Fraud buster

Feature When criminals scam institutions and ordinary folk of their hard-earned cash, who are you going to call? M meets the man who's not afraid of any con men.

Martin Kenney in London this year. The Canadian lawyer leads a team of expert international fraud investigators.

When criminals scam institutions and ordinary folk of their hard-earned cash, who are you going to call? Nick Ryan meets the man who's not afraid of any con men. Martin Kenney has been called a "top international asset chaser"; "one of the world's leading authorities on the legal aspects of freezing and seizing assets in multiple jurisdictions"; "- just may be - considering his Robin Hood reputation and his bulldog legal tactics - one of the most determined and trusted lawyers around".

From the confines of one the few modern office buildings in Road Town, on the island of Tortola in the British Virgin Islands, Kenney and his team of lawyers and investigators wage a war against some of the world's most ruthless criminals and con men. His 17 staff - from Britain, Ireland, Canada, the United States and Argentina - target the charmers and the visionaries who promise riches and dreams: sophisticated fraudsters fiddling merchant banks and insurers, as well as ordinary people, out of tens, or hundreds, of millions of dollars.

Their boss is one of the world's pre-eminent "multi-jurisdictional" lawyers, a Canadian licensed to practise in several countries. Kenney's team of covert investigators, attorneys, forensic accountants and IT specialists tracks down and recovers criminal wealth, returning it to victims. With traditional law enforcement increasingly ineffective against sophisticated money launderers, Kenney targets felons where it hurts most - their pockets.

Early in his career, he investigated Nick Leeson, the man who brought down Barings Bank. Two of his British team took on the controversial property millionaire Nicholas van Hoogstraten, once convicted of the manslaughter of a business colleague. Since then his firm has tackled American telemarketing fraudsters, dodgy Brazilian banks, corrupt insurers and Russian organised criminals. "Mr Fraudster is nomadic, boundariless; he moves around the world, prowling for victims and knows how to hide the money. Most of these characters are very charismatic," he says. "But I've seen people brought to ruin, even died as a result of their actions. I've been in some horrendous cases. I've had a client suffer a heart attack due to the stress of a case."

This is a war fought in the shadows of an increasingly globalised world. Yet its ramifications are massive. Even after spectacular anomalies such as the Bernie Madoff case are put aside, Kenney estimates that white-collar fraud has swollen to US$1 billion a month over the past three years. Few in this hidden war ever reclaim their money, especially in an electronic age when funds can be moved in a matter of seconds. Once the FBI or Serious Fraud Office goes after a fraudster, restitution to victims is not high on the list of priorities, either.

"There's a huge portion of the world's legitimate economy owned by criminals. And it's very hard to distinguish between the legitimate economy and that which is not, because they have blended. How do you distinguish between the two? " Kenney and his team pursue the criminals by various means: making extensive use of "gagged" (secret) court-appointed powers to obtain documents or enter premises; undercover surveillance and sting operations; forensic accountancy to trace document trails and build a model of how a crime was committed. Working with lawyers and other specialists, such as handwriting analysts, psychologists and IT experts, his team locates and freezes the criminals' assets via civil courts, right across the globe, at exactly the same time. A "Mareva Injunction" prevents the villains selling on any of those assets, before they are then liquidated and the proceeds shared with the victims. The criminal can even be bankrupted by the process.

"To work here," says Dan Wise, a former British Army officer and now partner in the firm, is "very interesting indeed - demanding. A lot of the work involves getting freezing orders for different types of injunctions, either in the court here or getting papers for other lawyers in other jurisdictions. And a lot of the time that's time-sensitive. You can end up working late nights and a lot of weekends."

His boss is doubly unusual in that he will work for the poorest, as well as richest victims, sourcing private financial backing on certain cases. The model has been so successful that officers at law enforcement agencies such as the FBI have referred some of the world's most complex fraud cases to the company. These can still take years, however, leaving the con men free to spend victims' money to fight their corner.

