter to us who was conning the bank.”
As an asset recovery specialist, Mr. Rein has spent 10 years chasing money from banks and hedge funds that has disappeared overseas — a common problem, even as banks have improved their ability to stop smaller-value crimes, like debit card fraud.
“Bank secrecy laws in certain countries and the fact that a wire transfer might not have a high degree of information that helps you track those funds still impede us in trying to ferret out high-dollar crime,” says Doug Johnson, vice- president of risk-management policy at the Washington, D.C.-based American Bankers Assn.
ROBES AND WHITE WIGS
Mr. Rein’s cases take him to far-flung places like the Caribbean island of Dominica and the Isle of Man in the Irish Sea. He and his colleagues, such as New York lawyer Eugene Becker, who’s licensed to practice in several countries that use English law, have sweated through hearings in courtrooms without air conditioning in the Cayman Islands, Barbados and other sweltering former British colonies where judges and lawyers still wear heavy robes and white wigs.
Regardless of the location, Mr. Rein’s strategy is the same: find the money, freeze the account, then file a lawsuit or wait for the con artist or his associates to come to the bargaining table.
Lawyers unschooled in the ways of overseas fraud often go the traditional route of getting a judgment in the United States and then trying to get it enforced overseas. But that, Mr. Rein says, is a mistake. Suing first alerts the fraudster you are coming, giving him time to hide the assets.
Of the 20 cases he has worked over the years with a network of private investigators and foreign lawyers, Mr. Rein says he has recovered some money in every one. In his biggest case so far, he recouped more than $10 million.
But Mr. Rein is selective. He turns down half the requests he gets each year, usually because the money has been wired to countries like Liechtenstein, which doesn’t have bank fraud laws, or Belize, where the legal system is so backward it’s nearly impossible to seize funds. He usually avoids cases in the Middle East, where politics and Islamic law keep banks from revealing account-holder information.
Mr. Rein, who works on a fee basis rather than on contingency, also rejects cases in which the assets are under $1 million and won’t justify recovery costs, which can run from $50,000 into the millions.
“Rick is one of the most tenacious attorneys I’ve ever dealt with,” says Steven Snyder, a private investigator who has chased money for him since the early 1990s. “He sinks his teeth into a case and doesn’t let go.”
Persistence is essential because money can elude Mr. Rein’s grasp for years, even when he gets a lucky break. In one such case, the owner of a Chicago-based juice distribution company wired $2 million from his company’s line of credit out of the country and fled to Switzerland. Mr. Rein traced the money to a bank in Uruguay and was trying to get it back when U.S. Department of Justice officials intervened.
The U.S. government had recently signed a mutual legal assistance treaty with Uruguay, and the department wanted to test it. The feds got a Uruguayan judge to freeze the money and send it back to Illinois, but on one condition: The Uruguayan judge said a U.S. criminal judge had to rule that the money was stolen. That case couldn’t go forward without the appearance of the defendant, who refused to leave Switzerland.
So Mr. Rein and his colleagues got creative. They persuaded courts at home to dissolve the juice distribution company by proving that it was out of business and its owner had fled the country. The court appointed a receiver to collect company assets, pay its debts and, as part of a plea bargain, enter a guilty plea to fraud charges to satisfy the Uruguayan court.
It took three years, but the bank got its money back.
©2008 by Crain Communications Inc.
Read this article at Crain’s Chicago Business.