On January 28, the previous day, former US Treasury Agent Al Ristuccia had flown in specially from Los Angeles to lead the six Canadian teams. In a bitterly cold, storm-licked Vancouver, Ristuccia had laid out the plans to the assembled men. Tightly packed into the boardroom of a local legal firm, they were a mixture of private detectives, ex-intelligence agents, attorneys, videographers, IT specialists and police officers.
The mood was sombre but expectant, as the months of planning came to a head. Ristuccia explained how they were going to storm the four Vancouver addresses the next morning. Two smaller groups were to raid the target’s accountants and lawyers. The man they were going to tackle was one of Canada’s most infamous felons, a powerful, heavyset figure called James Blair Down. Down had been plaguing the US authorities since the mid-1980s, as they tried (unsuccessfully) to stop his Canadian-based telemarketing scams. He’d stolen $240 million from up to a million elderly Americans, one of the largest such crimes in history. All he had to do was serve a short, six month sentence, and he would keep most of his ill-gotten gains.
As Ristuccia finished explaining the background, another figure took the floor. A short, stocky, pale man, dressed in a pristine Saville Row suit, Martin Kenney, 39, addressed the gathering in his precise, clipped voice. Absolute precision was called for, said the Canadian-born attorney – if anything went wrong, the money or evidence could be lost in minutes, whisked electronically to the other side of the world. Kenney wasn’t an easy man to read, and had a habit of peppering his speech with legal phraseology and Latin terms. However, his fierce intellect and conviction were readily apparent.
Working 16 hour days, Kenney’s team had been on a global hunt for the past seven months, secretly tracking the con man and his associates, placing them under surveillance and tracing the victims’ money as it was ‘washed’ through a tangled web of offshore constructs. They’d convinced a British Columbia Supreme Court judge to issue secret, specialized court orders to support their mission, giving them powers akin to a law enforcement agency. Why? Because this was no government operation. In fact, they were going where few governments could tread, where the FBI, police and customs authorities had all failed before them – taking the war to economic criminals.
When you read of rogue traders such as Nick Leeson, who brought down Barings Bank, or corrupt dictators siphoning millions into Swiss bank accounts, the chances are that Kenney’s men could one day be on their trail. Down had found himself the hapless quarry of this new breed of crime fighter; a unique global fraud-busting operation called Interclaim.
Martin Kenney’s brainchild, Interclaim and its small team of 18 investigators, lawyers and accountants, tracks down and recovers criminal wealth, returning it to victims (minus a negotiated share of the recovered loot). Down was Interclaim’s first big case and, if successful, heralded a profound shift in the fight against ‘global’ economic crime. With traditional law enforcement increasingly ineffective against sophisticated money launderers, Kenney’s men were targeting felons where it hurt most – their pockets.
To Kenney’s mind, the offshore banking world was being abused on a massive scale by these money launderers and white collar criminals, people who had ripped off not just banks and corporations, but millions of everyday citizens – even countries. “Mr Fraudster is nomadic, boundariless, he moves around the world, prowling for victims and knows how to hide the money,” says Interclaim’s CEO. Men and women had been brought to ruin, even died as a result of these actions, from the boardrooms of international conglomerates to the poorest trailerparks. Now these fraudsters would become Interclaim’s prey.
There is little clue to this economic war as you stand in front of Interclaim’s Georgian headquarters, just off Dublin’s fashionable St Stephen’s Green. Only the cold, mechanical gaze of the discreet security cameras, clinging to the faded brickwork, suggests otherwise. Yet despite the initial appearances – past the huge, solid oak door and away from the sombre exterior – there is an undeniable ‘buzz’ throughout the grand old building.
The work undertaken in these labyrinthine boardrooms and alcoves, crammed with their ancient law tomes and gilded frescos, is cutting edge; the atmosphere more like a Silicon Valley software house than traditional law firm. And Interclaim is indeed a unique set up. The company was born two years ago, following a New York dinner meeting between Kenney and Irving Cohen, 36, a sharp, direct Manhattan lawyer who became the company’s first investor (and now its Chief Operating Officer).
