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Follow The Money

In an era of financial scams and Ponzi frauds, it takes cunning, smart thinking (and a little luck) to nail the bad guys. Nick Ryan meets Martin Kenney's 'fraud busters', who hunt down major-league swindlers from their luxury Caribbean base – and recover millions for victims. By Nick Ryan.

Martin Kenney & Co ©Neil Massey

March 2003 – The ambulance raced through the traffic. It flew past the San Gabriel Mountains which hemmed in the Los Angeles suburb and framed the Mojave Desert to the north. The driver weaved expertly off the freeway into the faceless cul-de-sacs, as the radio crackled into life.


He waited. He could hear the woman sobbing, choking off the words as she vomited, then groaned. He turned and risked a look, saw the near-comatose lady – Chinese he guessed – his colleague obscuring his view as he checked her blood pressure.

'… female … middle aged … nearest kin identifies her as Susan. Susan Kheng-Lok,' repeated the paramedic. '… Suspected overdose.' He was trying to calm her as best he could. The driver punched the details into his AMPD (Advanced Medical Priority Dispatch System) then turned towards the Foothills Presbyterian Hospital. He glanced at the clouds overhead: the early spring weather had yet to break. Time was tight. He wasn't sure if they were going to make it.

Five minutes earlier they had been greeted by a rather ordinary house; Susan Lok and her Cambodian father kept a tidy home, comfortable but not overly-ostentatious. The family had lived the American dream and, it seemed, had made it. They were quiet, perfect neighbours. Not the sort to have a massive money laundering operation running from the neat gardens of Glendora, California.

A turn for the worse

Art Ferdig as he appeared to investors

April 2003 – He felt a light dew of sweat. James Lee looked at his watch for perhaps the sixth or seventh time. He knew several of the others by name, if not sight. That didn't make him any more comfortable. He adjusted his suit once again and thought back on Art Ferdig's newsletter.

“Tradex has been defrauded of $129 million – all the money has gone missing." Lee had travelled all the way from California to discover what had happened to his life's savings. A technology consultant with clients across the country, he was, until a few weeks ago, comfortably retired. Every month, on and off for several years now, he'd been receiving his statements. He’d invested thousands into Tradex, a Forex (foreign currency exchange) investment scheme, which gambled on minute fluctuations in the money markets. He’d made apparently-fantastic profits, averaging 2.5 percent per month. Hadn't he? On paper, yes …

He scratched at his collar. His life was being turned upside down. Maybe it was a joke. He held the letter crumpled in his fist. "… I shall be doing everything in my power to find out what's happened." One of the most vocal of his fellow investors had told him that Tradex’s boss, Art Ferdig, was claiming that his lead trader had run off with all their money; that he was as much a victim as the rest of them. Lee wasn't sure; he and a small band had pressured hard for this meeting. He looked out for a moment onto downtown Montreal, 28 floors below, and thought of the strange turns in his 61 years that had brought him to this place.

Lost in thought, at first glance he almost missed him. A figure in a cheap, off-the-rack suit. The Californian blinked in surprise. There was no towering presence; no gold chains or swagger. Art Ferdig looked a little like a local pastor, thought Lee, who till now had never met the investment chief. It was this disarming, low-key approach – and the evangelising of fellow investors – that had led so many to sink tens of thousands of their dollars with Tradex in the first place. That, and the huge returns the scheme promised.

'Hello folks.'

After some preamble, Ferdig explained to the dozen assembled figures that it looked like his chief currency trader had indeed taken all their money, confirming Lee’s worst fears. Susan Lok, based out of Tradex's sophisticated operations centre in Singapore (or so he claimed), was a trusted figure but had betrayed them all – himself included. He didn't quite know how, yet, but she'd written to him in a note he held out and read from now, claiming she'd been "trying to make it work all along" but had duped them. "Maybe me punished by God," she'd scrawled in poor English.

Ferdig then introduced them to a a tall, pale woman on his right, whom he addressed as “Rita” – Rita Laframboise, (‘the Raspberry’)– a Montreal-based private investigator “of great repute”. She was dressed in black: the kind of woman you might see in a slasher movie, thought Lee.

'I've given Ms Laframboise $300,000 of my own money to start an investigation right away,' said Ferdig, in the manner of a humble town clerk addressing a local planning meeting. 'I've even sold my house to help finance this.'

Rita was an expert in asset recovery, he then told them, reeling off a long list of her achievements. She flashed them a small, comforting smile and took to the stage. She went on a long ramble about her prior successes, projects in Hungary (where she said she had recovered $2 billion in embezzled government pension funds), Brazil, Nigeria, and elsewhere. Lee found her humorless, rather brittle, almost military in her bearing. She seemed to have extreme confidence in her pronouncements but would not tolerate any questions; she adamantly refused to divulge any details nor would she provide any references so that Lee and his fellow investors could confirm her claims. Ferdig coughed and brought the meeting to a head. 'We'll get to the bottom of this. Don't you worry,' finished the silver-haired grandfather, as Rita stepped down.

A self-proclaimed "man of God", most had met Ferdig through his extensive Christian networks – just like Jewish investors were to meet to the now-notorious New York financier, Bernie Madoff, who ripped them off to the tune of billions of dollars. What Lee did not know was that Ferdig had been involved for many years with the controversy-dogged Californian evangelical group, the Worldwide Church of God. While Ferdig was "personal assistant" to the Church founder Herbert W. Armstrong during the 1970s, numerous sexual and financial scandals had erupted. Unbeknownst to his flock, Ferdig had had his share of wives and concubines, too – even a fake wedding to one poor lady he duped – and cavorted with young Caribbean women as he flitted between the States and various small islands, running his Tradex empire.

Lee was unaware of the former Navy SEAL bodyguards now shadowing Ferdig, as his paranoia over assassination by Chinese gangsters or disgruntled investors grew; or that several of these leading investors (most of whom still supported the preacher) were what investigators would later term “birddogs”, financially rewarded by Ferdig for sales. Ferdig's trader, Susan Lok, had never been working from Singapore, either: she was operating from a suburban house in Glendale, California and passing all monies through her father's personal account. But the hundreds of thousands recorded every month was only a fraction of the entire sum going to Art Ferdig – the rest was being recycled out as “fake” interest payments to investors, or siphoned off via a tangled web of offshore companies to the Ferdig family and associates, as part of a massive “Ponzi” scheme. Named after 1920s con-man Charles Ponzi, Ponzi fraudsters would steal investors’ money and return a fraction as fake interest/profit, to keep them hooked. All they needed was a grand-sounding proposal, promising great returns: but in reality without any genuine economic activity. It was one of the most commonly-used frauds; favoured by sophisticated swindlers to rip off billions of dollars from hapless investors every year. It went without saying that James Lee and his colleagues had no idea that organised criminals had been washing their dirty money through Tradex (a common Ponzi tactic), or that Rita Laframboise – standing in front of them right now – was in fact a “reloader”, a fake investigator in cahoots with the con-man.

In fact, Tradex had been a classic example of an old-style confidence game, its operators right out of Hollywood’s Central Casting. The 'Ferdig Gang' – evangelist Art and his daughter-in-laws – operated under various pseudonyms across the US and Caribbean tax havens. As regulation tightened in one territory, they'd simply hop to another, working their way down the West Indian island chain. Using the Ponzi model, the Tradex fraud deceived laypeople who had no in-depth knowledge of the investment world, using dazzling descriptions of financial constructs, and asset-holding plans, that sounded impressive but were essentially meaningless.

Over 600 investors, mostly residents of the United States, fell for the scheme and its impressive marketing materials. In well-crafted letters and brochures, the Ferdig Gang made use of the plural possessive pronoun “we” when referring to Tradex, as in: “We focus on achieving consistent growth and client loyalty;” “We have an exemplary and remarkable record – 84 consecutive months of profitable trading without a single losing effort; and “We trade currencies through administrators in Singapore. Your capital will normally be trading within 5 (five) days after receipt of cleared funds.”