"They're heavy hitters, for sure," says Kenney's head of investigations, James McGunn, a former US Secret Service agent. "The general public doesn't realise how powerful these characters are, because they have so much money. They can be very challenging adversaries. You just can't underestimate them. That's a serious mistake." A fraud that Kenney investigated on the Caribbean island of St Kitts is a case in point. Bill Sherwood was an American. Everyone loved him. He charmed old ladies, took in the homeless. He was a larger-than-life street preacher who told everyone he had given away his worldly riches when he was "saved". Christian investors loved him especially. During the mid to late 1990s, he travelled the US preaching and selling offshore trusts linked to a luxury Christian-funded beach resort called Paradise Beach (later renamed the Angelus) that he was hoping to build in the Caribbean. On sales videos he looked like a bank manager, peppering his sales talk with veiled attacks on the taxman. "He was just a normal looking guy, kind of modest," says Dick Rowe, one of the investors. Rowe, a FedEx airline pilot, flew up to Helena, Montana, where Bill lived with his wheelchair-bound wife Mary (she suffered from MS). "I did find some of his associates rather... unseemly. But he showed me the plans for the resort and I was convinced from what I saw that it was good, solid truth and a good investment. It just looked very believable." In return for their cash, investors received fantastic, apparently tax-free rates of return. Kittian government ministers and other highly placed figures were only too keen to associate themselves with Bill's project. "I attended one of his seminars on the island and sat across from Sir Probyn Innis, the former prime minister of St Kitts," says Rowe's wife, Diana. "He told me that I would be getting on the ground floor of the investment opportunity in his country."

Sherwood was, in fact, a consummate con man, with a hidden past - and second name (Gagnon). "What a colourful character," says Kenney. "He used to be a Mob enforcer: he had hand grenades with the pins pulled, going in to collect from Chicago restaurants." The resort had been a con from the start: an elaborate Ponzi scheme, like a vast pyramid, collapsing when new investors ran out. But Sherwood did not live to enjoy his ill-gotten gains. In 2001, he died from a heart attack. The investors' troubles did not end there. Taking advantage of Sherwood's death and the fact that his wife Mary was terminally ill, the scheme had been snapped up by a smarter con artist: a suave-talking Englishman by the name of Roland Thomas, who had shown up promising a "$100 million" rescue. Originally from Surrey but living in the US, Thomas had a history in penny stock swindles and casino scams. He swindled controlling shares from Bill's ailing wife. He then took out new mortgages on the property with the National Bank of St Kitts and other institutions, in excess of $2.5 million (Dh9.2m), as well as other loans. He would end up stealing a resort worth $12 million (Dh44 million).

When Mary died in the summer of 2003, investors were cut adrift. Towards the end of that year, they had hired a local lawyer and managed to get a class-action lawsuit together, prosecuting Thomas and what remained of the Sherwood empire. Thomas and his cronies simply ignored them. When the investors obtained a High Court order for all the resort's records and documents, Thomas at first denied their existence and then had them shipped to rogue agents in the Internal Revenue Service, back in the US. Now the victims themselves would be investigated for tax evasion. "We strongly believed that this would be the 'smoking gun' that would seal our case," says Diana Rowe, who by now had lost more than $100,000. "Instead it was an indication of the legal nightmare to come." Kenney became involved after he was contacted by a victim who had lost more than $500,000 (Dh184 million). He headed To St Kitts to find a lawyer. "But the case was radioactive among local members of the Bar," he says. "I was consistently told the whole matter was a disaster and highly complex and I would 'do well' by having nothing whatsoever to do with it." Suspecting "some form of corruption", yet undeterred, Kenney met the lawyer for the other (class action) victims, including Dick Rowe. But there was resistance to allowing Kenney's team onboard. "It's not uncommon," he shrugs. "Our investigations soon revealed that two leaders of the board [of victims] were openly hostile to our involvement. It transpired that they were linked to another major fraud in the US and had laundered about $700,000 (Dh2.57 million) through Paradise Beach." Having infiltrated the victims, they were also in secret negotiations to force through a sale and then buy the resort from Thomas, at a vastly discounted rate. Kenney and his men swept in. The two fraudulent "victims" were removed. Wise, the former London solicitor who had once investigated Nicholas van Hoogstraten, visited St Kitts 32 times, tracking down witnesses, collecting affidavits and preparing a "freezing order" that would stop anyone from selling on the resort. Thomas and his associates had been continually trying to sell individual condo-apartments, which the victims' previous lawyer had had to try to re-freeze, one by one. Kenney's lawyers also moved against a bank in Antigua holding the fraudsters' accounts, secretly obtaining their records. As they were tracking Thomas, agents were dispatched to interview Dwayne Parsons, Sherwood's record keeper in Montana. Further investigations gave the lie to Sherwood-Gagnon's stories about his great financial acumen and success. As the truth came out, Sherwood's former employees on St Kitts, including Derrick Fraites, his former administrator, swore affidavits to Kenney's men. If the original investors had seen some of Sherwood's sidekicks, they may have had second thoughts about investing their money. There was Terry Parsons, a drunk and a heroin addict who seemed to rub up the local mobsters the wrong way. Bill and Mary's son, Tim, had got into drink and drugs and caused trouble. Bob Estes, Mary's brother, had tried to take over the resort when she was ill, before being sidelined by Thomas. When Kenney's team tracked him down, questioning under oath revealed that someone was signing off all share transfers in the resort using a signature stamp: millions of dollars were being transferred, illegally, in effect for nothing. By this point, the legal team was ready to unleash its Unless Order - freezing the entire resort, as well as ordering over all the documents that had been sent to the IRS - while McGunn had sent agents to shadow Thomas once he had left St Kitts for the US.