Kenney came from an old-school Canadian family; his grandfather being the renowned bandleader Mart Kenney, and his brother Jason one of the country’s youngest politicians. By his early 30s, the former champion ice hockey player was already a high-flying partner in an international litigation firm, and one of the world’s few specialists in multi-jurisdictional law.
Yet it was the failure of traditional law enforcement agencies in tackling major economic criminals that really bugged Kenney – whom colleagues refer to as “a straightshooter” – and led to the idea for Interclaim. Only 17 percent of institutional crime victims were taking civil proceedings to reclaim their money, according to a KPMG study in 1994. “Seventeen percent!” Kenney repeats twice, hands planted on the mahogany desk of his spacious office. He utters a short, characteristic, puffy laugh. “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!” he says, tearing off a sheet of notepaper and waving it in front of me, like a piece of fictional proof.
But in the offshore world, he adds, it can be illegal to even ask questions about potential fraudsters, due to harsh bank secrecy laws. Not to mention the fact, as Cohen interrupts, that economic criminals “tend to flit around the world in their own private jets, living in hotel suites,” making it difficult and expensive for traditional agencies to track them down. Restitution to victims is not high on the list of priorities, either. Yet with at least $500 billion – some experts say as high as $8 trillion – travelling through this highly secretive world every year, including the proceeds of economic crime and drug money, the problem has clearly been getting worse.
“There’s a huge portion of the world’s legitimate economy owned by nefarious criminals,” says Kenney. “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?” he adds, clasping his fingers, temple-like.
What Kenney decided to do, therefore, was quite different to what had gone before. Interclaim would buy up, or joint venture, claims from defrauded victims, using funds raised from the capital markets. These victims were usually financial institutions, corporations or, occasionally, sovereign states. In the Down case, they were uniquely a set of elderly individuals, lacking the financial capital to act on their own. The ‘enemy’ were sophisticated economic criminals like Down – sometimes even corrupt governments – who used the power of the global money markets and offshore world to hide their ill-gotten gains.
Making extensive use of ‘gagged’ (secret) court orders – to obtain documents or enter premises, just like a law enforcement agency; undercover surveillance and sting operations; forensic accountants, to trace document trails and build a model of how a crime was committed; a variety of lawyers and other specialists, such as handwriting analysts, psychologists and IT experts; Interclaim would then freeze the criminal’s assets via the civil courts, right across the globe, at exactly the same time.
The model has been so successful, in fact, that officers at law enforcement agencies such as the FBI have referred some of the world’s most complex fraud cases to the company. It is a battle that Interclaim’s lawyers and investigators take deadly seriously; a battle against what they label a multi-billion dollar-headed “hydra.”
James Blair Down found out Interclaim’s tenacity to his cost. Down was a one-time real estate agent and convicted felon, who up to 1998 ran illegal telemarketing scams into the US from Canada. He promised his victims fantastic odds and winnings if they invested in his foreign lottery resale schemes – only he disappeared with their money instead; an estimated $240 million, which he laundered via a complex series of offshore constructs into assets around the world. His staff of 500 telemarketers operated from high pressure “boiler rooms”, targeting and befriending vulnerable, elderly Americans – many of whom came to regard the callers as their friends (even though the sales staff often used crude pseudonyms such as ‘Michael Jackson’ or ‘George Michael’). All these ‘lottery sales’ were illegal, a fact known to Down since 1993.
FBI Special Agent Ross Gaffney called Interclaim last year, after the Bureau was unable to retrieve more than $12 million of the victims’ money. Like most government agencies, it simply didn’t have the resources necessary to pursue this global case, and had found just 900 victims. Down had plea-bargained a six month jail sentence, on a sample charge of criminal conspiracy involving the sale of foreign lotteries, after he was arrested in Canada in the fall of 1997 (he has since served his time). Another 144 felony counts, including money laundering and charges related to racketeering, were dropped. The victims were dying off and few knew where to turn.
“Our one-man marketing office on the East Coast has hundreds of letters from these victims,” explains Kenney, as I sit with his team in Dublin. “These people were elderly and vulnerable. They grew up in a mid-20th century era which was very different from today’s; I mean, we’re talking about our grandparents and great-grandparents here.” Cohen interrupts, showing me a copy of a court judgment, which quite clearly states that the Down organization preyed on elderly Americans. “After children, the elderly are the most vulnerable members of society. We’ve had people write in and tell us how they’ve lost loved ones, thanks to the stress caused by Blair Down. People have had strokes and heart attacks which they attribute to the stress caused by this crime.”
