Whipping Boy (27 page)

Quilty eventually determined that even the most venal members of the finance committee failed to recognize the dizzying magnitude of the Badische charade. All got a pass.

Quilty had no problems letting the finance committee off the hook. The Badische lawyers presented a tougher challenge. Of the dozen or so legal experts entangled in the fraud, only four were materially relevant to the criminal investigation: Richard Mamarella, the Weehawken wiseguy; Richard Zeif, the Trust’s in-house attorney; Clifford Chance lawyer David Glass; and Robert Gurland, the plummy-voiced London counsel.

The more pliable of the two Richards—Richard Mamarella—received a call from Quilty early on in the investigation. The Mobbed-up “litigation expert” with a history of turning state’s evidence had no hesitation turning on his “royal” clients. He furnished Quilty with printed activity reports, invoices, and a five-page single-spaced timeline documenting every meeting, meal, letter, phone call, legal review, and consultation he undertook on behalf of the Badische Trust Consortium.

Mamarella’s evidence not only corroborated the Laurence testimony, it also supplied names of additional casualties. “That was crucial,” Quilty tells me. “The more victims I could find and interview, the greater the likelihood of taking the case to trial.” It also helped clarify why the Trust demanded that its lawyers generate complex anti-money-laundering protocols. By tethering mandatory
transparency
to a loan contract demanding
confidentiality,
the bankers created conflicting obligations impossible for the would-be borrower to satisfy. (Logicians call this kind of incompatibility “pairwise mutually exclusive.”) Irreconcilable rules
guaranteed
contractual failure.
That, in turn, allowed Badische to retain the advance fees placed in the care of its lawyers.

In view of the assistance he provided to Quilty and the paltry compensation he received from the Trust ($10,000), Richard Mamarella avoided prosecution. But because he was a predicate felon convicted of, among other things, perjury, he was of little use on the witness stand.

Richard Zeif was another matter. Discovery materials and depositions confirmed that the Trust’s in-house attorney had had a recurring role in the costume dramas staged by the fraudulent bankers. Wearing a jacket bearing a UN logo and representing himself as a global peacekeeper, Zeif boasted that he had the diplomatic clout needed for Badische to hold contract negotiations in the Delegates Dining Room of the United Nations, a restaurant ostensibly exempt from American banking law.

“That turned out to be nothing but smoke,” Quilty tells me.

Zeif corrected the misimpressions of the Trust’s victims when he took the stand at trial. He acknowledged that he never worked for the United Nations (although he did rent an office with a UN Plaza address). That the meetings he booked in the Delegates Dining Room required no clout of any kind. (The restaurant is open to the public and is governed by the same laws as the McDonald’s two blocks north.) As for the distinctive jacket he wore during loan meetings? That granted him as much entrée to the United Nations as my son’s Red Sox cap permits to the Fenway Park bull pen.

Zeif testified that he began working for Badische a year before the loan program started turning a profit. That he had reviewed the $50 billion special deed of trust from the Kingdom of Mombessa, and that he had discussed its particulars with both of its principal signatories, Prince Robert and King Henri-François Mazzamba. Given his familiarity with the specifics of the scheme, it’s hard to imagine Richard Zeif was entirely irreproachable. But by agreeing to forfeit some $100,000 in purloined performance guaranties (parked in a London bank account managed by Robert Gurland),
and by further agreeing to testify at trial, Richard Zeif avoided the fate of his clients.

The Richards—Mamarella and Zeif—were relatively cooperative compared to the other two lawyers Quilty was determined to interview. David Glass and Robert Gurland both tried to rebuff the investigator by wrapping themselves in the mantle of attorney-client privilege. Both learned very quickly the futility of that gambit.

“I went after Glass before I took on Gurland,” Quilty remembers. “He was in New York. That made him easier to pursue.”

Easier but not easy. The moment the senior partners at Clifford Chance found themselves dragged into a federal fraud investigation, they reviewed their malpractice insurance and compelled David Glass to surrender all of his Trust-related materials to the firm’s compliance team. A quick survey of those files revealed that Glass hadn’t been the one to add the Badische Trust Consortium to the Clifford Chance client roster; two senior partners had served as liaisons before he took over. It had been their job, not his, to vet the bona fides of the Trust. Nor was Glass alone in providing counsel. At least six Clifford Chance attorneys had attached their names to documents prepared for Badische. The firm had no choice but to circle the wagons and hire outside counsel.

“When lawyers lawyer up, they
really
lawyer up,” Quilty says with a chuckle. He describes one pretrial conference with particular relish. “There were two federal prosecutors, Tim Coleman and Jay Musoff, the assistant US attorney who took over from Coleman just before the case went to trial. There was Glass and
his
lawyer. There were the Clifford Chance lawyers that Glass worked with. And there were the lawyers
representing
the Clifford Chance lawyers. It was a bunch of lawyers and me.”

Pressed for an exact head count, Quilty drily notes, “Let’s just say there were a lot of billable hours in the room.”

Soon after the investigator introduced himself, a member of the Clifford Chance defense team made a passing reference to Clare Quilty, the cryptic pedophile who appears in the more baleful passages of
Lolita
. “I always display my most stern and disapproving face when that book gets brought up,” Quilty tells me. “If anything, I’m more like Inspector Javert, the cop in
Los Mizzer-whaddever-it-is
. The one who says, ‘You know what is going to happen, don’t you? I will take you in the end!’”

After the literary small talk had run its course, the defense lawyers invoked two superficially compelling arguments to keep mum: attorney-client privilege and the confidentiality protections that shield attorney “work product” from discovery.