The Ferdig Gang created the illusion of paying out these astronomically high “returns” to its investors, but such “payments” usually represented only paper profits that consisted of mere journal entries on falsified account statements. However, the false monthly account statements looked so rewarding that most Tradex investors chose to reinvest their money, while all the time believing they were earning thousands if not millions of dollars in profits (which of course never existed).

The members of this Ferdig Gang included its patriarch, Art Ferdig, and his wife, Elaine. The Ferdig Gang also comprised the couple’s three adult daughters – Alisa, Deborah, and Rachel – as well as their daughter’s husbands, Jeff Lockhart, Michael Elliott, and David Riotte. Throughout the life of Tradex, the gang flew in private aircraft and purchased homes and estates in California, The Bahamas, Dominica and lastly Jamaica, where they bought hundreds of acres of tropical forests with breathtaking views of the azure sea. Later, after the Tradex party ended, they purchased homes in Florida, Louisiana and Texas, as well as cars, sailing yachts and a marina slip. Where the money to finance such an ample life style came from, the hapless Tradex investors had little way of knowing.

All had been sunny until a few weeks before the Montreal investors' meeting. One morning in February 2003, financial investigators on the dirt-poor island of Dominica had stormed into a downtown Roseau building and ordered everyone to stand away from their desks, changing all locks and keys. Banc Caribe had been a money launderers' bank, run by crooks, for crooks and had been closed under pressure from American authorities. That same bank handled Tradex's Ponzi account, the monies which were constantly being recycled and sent back out to investors to keep them on board (whilst the rest was stolen). (According to the Liquidator’s report of April 18, 2007: 45 percent was cycled back to investors; 33.5 percent was directly stolen, 11.2 percent was used in operating overheads, and only 1.5 percent was set aside for Forex trading losses.)

With no access to its main account, no payments were possible. The fraud – a massive con which had been running since 1995 to this moment in Spring 2003 – was collapsing. Susan Lok had taken an overdose and presented Ferdig with the perfect opportunity to offset blame. He was getting away, scott-free.

To the investors, though, there were no sharp edges, no arrogance, no hint of untoward cleverness about Ferdig as he gently explained his version of events. Something was not right; Lee knew that, but couldn't prove it. The others were still with the financial guru, however. They shouted Lee down. Ferdig had said he'd stop at nothing to get their money back. And they believed him.

'Never would you believe that he had the imagination or intelligence to run a complex international fraud nor that he was a master of misdirection,' Lee later recalled. 'In retrospect, it's as if there were two entirely different personalities in one body.'

Top asset chasers

The MKS crew today, Martin Kenney at front ©Neil Massey

Summer 2003 – The two men stepped off the long flight from Dublin. The Miami heat washed over them in a second, but they didn't flinch. In their line of work they were well-used to entering harsh climes; war-torn Liberia, the jungles of Papua New Guinea or a freezing Toronto winter – they went wherever the money trail led them.

The taller and more broad-shouldered of the two had once guarded US Presidents and worked out on the Pakistan-Afghanistan border when the US supported the mujahideen. His companion, shorter and with carefully-buttoned suit and tie, was a forensically-minded lawyer responsible for crossing swords with some of the most tenacious con-men the world had ever seen, sociopaths who would stop at nothing in their avarice. When you heard of names like Bernie Madoff or Sir Allen Stanford, chances he was on their trail. He had sat across from these criminals as they told him how they lay awake at night, dreaming of ways to kill him.

In the arrivals halls a stocky, bearded figure shook their hands: 'Martin, James – so glad you could come!'

Burke Files was a former insider in the complex world of corporate finance. He'd swapped his investment hat for the shadowy arena of private investigations, working undercover on complex fraud cases. He'd front up to the bad guys, often impersonating a mark or fellow con, anything to get the drop. He'd recently taken a call to the small office he shared in Phoenix, Arizona, with fellow investigator, Richard Isaacs: a small group of investors in an obscure Forex scheme wanted their help. From their descriptions he was worried he was looking at a potentially-dangerous Chinese crime syndicate out of the Far East. The trouble was, there was only $5,000 on the table: the clients were broke. He'd put a call in to his old friend James McGunn over in Dublin.

McGunn was a barrel-chested figure, silver-haired and still far more youthful-looking than his 66 years, his office surrounded by certificates and frames from his service days, even a picture of him as a beat cop taken in the late-1960s, before he became a US Secret Service agent. A huge blowup cover from TIME magazine showed him in a car behind Richard Nixon, during a 1974 state visit to Egypt. Wedged into an old diary were a couple of photos taken on the Afghan-Pakistan border in the early 1990s, with a younger version of himself hoisting an AK-47.

An expert in complex financial investigations, there were no typical days for McGunn: he could be sweeping the office for electronic bugs, shadowing a criminal in a Panamanian dive or liaising with a worldwide network of investigators, often drawn from the ranks of former law enforcement and intelligence units. 'We fish,' as he often put it, 'in troubled waters'. Behind his desk lay a radiowave detector; overhead, in the sophisticated alarm system, were motion sensors; he kept a carved human legbone as a memento from an undercover operation in Papua New Guinea, where he'd followed a con-man who was friends with the Prime Minister and had had hired killers at his disposal. He sometimes chuckled when thinking back on his long career, comparing it to his literary hero, the fictional private eye Travis McGee, who had lived on a houseboat nicknamed “The Busted Flush”.

McGunn had worked with Martin Kenney, one of the world's top fraud lawyers – a specialist in asset freezing and recovery – for several years now, and as a team they had brought down some huge cases. The Financial Times had called Kenney a “top international asset chaser”. Miami-based Offshore Alert said that he was “one of the world’s leading authorities on the legal aspects of freezing and seizing assets in multiple jurisdictions”. Meanwhile, The Canadian Lawyer Magazine claimed that he “…just may be – considering his Robin Hood reputation and his bulldog legal tactics – one of the most determined and trusted lawyers around”. In one famous case they had taken on Canada's most infamous telemarketing fraudster in a massive worldwide investigation; Kenney had made legal history when he'd had to sue a class action law firm working for his victims, but which double-crossed him (and them) to cut a secret deal with the con-man. It led to what was reported at the time as the largest jury award ($36 million) in US legal history, for a dishonest breach of a lawyer’s duty of loyalty to his client. The money he'd made off that case had not only paid off the elderly victims, but also investors into his firm.

From the confines of a County Wicklow (Ireland) office, Kenney and his team of lawyers were waging a war against some of the most ruthless criminals and con men in the world today. Surrounded by the hum of computers, faces scrunched over handheld Blackberries, the staff hailed from across Britain, Ireland, Canada, and the Americas. Their targets were the charmers, the visionaries, those promising riches and dreams: sophisticated fraudsters fiddling merchant banks and insurers, as well as ordinary people, out of tens, or hundreds, of millions – even billions – of dollars.

Their boss, the precisely-spoken Kenney, had become one of the world's most pre-eminent "multi-jurisdictional" lawyers. A solicitor advocate, Kenney had powers similar to a barrister and was licensed to practise in several countries, including England & Wales (where he once trained), Canada, New York State and much of the Caribbean. Hailing from an old-school Canadian family, his grandfather Mart had been a famous Big Band leader whilst his brother Jason was Canada's Minister of Immigration and Citizenship. His ferocious work ethic and passion for justice were inspired, he said, by the example set by his schoolmaster father.

His team of covert investigators, attorneys, forensic accountants and IT specialists tracked down and recovered criminal wealth, returning it to victims. With traditional law enforcement increasingly ineffective against sophisticated money launderers, Kenney targeted felons where it hurt most – their pockets.