“We’ve been contacted by the daughter of one lady who lost over $1 million and who has Alzheimer’s,” continues Kenney, turning to address me directly. “The daughter says that her mother was so fooled by these people that she would get all dressed up in her Sunday best on the nights that the lottery was being announced – because she would win the lottery, she was guaranteed to be a millionairess. She would phone caterers to bring platters of food, to welcome all the news broadcasters from television because she would be announced as this new lottery winner...” his voice drops, “...and of course, nobody called her. They just took her money.”
“She actually had access to a million dollars of the family’s money,” says a deep baritone coming from Kenney’s left. James McGunn, 55, Interclaim’s Co-Manager of Investigations and a powerfully-built former Secret Service agent, is shaking his head. “And it was taken,” snaps Kenney, deadpan and quick.
The photographs are grainy, silent and numb. In stark black and white, they show a heavily built man dressed in a suit and sporting a full moustache, running across a busy road.
“That’s James Blair Down,” McGunn muses, looking up from the surveillance pictures strewn over his large desk. A wry smile appears on his youthful-looking face: “He looks like he’s right out of central casting, doesn’t he?”
McGunn sits calmly in his office at the top of the Interclaim building, 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 federal government agent. A huge blowup cover from TIME magazine shows him in a car behind Nixon, during a state visit to Egypt. Speaking slowly, sighing occasionally as he struggles for the right words, he explains his role in the Down affair.
“You’re talking about a huge case, involving hundreds of millions of dollars moved offshore,” he says, leafing through a set of appeal documents supplied by Down’s lawyers and making a quick note to speak to one of his informants. “To find that money involves tracing the activities of that individual, from different ends – finding out where the money went, and where it is now. These people don’t write a check from the bank. Land is not in their name.” He tells me that the economic criminal will sometimes literally move millions of dollars in cash from one bank to another across the street, inside an armored security van, to destroy any electronic or document trail. “So you try and identify partners and business associates, business connections, any financial institution they’re using. You determine who leased their vehicles, who lives at certain addresses, and tie it all together.”
As McGunn was readying his men to tackle Down, Kenney and his lawyers were preparing an innovative series of secret legal weapons. These would help them trace Down’s stolen wealth as it moved between his offshore trusts and a Canadian bank. Kenney utilized a unique and sophisticated legal manoeuvre – called a Norwich Pharmacal/Bankers Trust Order – which could force third parties to disclose information, if it could be shown to be crucial to a civil suit.
This order “is the most important order in the regime of orders we get,” says Kenney, because it gives investigators access to the internal working documents of a bank. It allows them to follow exactly where a client’s money is moving. “When you know where the assets lie, it’s not difficult to get an asset-freezing order against these yahoos who steal the money,” he quips.
Towards the end of 1998, Interclaim had compelled the Toronto Dominion Bank in Calgary to reveal details of money transfers into a Calgary real estate management company run by Down’s brother, Tim, and his wife Cindy. The records proved that the victims’ money was being invested in 25 office buildings and other commercial properties in Alberta, worth about $140 million (Canadian). Interclaim had by this time obtained 90-day gagging orders from Mr. Justice Donald Brenner of the British Colombia Supreme Court, ensuring the investigation remained secret. Arthur Andersen was appointed as interim receiver (the court orders being sought were for an involuntary bankruptcy order against Down), ready to manage the assets seized. Down had no idea he was being targeted.
Such information was used to launch a series of raids on January 29 this year – the day after Down entered prison to serve his sentence. Over 110 people were assembled across the world for this task; lawyers, videographers, the interim receivers, security personnel, computer specialists and local law enforcement officials. Among the raids which took place were those on 29 office buildings and commercial properties in Calgary, as well as on Down’s personal address and those of his legal and financial advisers in Vancouver and a seaside mansion in Barbados. Irving Cohen later related to me the look of shock he saw etched on their faces, as the full magnitude of the raids took effect. Over $100 million of assets – from real estate to race horses – were seized and frozen.
