Monday, September 29th, 2008...1:50 pm
5 Famous Financial Fraudsters
Fraud is nothing new – the Old Bailey has records going back to the 1750s of cases where sailors were charged with sinking their own ships. But in recent years a number of high-level fraud cases have made the headlines and continue to do so. Here are five of the biggest fraud cases from the 20th and 21st centuries, both from the UK and overseas:
Catch him if you can – Frank Abagnale
Frank Abagnale remains one of America’s most successful fraudsters ever, cashing $2.5 million (£1.35 million at the current exchange rate, and enough to fill many virgin credit cards and capital one credit card) over a five-year period in the 1960s. Eventually, he was caught and imprisoned in France, only to be released again five years later as an unpaid adviser to the FBI.
The move has proved to be one of the longest lasting arrangements of its type, with Abagnale still lecturing to the bureau’s Academy students more than 30 years on. While he does not get paid for his work with the FBI, the fraudster’s short-lived but prolific criminal career has proved successful.
As well as a series of books about his own experiences of fraud, Abagnale was the subject of the Leonardo DiCaprio film Catch Me If You Can. He also designed the Integrated Payment System cheque now used in place of the old-style cashier cheques, which is issued more than 300 million times each year.
Based on his experiences, it may seem like fraud is a good career move – and Abagnale claims that convictions are rare. Other fraudsters have not been so lucky though, as more recent cases have shown.
Bobbing around – Robert Maxwell
Robert Maxwell was a familiar face in the British media – and there remains controversy as to whether he drowned after slipping overboard from his yacht, or whether he committed suicide.
What we do know is that, following his death on November 5th 1991, his media organisation, Mirror Group Newspapers, hit the financial rocks. The Department of Trade and Industry (DTI) promptly launched an investigation and found that Maxwell was heavily involved not just in the management of the group of companies, but in controlling the pension funds of his employees. He was also the only authorised signatory for transferring unlimited amounts of cash between the firms’ bank accounts – including that of the flagship Maxwell Communication Corporation.
According to the DTI report, Maxwell routinely used the pensions of his employees to provide cash for investments and then “window dressed” the company accounts to disguise the shortfall. In 1986 particularly, the pensions were used to purchase Maxwell House in Holborn, London, as well as to lend £34 million in cash to Mirror Group Newspapers. While this was exchanged for shares in news agency Reuters, the pensions fund did not receive the “significant profits” derived from an increase in share prices soon after.
Baring his soul – Nick Leeson
Nick Leeson’s official website now carries the full story of how he brought down Barings Bank in 1995 as part of one of the highest-profile fraud cases in British history. And it emerges that the cover-up began not with his mistake, but with somebody else’s. Hidden among the financial institution’s accounts – most of which it was not directly liable for – was error account 88888, set up to hide a £20,000 debt from an inexperienced employee’s poor investment decisions.
But when Leeson began to make losses of his own, he turned to account number 88888 to hide them too. As the end of 1994 approached, he had racked up more than half a billion dollars’ worth of debt – which was worsened in January 1995 after an earthquake knocked seven per cent off the value of the Japanese stock exchange.
In all, $1.3 billion was lost by Leeson’s dodgy dealing, driving the bank irreparably into the red. Still, the situation could have been avoided if Leeson had not been given sole responsibility for two different roles, he asserts. “In a fatal mistake, the bank allowed Leeson to remain chief trader while being responsible for settling his trades, a job that is usually split,” his website explains.
One for all and all for fraud – the NatWest Three
The NatWest Three are a trio of British businessmen implicated in the 2001 bankruptcy scandal of American energy firm Enron. In a court ruling from the US district court of southern Texas, the three are accused of conspiring to keep money for themselves that should rightfully have gone to the company.
Enron had a Cayman Islands partnership, LJM Cayman, overseen by the energy operator’s chief financial officer – which in turn created a subsidiary known as Swap Sub in June 1999. David Bermingham, Giles Darby and Gary Mulgrew were three London-based bankers responsible for representing NatWest in dealings with Swap Sub. But in the summer of 2000, they recommended that NatWest sold its stake in Swap Sub for $1 million – which the US court noted is far less than it was worth – and keep the surplus for themselves.
The whole deal hinged on the fact that the stake would be sold to a company owned by Enron’s managing director for global finance Michael Kopper. By skimming off a portion of the profits for themselves, the trio were deemed to have broken their promise to act honestly and in the best interests of NatWest.
Taking Aleef from the fraudsters’ books – Aleef Garages
Proving that fraud is as popular today as ever, November 2007 saw seven employees of newsagent chain Aleef Garages convicted of tax fraud. A total of £5.3 million was skimmed from the north-west company’s balance sheets by fraudulently declaring takings, with the deception taking place at director level. Three company directors and six other people, including both senior managers and lower-level employees, pleaded guilty to charges of tax fraud.
Steve Armitt, group leader of criminal investigations for HM Revenue & Customs (HMRC), stressed the scale of the dishonesty. “Criminality crept into every aspect of this business and the investigation was made all the more difficult because of the closed ranks of the employees,” he said. “Those involved tried to make it as difficult as possible for the cheating to be discovered.”
Following the Liverpool-based trial of the nine, confiscation orders were put in place for the full £5.3 million owed by the company. Robert Alder, head of the restraint and confiscation at HMRC, warns fraudsters that such action is necessary in order to recover funds obtained by deception. “HMRC and the Revenue and Customs Prosecutions Office will vigorously pursue confiscation orders to the full extent of the law to ensure that criminals do not benefit from their crime,” he states.