Early on in his career the former champion ice-hockey player had investigated Nick Leeson, who brought down Barings Bank. Two of his British team had taken on controversial property millionaire Nicholas van Hoogstraten, once convicted (later overturned) of the manslaughter of a business colleague. Since then his law firm – Martin Kenney & Co., Solicitors (MKS) – had tackled American telemarketing fraudsters, dodgy Brazilian banks, corrupt insurers, Russian organised criminals and even crossed swords with the Chinese government in its battles on behalf of victims of economic crime. One moment they could be tracking a case involving a Wall Street legend; the next they might be in the depths of Liberia, hunting stolen assets. He knew, however, that his foes would often stop at nothing to hide their deeds.

'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,' stated the impeccably-dressed Kenney when he was called to lecture on the subject. '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 was a war being fought in the shadows of an increasingly globalised world. Yet its ramifications were massive. According to international security firm Kroll last year, in the past three years four out of five firms have suffered from some form of corporate fraud and about one in 10 have been losing more than $100 million a year. Those costs are often passed along the chain to us, the public. And with the financial crisis currently unfolding, more cases are being revealed every day.

Once stolen, Kenney knew that money could be laundered through any number of offshore jurisdictions, “washed” through shell companies with “straw men” directors – names on pieces of paper locked in a faraway lawyer’s office – in massively complex constructs. Sometimes armed guards would escort bullion trucks from one side of the street to the other, as the fraudster physically moved his cash in order to break the paper trail. The most sophisticated would often create half a dozen or more of these constructs in which to hide the money (very often the individuals in these networks knew little about each other) before spending the proceeds on “the other side”, buying yachts, property, racehorses or whatever else indulged their fancy. The ‘Language of Hiding,’ as Kenney called it, included terms used by professional laundrymen such as a ‘Starburst,’ the ‘Ricochet,’ the ‘Hop Skotch,’ or the ‘Sausage Machine’ – where money gets moved in different ways to conceal its origin.

But it was not just corporations that fell victim: rich individuals and poor alike had been targeted. Few in this hidden war ever reclaimed their money, especially in an electronic age when funds could be moved in a matter of seconds. Once the FBI or Britain’s Serious Fraud Office went after a fraudster, restitution to victims was not high on the list of priorities, either. With trillions travelling through this highly secretive world every year, including the proceeds of organised crime and drug money (which was then “washed” back into everyday use) the problem had clearly been getting worse.

'There’s a huge portion of the world’s legitimate economy owned by nefarious 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 would utter a short, puffy laugh as he spoke. 'You know, in most normal communities, if a bank robbery takes place and someone has taken a gun and shot a teller, stolen money and run off down the street – people will help!'

These were not victimless crimes either. People had taken their lives after financial ruin; been forced to sell all; or left unable to afford lifesaving medicines or operations. In his filing cabinets were stacks of letters from desperate pensioners – victims of different con men – attesting to the cruel power of these crimes. Kenney loathed the confidence tricksters and often spoke as though he was on a crusade.

What he did in response was innovative in the extreme. Making extensive use of “sealed and gagged” (secret) court-appointed powers, such as the curiously-named Norwich Pharmacal-Bankers Trust Order (a “discovery order”, which forced an organisation to turn over records) and Anton Pillar Orders (a “raid order”, allowing them to enter premises), Kenney had pioneered and masterminded innovative uses of old and forgotten pieces of English law in tackling complex, money laundering cases. He was a legal trailblazer.

With secrecy on their side, in the form of these “gagged” orders, the organisations they targeted were legally forbidden from telling their clients they were being investigated. In fact, Kenney’s teams could act just like a law enforcement agency: to obtain bank or phone records, raid a corrupt lawyer helping create fake companies or seizing luxury yachts, registered via a complex set of offshore trusts to the wives of con men.

Kenney’s operations involved a variety of undercover surveillance and sting operations; forensic accountancy skills, to trace document trails or build a model of how a crime was committed; together with the use of experts such as handwriting analysts, criminal psychologists and IT specialists; as well as legal teams who could “depose” (interview under oath and threat of contempt of court) any witnesses. His men then located and froze criminal assets via civil courts, right across the globe. A Mareva Injunction (“freeze order”), or sometimes a “lis pendens” (a "notice of claim") prevented the villain selling on any of those assets, before they were then liquidated and proceeds shared back with the victims. The criminal could even be bankrupted by the process.

Kenney was doubly unusual in that he would work for the poorest, as well as richest victims, sourcing private financial backing (investors) on certain cases and deferring his costs until a case was successful. The model had been so successful, in fact, that officers at law enforcement agencies such as the FBI had referred some of the world’s most complex fraud cases to the company. These could still take years, however, with the con men free to spend victims' money to fight their corner.

'They're heavy hitters, for sure,' interjected James McGunn, who would stand with arms folded, watching his old friend. 'The general public doesn't realise how powerful these characters are, because they have so much money. They can be very challenging adversaries. Very difficult. You just can't underestimate them. That's a serious mistake.'

As they started discussing the case, Kenney pointed straight at the name and photo: Ferdig. 'There's our man.'

Secrecy & Surprise

James McGunn, chief investigator ©Nick Ryan

November 2003 – Amid the old world charm of the Biltmore Hotel in Coral Gables, Florida, as the last wisps of the hurricane season faded, Martin Kenney and James McGunn nursed their cocktails. The annual 2003 Offshore Alert conference was a meeting of the world's finest fraud attorneys and investigators, soon-to-be-united by a global network called ICC FraudNet, drawn together by the International Chambers of Commerce. Burke Files was there too; he grabbed Kenney's arm and pulled him to one side.

'Martin, there's someone I think you should meet.'

Kenney allowed himself to be led over to a table in the bar, where a suited figure was sat with Files' partner, Richard Isaacs. By now Kenney and Files had been working together on a case which had already seen over $150,000 of Kenney's time invested, so far unpaid. Phase One of the investigation plan had been launched, and the team had split into its investigative and legal components, starting on the long and tortuous process of identifying and following the convoluted audit and evidentiary trails left by the Ferdig Gang.

A small number of the Tradex victims had now come over to their side, too, led by James Lee, but they'd had to do so in secret: the majority of the investors still believed Ferdig's honeyed promises. In fact, as Kenney knew too well, there were many fraudsters who would even pose as defrauded victims themselves – and would fight tooth and nail to stop an asset retrieval specialist like himself from ever getting a whiff of the money trail.

That summer they'd sat around the conference table back in Ireland, together with John Bagalini, their forensic accountant and chief negotiator. An extreme sports enthusiast from Arizona, Bagalini was a passionate amateur chef, hailing from proud Italian stock. Together they'd pondered the likely twists and turns to come. McGunn would lead the initial investigative movements: seeking witnesses, surveilling locations, drawing up complex affidavits in support of court orders. Kenney and his lawyers would execute the complex discovery and raid orders – always sealed and gagged, so the other side remained ignorant of their true intent – and clash with the legal heavyweights the con-man and associates would draw up in their defense. (Kenney sometimes found himself having to lecture the judges he encountered in different jurisdictions: several remained unaware or ignorant of the razor-sharp forms of the law he could employ – one judge in Georgia even wanted to find him in contempt of court for using these methods.)

Bagalini, meanwhile, would be responsible for sifting through the layers of evidence, looking for the one clue or pattern in the money trail that could lead them to a stolen asset. (If accountancy had a “special forces” division, then this would be it.) He'd then draw up “link analysis” charts, using specialist software and a linked database the company had been developing. It was a method pioneered during the FBI's Mafia investigations in the 1950s and 1960s, allowing them to pictorially plot and connect all the money flows, entities and people in a case. Already they had uncovered enough to suggest the crime had its roots not so much in Asia as the steamy ports of the Caribbean.