McGunn’s dry, business-like tone conceals the complexity of this task. His men – former intelligence operatives and private investigators hired on for the case – shadowed Down for months. The chase took in Vancouver, Calgary, Washington, and places as far away as the Caribbean, South America, Australia and Papua New Guinea. They came to know Down intimately, better perhaps than even his common-law wife.
By mid-December last year, Down was under daily video scrutiny in Vancouver. His life was being captured on Interclaim’s tapes. They showed him spending most of his time eating and in meetings, his most frequent companion being convicted felon and business partner Harvey Wong. In one lengthy tape, shot just before Christmas, the two men are spotted leaving Wong’s offices and visiting a strip club, where Down became friendly with a blond stripper who called herself “Sharen Stone.”
At one stage, McGunn even placed investigators on a South American luxury cruise to shadow Tim and Cindy Down. With his team pretending to be a wealthy jet-setting couple, McGunn explains that: “We went to a lot of trouble to have them placed at the same dinner sitting, so they could get the conversation going and interact. Our man – a former undercover operative for the Canadian Mounties – was so good that he got invited out to their residence in Calgary, then to one of their dinner parties. He got a quite a bit of information from them on how to conceal assets – he actually coaxed them to show how they could do this. They told him, even faxed the information to him when he asked for it again.”
He turns behind his desk, and picks up a strange mace-like object from the mantelpiece. “This is actually a human legbone,” he says. “At least, my armed escort said it was genuine. I think it is. I picked it up in Papua New Guinea.” He recounts that prior to one of their raids on Down, Interclaim discovered a commercial debt – a phone bill – owed by one of his companies. They bought the debt and looking at the underlying telephone charges, found that many of the calls were to Papua New Guinea; Down was in the middle of sinking millions of victims’ money into native hardwood forests, which he expected to turn a $50 million profit within five years. Within 24 hours, McGunn had assembled an 18-man covert surveillance team, and was on a flight – with Down.
“We found out where he was going at the last minute, using various investigative techniques. We had someone follow him from Vancouver, then I joined him in LA. He was looking around, very self-conscious, doing counter-surveillance manoeuvres.” What does that mean, exactly? “He was hanging out in a lounge that wasn’t used for this particular flight; he was also the last person to board the plane. He just stood there and looked at everybody – so I boarded.” McGunn chuckles. “He would do the same thing when we followed him in cars, like driving down a one-way street the wrong way or parking and concealing his car. We actually overheard conversations where he was discussing these surveillance problems at dinner. We had people very close to him most of the time.”
McGunn details how he then shadowed Down right across the Pacific, through Australia, and up into Papua New Guinea – all on the same flights – whilst changing disguises and travelling companions. His team then followed the felon as he visited his business interests, whilst avoiding the bodyguards assigned to him by the island’s Prime Minister (Interclaim’s team being there without the government’s knowledge). McGunn had already been warned that the head of these guards was a known hired killer, and that the capital, Port Moresby, was the most dangerous city in the world. “It would be extremely hazardous to be detected,” he only half-jokes, raising his eyebrows.
Ironically, it was an old policeman’s trick which revealed some of the most interesting evidence. One of McGunn’s men entered Down’s hotel room just after he had checked out, and probing the s-bend of the toilet, found a series of torn receipts. These receipts showed which accounts Down was using whilst on the island and helped lead investigators to his bank (this evidence was later fortified by additional scraps of information obtained, in part, from piecing together documents that Down had shredded in Vancouver – but which were later recovered and reconstructed). McGunn adds that as his covert team were working, other similar operations were being prepared in Hong Kong, Australia and the Caribbean.
The story is interrupted by the phone ringing. McGunn answers it, and starts speaking to someone downstairs, complaining about clicking noises on their line. “I’ll do a sweep,” he says, glancing to the large black suitcase lying to one side. “Unlikely we have anything,” he says to me when the call is finished. “But there are people and agencies that the opposition can use against us,” he adds, “particularly when some of our cases involve foreign governments. They have that capability, easily.”
So is there danger involved in all this? Martin Kenney told me “yes” when I asked him earlier. McGunn just says: “It can be a dangerous neighborhood. These people are hardball players – business partners have been murdered in some cases – and there is the possibility for somebody to do something irrational. After all, the stakes we play for are very high.”