"You know, we go around, we ask people questions. If they won't assist we get an order and compel them. All of this investigative activity was designed to build the rudiments of a core case," says Kenney. "We had to build this from very little to start with, as the fraudsmen had been very aggressive in their activities in suppressing the core evidence in the case - the resort's financial records." The crime fighters had one other ace. An inside route to the fraudster himself. "Rumours had been passed to us suggesting that [Thomas] borrowed money from some businessmen in Las Vegas who were not the nicest of people. He had quit St Kitts because press articles about him had made him persona non grata with the powers that be. He needed money." Under Kenney's direction, one of the victims became a "white rabbit", whereby he corresponded with Thomas to see what he could learn. The ploy revealed Thomas's contempt for the victims: "He kept saying that the victims were not victims at all, but tax-evading crooks who got what they deserved," says Kenney. It also confirmed that the victims had sprung a major leak. Thomas gloated about possessing confidential lawyer-client communications between the victims and their law firm. "You can't underestimate this. In almost every major fraud, the villains will be found swirling around their victims, trying to leech yet more money, using the cover of specialist asset recovery firms - what we call re-loader frauds. Or they seek to penetrate the victims' veil of confidentiality with their own lawyers, so as to be able to take evasive action." He smiles grimly. "That's why the fraudsters hate our becoming involved in a case and why they fight so grimly and make us the subject of such ferocious slurs, because we see through all that." Thomas launched one last ferocious counterattack on Kenney's team, using victims' stolen money to defend himself through the courts and trying to cast doubt on Kenney's methods and his firm. Despite his shenanigans, the noose was tightening. Wise and his team obtained a court order to force the con man to turn over all relevant documents within three days, or face having his case struck out. The victims stood to gain $19 million (Dh70 million) in damages. After such a tremendous struggle, it was a major victory. And then the government stepped in. In January 2007, the St Kitts authorities compulsorily acquired the resort just as Thomas was about to pay up. To date, the government has dragged its feet on any compensation. Not only that, but after the island's English-trained attorney-general Delano Bart pushed through the acquisition in parliament, he resigned his position and joined the Marriott Hotel (next door to the Angelus resort) as legal counsel. The Marriott then bought the entire site from the government in a deal shrouded in secrecy. No one has been able to find out what the new owners paid for the Angelus. For Kenney, such hiccups are par for the course. "What inspires me to work hard in these cases is to help right wrongs and to help those folks who have been vanquished by villains. I just think that it's a good thing to do." Nick Ryan is author of Homeland: Into a World of Hate (Random House); www.nickryan.net