Marcus Wide shook Kenney's hand. The two men knew each other by reputation; Wide was a senior insolvency professional at Price Waterhouse Coopers (PWC) based out of Halifax, Nova Scotia – and was also the Liquidator of Banc Caribe down in Dominica.

'I'm sitting right now on $2 or $3 million of Tradex monies, as you know,' said Wide. 'Art Ferdig and that woman of his, Rita Laframboise, are raising hell night and day trying to get it unlocked. The thing is … I can't keep stalling them forever. Sooner or later I'm going to have to hand it over.'

Kenney nodded. He looked thoughtful. 'You know that the FBI and FIU [Financial Intelligence Unit of Dominica] raided Tradex's office in Roseau last month?' The authorities had arrived at the one-storey residential building, perched on the edge of the ramshackle Caribbean town, just as Ferdig had fled. He was now squirreled away in a hotel in Montego Bay in Jamaica, where McGunn's agents – former Scotland Yard and FBI men – were keeping tabs on him.

What they only discovered later, in a hilarious scene that Kenney would delight retelling, was that Rita Laframboise was attempting to blackmail the con-man herself, to get her hands on more of the cash. 'She had him begging on his knees in his hotel room in Nassau – unbelievable!' roared the lawyer. Once they turned their sights on her, they would attack the remaining $115,000 of the victims' money that remained unspent and neutralise her threat.

Kenney knew that one of the key steps in the initial meeting with victims was to convince them to spend more of their money. 'Understandably they’re reluctant, because they’ve already lost a lot: but just enough to start the investigation can lead us to some of the initial assets. Once those are located, frozen and then liquidated (sold), the funds released from that can then be used to fund the real (rest of the) investigation.'

If they could get their hands on the frozen Tradex monies in the Banc Caribe account, that would be enough to fund Phrase Two of the investigation: a full, comprehensive field investigation with a chance to locate targets for recovery.

With his suspicions focused firmly on Art Ferdig, Kenney steepled his fingers and considered his options. 'Gentlemen,' he said, with characteristic understatement. 'What we need is secrecy – secrecy and surprise!'

As they ordered further drinks, he proposed they help Marcus Wide become not only Liquidator of Banc Caribe, but also Liquidator of Tradex: to leave Ferdig in control risked destruction of the remaining evidence and money. Not only that, but the majority of investors were still convinced of Ferdig's innocence and encouraged by slander from Rita Laframboise, were kicking up a storm about their involvement, as well as threatening legal action against them. They needed to wind up Tradex, fast. If they failed, Ferdig would surely get to keep the loot.


Dan Wise, MKS's chief lawyer and former British army officer ©Neil Massey

Summer 2004 – It was a legal firestorm. Well over 130 "sealed" (secretly obtained and executed) subpoenas were issued from the US Bankruptcy Court in Los Angeles; discovery and raid orders were served on banks, businesses and associates of Art Ferdig across the Caribbean from that summer of 2004 onwards. Sealed requests for judicial assistance abroad were sent to nine different territories on Marcus Wide's behalf, allowing Kenney powers of asset discovery, arrest and recovery across the Bahamas, Jamaica, the USA, Antigua, the Cayman Islands, Canada, Singapore and further afield.

In spring of that year Tradex had finally been wound up. Over $2.2m had come in as a result (from the frozen Banc Caribe accounts) to fund the investigation. As agents of the Liquidator, Kenney's teams now had supreme power over the company and its related entities. Via the requests he was sending out from Dominica on the Liquidator's behalf, Martin Kenney was again breaking legal history, pushing the law as far as it could go.

The team was also employing both “forward” and “reverse” tracing techniques, following the movement of funds as they were taken from victims; and then also tracing back from where the Ferdig Gang was now spending that cash. Thousands of pages of bank and investment account statements, email messages, telephone records, mortgage files and other pieces of data were flowing into the Martin Kenney & Co offices, pored over by handwriting, data recovery and other specialists the team had flown in.

Meanwhile James McGunn was keeping tabs on the crook. By now Ferdig was on the run. McGunn was in daily contact with the FBI, which was also looking for the villain. The ex-Secret Service man had tracked the fraudster as he moved between south Florida to the Bahamas, then from different Caribbean islands and onwards to Germany, London, Montenegro and other European countries, before heading back to the Americas.

Flying in to Los Angeles, McGunn met with Ron Lander, an investigator from the Dominican FIU. Records turned over from their raid on the Tradex base revealed the full extent of Ferdig's daughters' involvement in the crime. The MKS investigation uncovered evidence that Ferdig, his three daughters, and his daughters’ husbands had each spent hundreds of thousands of dollars from investor deposits to secretly buy homes and boats, and pay for country clubs and travel by private jets. They had no-name credit cards, identified by number only, for use at ATM machines in the U.S. to withdraw Tradex money they had diverted to secret, offshore bank accounts. Other records later seized from Singapore showed that Ferdig's currency trader, Susan Lok – who had taken the rap for the collapse of Tradex and who, in 2006, pled guilty to fraud and was sentenced to 10 years and ordered to pay US$27 million in restitution – was really a bit player in the scheme, only ever receiving about 10 percent of the Tradex funds and providing a thin veneer of legitimacy with her currency trades.

By now Richard Marston, a mild-mannered ex-Scotland Yard detective, was working the case with McGunn. With him was his old friend, Ross Gaffney, an ex-FBI agent based out of Florida. Both men had extensive knowledge of the Caribbean, having taken part in a joint task force to investigate and close hundreds of dodgy banks on the island of Montserrat. They were joined by John Boaden, a former homicide detective from Nottingham, England; and Al Ristuccia, an ex-IRS (Internal Revenue Service) agent who had helped Kenney on several of his past cases.

In The Bahamas, Ross Gaffney was soon photographing and making discrete enquiries about two residential properties that McGunn had discovered were purchased with Tradex funds. One was an ocean-front condo in Nassau and the other a canal-side home in Freeport. Title to both properties was held in a corporate name: Applewhite Properties Ltd.; together they were worth over $1 million. McGunn learned that Ferdig’s daughter, Alisa Lockhart, was an officer of Applewhite and had signed all of the purchase documents. The intelligence developed by the former FBI man helped them establish that the Freeport residence had recently been sold, with most of the proceeds going to personal accounts controlled by Ferdig and another daughter, Rachel Riotte. It was a classic example of what fraud investigators like Kenney called "layering": all money laundering operations involved three phrases – the placement, layering and then integration of illicit money into "clean" assets.

McGunn also tracked down a West Indian girl in Santa Domingo in the Dominican Republic, whom Ferdig had married in late 2001 when she was just 18 and he was 61. She was living in a condo that Ferdig held under a corporate name and had purchased with money stolen from Tradex. 'God told me to sire a son, so I needed a young woman,' Ferdig claimed, after getting a Dominican divorce from Elaine Ferdig, his wife of 36 years. Between those two wives, Ferdig arranged to “marry” a middle-aged Texan woman, who discovered after about a year that her union with Ferdig was a sham because their Las Vegas wedding had been performed by a fake religious minister (one of Ferdig’s long-time associates). She later went on to train as a private detective and sent her own investigators to shadow the fraudster.

Tragically, the MKS investigation learned that an investor in Bath, Maine had taken her own life after losing everything she owned to the Tradex fraud. She had been one of the earliest followers of Ferdig and subsequently brought others into the programme. After her suicide, her friends said she was not only “wiped out” financially, but was burdened with guilt after watching so many others lose their life savings.