When we speak again later, Kenney calls Down “the Al Capone of telemarketing”. The two sides have now locked horns in a bitter legal struggle in the Canadian appeal courts. Interclaim has already sunk some several million dollars into its battle. If it wins, it will return 50 percent of the proceeds to the several hundred thousand victims it has identified to date. If it loses, all effective chance of regaining their money is lost.
Down’s attorneys have not given up without a fight. One report describes them as “verbally flailing” Interclaim’s lawyers in the Canadian courts. They argued that Interclaim was violating an arcane and ancient English legal doctrine called ‘champerty and maintenance’, meant to prevent powerful and rich individuals, such as mercenaries, from profiting by siding with one side or another in a dispute. Unfortunately, last August Justice Brenner decided Interclaim had fallen afoul of this ruling.
However, in an unusual conclusion, he implied that he was troubled by this use of the law, and how it prevented Down’s victims from recovering their losses. He then invited an appeal to his ruling, saying that Interclaim “remains the most realistic opportunity for the compensation claims of the victims to be effectively advanced.” He also noted that Interclaim’s business arrangements with the victims were not dissimilar from those between a lawyer working for a client on a contingency basis.
Although disappointed by the judge’s initial ruling, Kenney launched an immediate appeal, and remains confident Interclaim will win. “If you reject the Interclaim model, you reject justice for victims...and that is what the higher courts will have to wrestle with,” he says. Meanwhile, Down’s assets remain frozen and new clients are seeking Interclaim’s services. Sitting in on one of their case meetings, held in coded language, the team discussed two cases involving sovereign governments, and fraud worth well over $1 billion.
Despite this demand for his services, Kenney’s vision has brought him critics. Robert Millar, one of Blair Down’s Vancouver lawyers, has said that his client was “blitzkrieged” into submission by Interclaim. “I don’t like what they do. It may be novel and ingenious, but it’s wrong.” Another member of his team called them “international economic terrorists who practise extortion.”
Others, however, have nothing but praise. “We find ourselves very much frustrated by our inability to help victims,” says John Moscow, assistant district attorney in the Office of the New York County District Attorney. “We have no horses to pursue assets...we often get the criminal but not the money,” which is where Interclaim comes in, he believes.
Martin Grieves, a principal financial investigator with Britain’s Serious Fraud Office, adds: “I think we’ve got a moral duty to recover the citizens’ money, whether you consider them to be high worth mugs who were simply greedy, or whether they were purely duped. We should be able to do something as far as the money is concerned. Because unless we can take away the money from the criminal, we’re not removing the deterrent. And it’s a serious problem.”
Whatever the outcome of the Down case, Kenney says he won’t stop pursuing the fraudsters: “Y’know, I’ve had a banker have a heart attack, seen others lose careers. People lose their edge, they lose their confidence,” he says, talking of the devastation caused by financial crime, “because they’ve been tricked and lost faith in themselves. It’s like rape. It’s that kind of violation.”
Even though he refers to his battles with the fraudsters as a “grand play”, like a Shakespearean drama or multi-dimensional chess game, there is also clear loathing in Kenney’s voice when he talks of these characters: to him, they are sociopathic, not loveable rogues who do little harm except to bloated financial institutions:
“They’re as sophisticated and bright and as well organized 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 victimizing and laughing at people. Why do they do this? Well, there’s a sickness there; they have sick, psychological states of mind.” He puffs his short laugh. “That might explain why some of these 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.”
With the evening drawing in, and the Dublin nightlife about to begin, he remains circumspect. “You know, we’re only a small part of the opposing force," he says, shaking my hand and sweeping up his briefcase. “There’s probably room for another five or six Interclaims out there, easily. Ten years ago, what we do was almost unheard of. Now there’s tens of billions of dollars stolen every year by fraudsters – and that’s probably a conservative figure. I tell you, if, figuratively speaking, we vanquish some of these swindlers, that will mean more to our victims than any check.”
This article was originally commissioned for The New York Times Magazine, then appeared in various versions in The Boston Globe Magazine, The Australian Magazine, and The Irish Times © 2000. See also alternative version.
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Video surveillance image of Down
James McGunn with a Time magazine cover featuring himself on security detail with Richard Nixon