By early March 2006, confidential Bahamian contacts developed by McGunn picked up “chatter” between Ferdig, a Nassau realtor (estate agent), and Ferdig’s Nassau attorney. The talk was about Ferdig’s condo in Nassau. While the intelligence failed to confirm that the condo was being sold, it was clear to Kenney and McGunn that they had to act fast. They moved against a local branch of Barclays bank, gaining access to records of Ferdig’s accounts under a seal and gag order. Using a Discovery and then Anton Pillar (raid) order, they hit the private trust company administering the condo: his team appeared on its doorstep one morning, taking the owner completely by surprise. Kenney knew the trust specialised in forming Bahamian companies to help money launderers. Not only did they seize scores of documents, they also flew in a forensic IT specialist from Miami, who cracked its server and recovered deleted emails.

McGunn then raced to gather all the available evidence to support a Mareva Injunction, which Kenney fashioned with the assistance of a Bahamian law firm, to freeze the condo. As it happened, they acted just in the nick of time. On March 16 Ferdig had signed an all-cash sales agreement with a couple from Wales, and the proceeds of the sale had already been deposited into an attorney’s account, waiting to be disbursed to Ferdig in a matter of hours. The result of the MKS effort was that the $425,000 sale was allowed to go through, but the buyer’s money was paid to the Liquidator. Ferdig got not a dime.

From the start of their chase this was the first time that the con artist had really been slapped in the face: that he knew they were after him, big time. Kenney understood that the important thing was to keep up the pressure – you went after the small things first, so you could take down the main prize later. McGunn joked in his trademark, laconic drawl that the legal firepower they were now unloading was tantamount to the bad guy living life in the tropics and suddenly opening the door to step into a snowstorm.

'A blizzard of litigation just smacked him right in the chops,’ he chuckled.

From now on, it would not be so easy. Ferdig would become more and more evasive and elusive, covering his tracks, not staying in any one place for more than a short period. He was feeling the hot breath of the hunter down his neck.

Casting the net

Art Ferdig and suspected wife, on James McGunn's desk
©Neil Massey

August 2006 – Road Town was a polyglot of low rises, shacks, palm trees and oddly-shaped office buildings. It pressed tightly to a bay clustered with the swaying masts and conning towers of billionaire yachts. The sailing capital of the world sat against a stunning backdrop of verdant mountains. It was also home to thousands of offshore companies. And now Martin Kenney.

The Canadian patted his faithful Afghan hound, Jackpot. The British Virgin Islands (BVI) was a perfect new base: nestled right in the heart of the offshore world. ‘We’re moving to be behind the enemy’s front line,’ Kenney had told his staff, only half-joking. They’d moved from Ireland exactly a year previously. The team – which had now expanded to nearly 20 individuals, and numerous freelance agents – gathered around the huge conference table. Spread before them were hundred-page plus affidavits; surveillance images; a screen lit with link analysis diagrams, showing the numerous parties in the fraud next to times, dates and bank account numbers. Phase Three of the investigation had begun.

'Can we do a Club Privée? Or a Maz Khan?' asked a figure dressed casually in shorts, sporting a goatee beard and Hawaiian shirt. John Bagalini was in his element, a spider pulling in the various strands of his web.

As well as his forensic accountancy and IT skills, Bagalini was a handwriting expert, running his eye over cheques and account signatures, spotting the telltale signs that would link two different names to the same person. He was also an arch negotiator and as he spoke now, he referred to previous cases in which he'd dealt directly with the fraudster, hammering out a deal to get back the majority of funds to the victims. They agreed to get McGunn to try and “run” Ferdig’s phones: subpoenaing his call data (from phone companies) and using that to determine his main contacts.

Meanwhile, Bagalini had weeded out fake creditors (frequently fraudsters put in dummy companies and claims to get back monies for themselves) and his careful analysis of the records that McGunn and Kenney had seized revealed that new money was coming from one of Art Ferdig's associates in Jamaica. Near a Sandals resort the fraudster had bought himself nearly 500 acres of stunning real estate (forest), on which he intended to build a New Age retreat for the gullible Californian crowds he was now working. The website for his new venture, Up The Vibration, even bore a photo of the happy-looking man standing atop a hill, the Caribbean seas behind him, whilst words talked about the healing ‘crystals’ he was sure lay there beneath the earth.

Former Army officer and solicitor advocate Dan Wise had now joined the firm as partner from London. Barely hours off the plane, he wasted no time and was soon discussing with McGunn the legalities of tapping the phone in a Jamaican hotel they knew Ferdig used and was intending to buy, having secretly intercepted his emails. 'Let me send someone down to talk to Norman Pushell [the owner] first', suggested the chief investigator.

McGunn informed the assembled team how he and Bagalini had been tracing funds sent through another money launderer called Jay Patel, over $2.5 million of which they had so far traced from Tradex into various other accounts – including into the 400+ acres near the Casablanca Hotel on the south coast of Jamiaca. McGunn would detail one of his men to go down and case the location, as Wise drew up the legal documents to support their discovery and freeze orders. (Eventually the resort lands would be frozen and liquidated.)

‘I’ve also been in touch with Special Agent Brian Coughlin of the FBI, as you know. We think they’ll be some profitable synergy from that relationship,’ McGunn smiled, knowing that his law enforcement contacts and knowledge could prove most useful.

By now the partnership between McGunn and Wise was becoming invaluable. Having worked out in conflict zones and often personally tracking down witnesses, Wise was unusual in the legal profession. With a penchant for fine sherry and dark humour, he rarely seemed fazed by what the bad guy had to throw at them: in one bitter case the lead barrister on the other side had complained about the volumes of material Wise would serve on him the night before a hearing.

‘He got so annoyed that he insisted the next time we sent materials we do so by serving them at his hotel room via two dancing girls, a bottle of Mount Gay Barbados Rum and some Cohiba Cigars!’ chuckled Wise. By that next time, however, Wise had converted the lawyer to their cause and had him working for Kenney on the Tradex case. Someone who understood the local courts, and most importantly the judges, could often tip the battle.

Not surprisingly, their foes rarely thought highly of Kenney & Co. Wise knew that Kenney had once been described by one fraudster’s lawyer as ‘an economic terrorist.’ That they would frequently be lambasted as zealots – essentially by the people they were suing of course. Sometimes their lawyers made very serious allegations and put the firm to a lot of expense to defend itself. Private investigators would often shadow them, as they shadowed the fraudster: it was extremely unpleasant at times. But it was all part of the game, designed to throw them off the scent.

It rarely worked.

Back in his office, James McGunn picked up the phone. A woman’s voice was on the other end. She was saying that she was a neighbour of the Elliots – Art Ferdig’s daughter and son-in-law – and that she had invested and lost money in Tradex. Then she confided how the Elliots had let slip that their family and relatives were planning to move to Florida. They knew Kenney and McGunn were on their trail and hoped to use Florida’s “homesteading” laws, which afforded protection against seizure of property, to safeguard their ill-gotten millions. (What they didn’t know, but Kenney and Wise did, was that where criminal intent and money laundering could be proven, those state laws became ineffective as a shield.) The caller became one of several “CIs”, or confidential informants, that McGunn ran on the case. One of the others was the Texan woman Ferdig had duped into believing they were married, and in fact had dumped her – during a surprise holiday visit – for an 18-year-old Dominican girl. He’d even had the gall to ask her, as they flew in on their “holiday”, if she’d meet and teach his “new” wife all the necessary skills to be his woman!


Undercover surveillance of Ferdig

June 2007 – He swatted away a fly. Florida was humid at the best of times. Insects would eat you alive if you stayed outside too long. But their quarry had gone “AWOL”, to ground, and the former Secret Service agent was determined to find him.

Thanks to his CIs, McGunn had managed to trace Jeff Lockhart, one of Art Ferdig’s main accomplices and his son-in-law, and freeze the house he was using in Louisiana. Ironically he’d found Lockhart through his connections to a Bible college. Now McGunn was heading into Boca Rotan, or “fraudsterville” as many in his profession called it. It held a remarkable number of money launderers, grifters, con men and swindlers. And, he thought, Art Ferdig.

By the time evening was drawing down that night in 2007, four years after they’d set out on the case, McGunn was confident he’d found his quarry. A tortuous chase from the Ferdig Gang’s California homes, via a money laundering associate in a tiny Nevadan town, and now through a complex series of trust companies, had led him to a house occupied by Ferdig’s “ex” wife, Elaine (he suspected that was a legal not physical split, to help the con man avoid detection).

Ferdig had exercised considerable care in selecting the Boca Raton house. Designed for the tropics, the high-end single storey residence had white masonry walls and a tile roof the color of an aqua-marine lagoon. A large screened-in terrace opened through French doors to a rear yard that bordered a fresh water canal. McGunn was struck with the impression that the owner wanted extreme privacy. Awnings shaded the windows of almost every house in the private road, and the expertly-manicured laws, sunny gardens and tall, leaning palms offered no hint as to whether the owners were home or away, or how they earned their money.

McGunn permitted himself a small smile. The various members of the Ferdig Gang had been under covert surveillance for some months now. A lucky break in tracing one of Ferdig’s cheques, via a Discovery Order on an insurance firm, had led him to an automobile repair shop; and then to a post office box (he knew Ferdig favoured collecting his mail from numerous private mail boxes); and thence to the county records office, back to the Nevada connections; eventually turning up the address where he now stood. It was detective work: long, hard, boring at times. But always yielding results. He knew that Wise, too, had just been able to freeze $90,000 in an account Jeff Lockhart held down in the Bahamas. Patience paid off.

He jumped back in fear as a large shape – an alligator – lumbered out across the canal path, not yards from where he now crouched. Backing up fast, it seemed for once as if even the animals were scared of McGunn: it slipped quietly back into the dark waters as quickly as it arrived. McGunn let his breath out, slowly, then edged back to his car to call back to Road Town. These stake outs reminded him of his early beat cop and Secret Service days: he’d recently had to carry out surveillance on a property from a car park used by young lovers, no doubt curious what this old man was doing in their midst.

McGunn was to spend many days, and visits, in “fraudsterville”. As he surveilled different properties, building lots, even a boat dock, Wise would prepare the necessary legal attack and Kenney would execute it in the courts. One by one, the properties were frozen. They’d even gone after the Banc Caribe estate, too, in the Caribbean courts; and gained a substantial victory there (taking over $5.5 million of value – or two-thirds of its estate) as McGunn’s affidavits revealed just how much the Dominican bank directors had known about the crimes their clients, including Ferdig, were committing. Banc Caribe and Art Ferdig had been inseparable. As for “the man of God” himself, Ferdig was running out of places to run. Bagalini, meanwhile, was updating the link analysis charts which plotted the Tradex con: he could pull up screens which would show that this was money laundering at its most brazen, a criminal offence that could sink the fraudster. The empire was well and truly crumbling.

With the information they were now collecting, they felt able to “run” Ferdig’s phones. The principal cell phone number came from records obtained through subpoenas: sometimes these gave you a lead to public information, like the incorporation documents of a company, and sometimes there was personal information which could be gleaned from those records. Every time they did a subpoena they asked for account opening documents, which often had a phone number attached. In this case the number tallied with one mentioned on Ferdig’s emails, obtained from the FBI raids on Tradex back in 2004. All the while, Ferdig had no way of knowing how much information was being accumulated about him.

‘One of the numbers I called when he was in Jamaica…we did this twice. I pretended I had a bad phone connection!’ recalled McGunn. ‘Another time Burke Files called him, disguised, Burke said he was calling for someone else. Art said it was the wrong number and how he’d just re-activated it in Montego Bay in Jamaica. It was one of the old numbers we were continuing to try.’

With the hotelier’s cooperation down in Jamaica, plans had been made to bug the room where Ferdig would be staying. Dan Wise knew that the team couldn’t cut corners: the techniques they used had to be able to stand up under local law or else the entire investigation could be ruined, when the legal battles ensued. In the event Ferdig never turned up.

However, the fraud busters had another ace up their sleeve. Ferdig had reinvented himself as a sort of New Age Christian guru, and was giving seminars at local colleges and spiritual centres, under his new banner Spiritual Ekklesia. Not only did McGunn trace an address via a Discovery Order served on PayPal, which was being used to collect payments on Ferdig’s new website, but a team of undercover agents set about tailing the con artist as he went about his latest swindle.

The team of ex-intelligence and law enforcement agents was assembled in an undisclosed location, where Ferdig’s calls, and Al Ristuccia’s tracking, had now placed him. They prepared to use a GPS tracking system that transmitted information via an embedded satellite modem to a secure website. By using customised software, the team could receive real-time speed, direction and/or position that was displayed against an electronic map.

There would only be a short time in which to place the device. The trick was to practise on a similar vehicle before finding a window of opportunity to gain access to Ferdig’s car. Magnetic trackers were easy and quick to install, but over rough roads could work loose and the magnets could interfere with the signals. So they decided on a clamp-based system, that bolted the transmitter beneath the vehicle.

Eventually a window presented itself: the men worked hard, and fast, smearing grease on the device so that it didn’t look brand new – just in case he had a mechanic check over the vehicle. They had disguised themselves in mechanics’ jumpsuits, placing a similarly-disguised work truck in a public lot next to Ferdig’s parked car. All went well, until the battery failed and they had to repeat the operation. When it stopped transmitting again, they had to repeat the clandestine manoeuvres once more, only to find it had gone, probably fallen off. But the six weeks of signals they did get was enough to pinpoint his location and routine.

In that time they would physically follow the fraudster wherever he went. If he used a cash machine (ATM), they wanted to watch and see which bank he was using, then match it to their electronic and court-ordered documents and surveillance. If he visited friends or attorneys, they would note those down; and make sure someone would record wherever he stopped and parked his car.

Al Ristuccia, the ex-IRS agent, was part of the operation. McGunn had now managed to track down Ferdig to a seedy apartment building in Los Angeles. As Ristuccia and another private investigator approached, they spotted Ferdig inside a second floor apartment: when they knocked on the door, an accomplice bolted out of the back (a man they later thought was Ferdig’s Nevada-based money launderer).

‘How did you find me here?!’ Ferdig snapped, through the closed chain. Ristuccia thought that a funny thing to say, unless you were hiding something.

‘Well, when folks have nothing to hide they’re usually pretty easy to find,’ replied his colleague, to which Ferdig could only reply ‘hmmph’.

Using a cover that they were investigating another legal matter – a different Ponzi situation, in which they implied Ferdig was merely an innocent spectator, on behalf of a different client – they tried to pump the fraudster for information. They learned that he was giving lectures on “angels” at the Learning Light Foundation, a New Age centre.

Suspicious and evasive, the men knew Ferdig would give little away. They noted the address in case they needed to serve him with judgement papers (on behalf of the Liquidator of Tradex) and reported back to McGunn. The old investigator nodded as he listened to their words, remembering the twists and turns of another of his cases; how they’d had to place a disguised “hobo” outside a restaurant, videoing a conversation inside which was later broken down and reconstructed by a lip-reading expert. Chasing money could sure take you to some strange places.

Panama Blues

Surveillance on Art Ferdig's car

McGunn hadn’t realised it at the time, but he already had a “gotcha” moment. Back in 2006, the fraudster had been on the move. McGunn had gone back to the emails they’d intercepted, searching for any clue he might have missed. Perhaps Ferdig would be prepared to deal. As he was about to give up, he spotted an alias Ferdig had used. There was little chance the address was still “live” but he sent him a letter attached to the email, anyway. Just in case.

Three days later there was a Postik note marked “urgent” stuck on his desk. “Please call Art Ferdig”. It listed a number in Panama City. McGunn dialled.

What followed was a verbal sparring session where Ferdig would make a serious mistake.

‘What are you, what are you really after?’ asked the voice crackling at the other end of the line. McGunn silently clicked on his tape recorder.

‘What we’re after is bringing closure to the matter in such a way that the interest of the creditors are served. That’s, that’s our responsibility,” replied McGunn in his rumbling, measured tones.

Ferdig sounded like a calm, reassuring preacher. Like he had mastered that persona, as an actor would do. Unlike James Lee, McGunn was not so easily taken in.

‘.. there may be, there may be certain avenues that we can take,’ he suggested, doing his best to box the con man in. ‘Certain ways out of this problem that actually would be in your interest. That would, that would benefit you somehow.’

Ferdig was slippery, evasive though. He sold McGunn a sob story; that he was a simple man, taken in by Susan Lok his currency trader [later “deposed” by McGunn, a week before she started a 10-year jail sentence for her part in the crime]; that he was trying to find a place he could live in for a few hundred dollars a week. ‘I have no cash,’ he said. ‘If you're looking for cash from me, I have no cash.’

It was easy to hide money in Panama and McGunn suspected that was his true reason for being there: to open accounts, perhaps start up an internet scam. It was pretty common, in his experience.

A settlement offer was on the table; McGunn in return wanted information about locations, assets. Ferdig knew that Kenney's men had already frozen property in Jamaica and in The Bahamas. But then he made an admission, as McGunn was speaking:

‘Then, you were under the impression, as you explained to me, that a percentage of those profits you could retain as earned income. As your share, as your fees for operating this,’ McGunn had put to him.

‘Right,’ said Ferdig.

Admitting he had made about $20 million from ‘foreign currency trades’, it was obvious he had paid no taxes on that “salary”. McGunn of course knew the business was neither legitimate, nor that Ferdig had shared that cash. It had gone right into his private accounts.

Now from his FBI contacts, McGunn learned that the IRS – the Internal Revenue Service of America – was looking into the case, too. McGunn suspected the fraudster had filed false tax returns. ‘Aha!’ thought McGunn to himself: ‘Gotcha.’

With the information coming in from Al Ristuccia and his teams in the USA, McGunn fed through Ferdig’s latest known whereabouts to the IRS agent in charge of the investigation. A tax evasion charge may not be the most glamorous of legal manoeuvres, but it was one of the most effective, famously catching Al Capone. Meanwhile, Ferdig’s attempted defence that he was earning all this money as a salary would be blown apart by Kenney’s legal thrusts, which could clearly show Tradex had been a Ponzi scheme.

‘They lied their way to get the money, to retain the money,’ the Canadian lawyer said as they sat around their huge conference table. Spread before Kenney were affidavits about Ferdig's scheme, surveillance images and a screen lit with link-analysis diagrams showing the numerous parties in the fraud next to times, dates and bank account numbers.

‘Only 1.5 percent of the $80 million taken into the scam went into loss-making foreign currency trading. And if it was honestly earned and you’re an honest businessman, what do you need with these machinations with 59 different companies and money being pushed through multiple bank accounts?’

‘Right,’ nodded Bagalini.

‘Yup ... when you operate a fraud, you can’t take a salary either!’ McGunn felt a smile spread across his face.


Art Ferdig taken on Jamaica, above the "healing crystals" he was sure lay beneath his feet

2009 – Today Martin Kenney & Co. has frozen or liquidated nine Ferdig Gang-controlled assets and accounts – and effected a recovery against the corruptly-managed Banc Caribe – totaling over $10 million of value. The investigation continues.

Meanwhile, there is a $35 million default judgement which has been awarded against Rachel Riotte, Jeff and Alisa Lockhart, on behalf of the Liquidator of Tradex, Marcus Wide, out of the court in Dominica where Tradex was once based. A $500,000 judgment stands against Elaine Ferdig and David Riotte, while the chief con man himself is facing a $20 million judgement from the same court.

There have been heated negotiations, as members of the Ferdig Gang face financial ruin and attempt to cut deals with the Liquidator. One daughter, Deborah, and her husband Michael Elliot, escaped judgement by settling with him. Much of the money is gone, though. Spent, recycled back out as fake interest payments, or simply was never there, inflated by Art Ferdig’s lies and sales talk.

Carmen Bryant, the woman once duped by Ferdig into fake marriage, suggested he was a sociopath: ‘While spouting Bible verse he is breaking all the Commandments. He justifies this by using the Old Testament and quoting or interpreting just what fits his present crime. I truly believe that these people only get worse as time goes on. They see how much they can get away with and if successful they continue to go on to bigger and better victims ... Just imagine, having a father like Art and working for him and breaking the law each day with sanctimonious necessity.’

So McGunn, Wise or one of Kenney’s younger lawyers, such as Englishman Andrew Gilliland, still have to face stomach-churning descents into the volcano-studded airport in Dominica, before a tortuous hour-long drive through jungle and rain to the capital Roseau. Winding up Orders are still being placed on various Tradex-related entities, as McGunn races to the local Court Registrar on Road Town’s cramped, colonial Main Street, to swear his affidavits; then rushes them off by Fedex to arrive the next day with MKS’s local attorneys in another offshore location, where the company is ‘chasing another million or two’.

McGunn is still keeping tabs on Ferdig too: the fraudster has become ever more desperate for cash, trying new schemes – his latest being a mineral-selling business that McGunn has already penetrated using one of his many holding companies kept for just such a purpose. Kenney, meanwhile, continues to fence, a brilliant international lawyer outwitting the local attorneys hired by the other side; using his encyclopedic knowledge of international legal systems and anti-money laundering legislation to run rings around the opposition.

It is not without danger, though. Kenney has recently had to hire private military contractors – former special forces soldiers – to protect him on his visits to Latin America, digging deep into corruption behind the collapse of several banks in Brazil. And he recalls one meeting where a fraudster forced to the point of bankruptcy ‘frothed and used many unkind expletives, explaining that he had lain awake all the night previous, thinking of ways to kill me!’

‘It becomes very personal when you get the guy by the pocket book,’ Kenney admits, looking up from a stack of documents. ‘ I have a fraud lawyer in Florida who had to get a specially-trained attack dog to live with his family, because of death threats. But it just washes over me: it doesn't stick.’

After five years on the case, James McGunn is tired. The all-nighters they often pull don’t get any easier when you’re 66. But he won’t give up. One colleague had to tough it out with over half-a-dozen bodyguards in Liberia, part of a massive fraud case, and in the process caught malaria. ‘He still stuck it out, though,’ nods Martin Kenney, approvingly.

John Bagalini puts it another way: ‘Everyone is very driven, very tenacious. Once any of us gets on the path, it really takes a death blow to get us off. You have to beat us on the head with a crowbar.’

With news of the collapse of Wall Street's legendary investor and Nasdaq founder, Bernie Madoff, it seems no surprise that Kenney and his team are already on the case, investigating two of the major BVI feeder funds that fed around $10 billion of reported value into Madoff’s Fund from a large European bank (Kenney's client).

As for Kenney he reveals that one day, perhaps when he retires from chasing economic crooks, he wants to work on behalf of Death Row inmates (‘men of insubstantial means’) who are denied justice. ‘I believe very strongly that all accused persons are entitled to a robust defence – especially when charged by the State with capital murder that can lead to their execution.’

For today, though, there is still a strong urge to wipe the world of the con artists and charmers who steal millions each and every day. There is clear loathing in his voice when he talks of these characters.

‘They’re as sophisticated and bright and as well organised and articulate as some of the best commercial business people in the world could ever be. And some of these fellows are really sick! They get their ‘jollies’ off of victimising and laughing at people. Why do they do this? Well, there’s a sickness there; they have sick, psychological states of mind.’

‘That might explain why some of the big boys who take $200 million at a roll, do it again, and again, and again. There’s no reason; they can never consume all they steal. It’s a sick psychological game, that’s what it is.’

Epilogue – The Tradex case rumbles on. Art Ferdig has been arrested (June 2010) by US Marshalls in south Florida and has appeared in a court in California, where he pleads "not guilty" to multiple federal charges of tax evasion on the profits he generated via the Tradex empire. (A Grand Jury had prepared a sealed indictment against Ferdig in 2009). He remains in custody, awaiting trial.

MKS continues to serve notices on the fraudster and associates; it has uncovered four deaths of US citizens, connected to Ferdig's associates, down in the central American state of Belize.

An edited version of this story appeared in WIRED (UK) magazine ©2009.

headline photo: Martin Kenney, the "fraudbuster" ©Hamish Brown


You can buy this article, and seek new commissions, either by contacting me direct or my syndication agency, www.featurewell.com

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Blog: Ryan's Rants
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A Fraudbuster Speaks – Dan Wise, senior partner, Martin Kenney & Co:

"To work here," he says, speaking over a rushed lunch at his desk, is "very interesting indeed – demanding. It's long hours, a lot of the work involves getting freezes orders for different types of injunctions, either in the court here or getting papers for other lawyers in other jursdictions. And a lot of the time that's time sensitive. You can end up working late nights and a lot of weekends. But it's very, very interesting."

"Many law firms are not equipped to take on cases such as this. Because they have other aspects of their business to run."

There are aspects which are similar to other law firms but in other organisations this type of work is not done by one company.

"Most litigation is a sensible commercial dispute. In most litigation, people will obey court orders. That's not always the case here." The firm is very unusual in having the focus on fraud and the spread of expertise inside: forensic accounting, legal and investigations. Both Wise, and his colleague Andrew Blackburn, whom he recruited from London, say they've invested a lot of time and effort in building up the firm. Dan, 43, joined the law after being an officer in the Army.

Martin has a "high profile in terms of asset tracing and obtaining these Discovery Orders, getting information by way of court orders. He spends a lot of each month speaking at lectures and devotes a lot of effort to keeping the profile of the practise high."

Wise thinks they are only tackling a tiny proportion of the fraud. "There is a lot of fraud out there. A lot. It's about taking financial advantage through deception, lies. I can only see more of it, sadly. Arising from the economic output of China, India, former Soviet Union. And structured finance products. Which increase the speed with which you can make or lose money. So it's a massive, huge, problem."

"In Paradise Beach, people lost their child's college fund with Bill Gagnon. The potential for damage in developing countries is huge, too, in terms of infrastructure, roads, schools, hospitals – all things that would help them improve their families' lot."

Is this a vocation? "I think there's a significant element of that. I don't want to sound too holy, but I do really enjoy the fact that we act for people who have been victims of bad conduct, as opposed to just acting in a commercial dispute. In all our cases there's some element of skullduggery. We're trying to help victims. And I like that."

On Enemies – Dan Wise speaking

"Martin was once accused of being an economic terrorist, by the lawyers for one of the fraudsters we tackled," laughs Wise. "We sometimes get accused of being zealots, essentially by the people we're suing of course."

"Sometimes their lawyers make very serious allegations and put the firm to a lot of expense to defend itself – it's part of their strategy to delay us, to try and frighten us off the pitch. It takes a lot of work and money to put them off. It's extremely unpleasant."



Psychology weds finance in Ponzi scheme frauds

Tue Apr 28, 2009 11:30pm BST

By Pascal Fletcher
MIAMI (Reuters) -
Take the malleable clay of human nature, add greed, deceit and manipulation, and you have the basic ingredients for a Ponzi scheme financial fraud.

Throw in 'bird dogs', 'boiler room boys', socialite philanthropists, 'front' companies, slick sales talk and glossy promotion. These are some of the accessories that can turn a simple scam into a persuasive fictional investment vehicle.

As victims and regulators still digest the shock of the recent scandals involving disgraced financier Bernard Madoff or Texas billionaire Allen Stanford, experts are probing the psychological and financial components of Ponzi schemes.
The Ponzi scheme is named after Italian immigrant Charles Ponzi whose 1919-1920 fraud was a cause celebre in Boston.

It works on the simple principle of luring investors by promising attractively high returns, while in fact paying its early clients with the money provided by later investors.
While basically insolvent from the start, it feeds, fraudulently, on the natural desire to obtain financial gain.

"It's human nature and psychology, it's preying on individuals that are vulnerable," Maria Yip, a forensic accounting expert at Yip Associates, told Reuters.

She and other fraud experts explained to an offshore finance conference in Miami on Tuesday some of the common attributes of Ponzi schemes, which have bilked investors in the United States and elsewhere out of billions of dollars.
Successful Ponzi schemes prey on close-knit communities of victims, so-called "affinity groups," which the perpetrators of the frauds are either already linked to or can tap into.

For example, Madoff, who has pleaded guilty to Wall Street's biggest ever investment swindle involving $65 billion in client funds, found many of his customers among the wealthy Jewish communities of Florida and New York.

"They are going for groups of people where they can build the trust quickly, it could be synagogues or churches or retirement communities," Yip said.

Stanford, who is accused by U.S. regulators of an $8 billion fraud, but who denies running a Ponzi scheme, was a "red-blooded American marketing to Americans," said D.C. Page, a managing partner of Verasys, who sat on the experts' panel.

While some smaller Ponzi frauds may operate only by word of mouth, larger, more sophisticated schemes often cloak themselves in a facade of respectability, with plush offices, investment advisers, nominal auditors and glossy literature.

Some also involve "bird dog" promoters, who work on recruiting investors, and "boiler room staff," who work the telephones using lists of potential victims. These lists are sometimes sold on the black market among swindlers.


At the center of the Ponzi scheme is the mastermind, who experts say often poses as a gifted investment strategist, cultivating an air of mystery or cloaking his activities with donations to charity and acts of social philanthropy.

"It's the guru behind the curtain," said Michael A. Tessitore, a lawyer who has acted on behalf of victims of Ponzi schemes and frauds in the United States and Latin America.

Investors are often told they are being made part of a privileged group, which maintains an air of cloistered secrecy around the frauds and discourages asking questions.

But the experts say, often one blunt simple common-sense question, 'Is this too good to be true?', would have been enough to puncture the deceit surrounding the promises of dazzling financial rewards.

Promises of above-average returns defying market trends are among the biggest "Red Flags" signaling a potential fraud.

"The market place is pretty efficient. If they're telling you you'll be getting oddly high returns and that it's guaranteed, there's something wrong," said Mitchell Herr, an attorney and partner at Holland and Knight.

Other tell-tale signs are grandiose, but incomprehensible investment strategies and "unbusinesslike" use of money. Page said one scheme listed investment in "sunken pirate treasure."

Lack of clear and demonstrable financial oversight should also ring alarm bells, the experts said.

For example, Herr said Madoff's vast investment empire was served by a "three-person audit shop," while Stanford's bank offering high-yield certificates of deposit was nominally audited by a "72-year-old gentleman from Antigua," who in fact died at the beginning of this year.

Discovery is only the first part of the dismantling of a Ponzi scheme.

The second is the fight between receivers, liquidators and lawyers for what Martin Kenney, an attorney and economic crime expert based in the British Virgin Islands, calls "the dripping roast" of the scheme's assets and those of its organizers.

"The investigation, the recovery becomes a feeding frenzy of professionals. It is not uncommon for there to be nothing at the end, but the fees to pay the professionals ... that adds insult to injury," said attorney Tessitore.

(Editing by Jim Loney and Andre Grenon)

Martin Kenney back in the Interclaim days, in Dublin 1999