That didn’t go over well with the prosecutors, Quilty recalls. “Coleman told the guys straight out that the crime-fraud exception nullified all privilege.
*
The defense countered with all sorts of legal nuance. About what was ‘privileged,’ what was ‘confidential,’ and what was ‘private information.’ I don’t know how many hours we wasted on that bullshit.”

When he’d had enough, Quilty made an argument of his own. “‘Fellas,’ I told them. ‘It’s simple. What Quilty wants, Quilty gets. I have three years left until I retire. I’ll work on this case night and day if that’s what it takes.’” The investigator’s good-natured swagger was bolstered by the two prosecutors, who made clear that the government would file a motion against Clifford Chance if it refused to cooperate.

In the end, the law firm relinquished thousands of pages of redacted work product and David Glass agreed to serve as a “witness
of fact.” In return, the government furnished a so-called proffer agreement guaranteeing that anything Glass revealed in his depositions
could not
and
would not
be used against him or his firm at trial. In the jargon of the profession, Glass was made “Queen for the Day,” a fitting metaphor given the aristocratic masquerade in which he and his colleagues had unwittingly participated for the better part of two years.

Three of the four lawyers Quilty contacted responded expeditiously to his inquiries. There was only one holdout: Robert Gurland.

“Gurland was key to building the case. Fraud investigation is all about deposits and withdrawals. Who gives the money and who gets it. I had proof that Gurland handled a lot of the stolen funds. He maintained an account in London on behalf of Badische. The problem was I couldn’t subpoena UK bank records.”

The matter of his foreign residency presented additional obstacles. “Going after someone, especially a lawyer residing outside the country, can add six months or a year to an investigation,” Quilty explains. “Extradition was not a realistic option. It costs a fortune, and you never know how it’ll play out. I had to figure out another way to make Gurland compliant.”

Quilty found the leverage he needed in the London counsel’s background. Despite the bespoke suits and posh accent, Robert Gurland was not to the manor born. True, he had attended the very finest of public schools. But the schools in question weren’t Eton or Harrow, Rugby or St. Paul’s.

“The guy went to P.S. 86 in the Bronx.”

The lawyer many Badische victims presumed to be an English barrister was neither English nor a barrister. He was a tax specialist with a law degree from NYU who had lived in England for thirty years.

“I knew some of the stolen performance guaranties were still under Gurland’s control. I told him, through his lawyer, that those monies
were the fruits of fraud and that if he failed to relinquish them, he could be charged with a felony. An outstanding arrest warrant might make it tough to visit his family in New York.”

Gurland, like Glass, tried to invoke attorney-client privilege. But that argument, to use a British loan phrase favored by the Bronx-born expat, “fell on stony ground.” (Translation: Fuggedaboutit.) Quilty clarified the difference between legal representation and
il
legal
mis
representation; the crime-fraud exception trumped all privilege that might otherwise protect the lawyer-client relationship.

After six months of transatlantic negotiation, Robert Gurland signed a nonprosecution agreement with the US Attorney’s Office that immunized him from all potential criminal charges stemming from his representation of the Badische Trust Consortium. In return, he promised to furnish prosecutors with redacted copies of his client files, hand over all monies in the Trust-related accounts he controlled, and testify at trial.

The Gurland materials revealed that the Trust’s American loan agreements constituted only a fraction of their bogus deals. Wire transfers from all over the world flowed in and out of the Badische bank accounts he controlled like planes at Heathrow.

And where did the money eventually land? A substantial chunk covered overhead. “Imaginary banks usually cost a lot less to operate than real ones,” Quilty jokes. “But Badische had higher expenses than your standard advance-fee scam. It used lawyers instead of PO boxes, and lawyers tend to cost money.”

Forgoing his usual hourly fee of £200, Gurland worked for Badische on commission, taking 10 percent off the top on all performance guaranties that he handled. He later testified that the arrangement netted him some $250,000, suggesting that he managed $2.5 million in stolen funds tied to bogus loan contracts with face values totaling $2.5 billion. His records also revealed that the bulk of the stolen funds ended up in bank accounts in Switzerland, Liechtenstein, and Austria.

Quilty contacted finance officials in Zurich, Vaduz, and Vienna. Only the Viennese proved cooperative.

Following a yearlong waltz between the US State Department and Austrian bureaucrats, Quilty obtained an inch-thick dossier from the Vienna-based Creditanstalt bank. It confirmed that $2.3 million in performance guaranties had moved through a personal account controlled by Brian David Sherry. Only a few hundred dollars remained by the time Quilty received copies of the account history, but the paper trail was invaluable nonetheless. “The Austrian records helped us substantiate the existence of a conspiracy. It showed how money moved back and forth between Barclay and Badische.”

“I can’t believe how much energy it took to pull the case together.”

“Fraud investigation is all about stamina,” Quilty says. “To do the job right you have to review and re-review evidence. Patterns only emerge after you’ve gone over everything two, three, four times.”

“I’m familiar with that sensation. But what you call stamina others might call obsession.”

“Doesn’t matter what you call it. It comes down to the same thing. The fraud investigator has to have paper in his blood.”

I found nearly everything Quilty said fascinating. But it was also distracting. I hadn’t flown down to Florida to amplify my understanding of fraud. I was there to learn about Cesar.

“I had doubts about him from the outset,” Quilty eventually tells me. “The name of his firm raised an immediate red flag.
Barclay Consulting Group?
It sounded about as authentic as the Rolexx watches—make sure you spell that with two or three
x
’s—you see guys selling on the street.”

Cesar’s bank records justified his skepticism. They confirmed the obvious; Cesar had no connection to Barclays of London. When he
began working with the Trust, he was receiving regular biweekly paychecks from a manufacturer of laminated jewelry display cases based in Hayward, California. As for the $9,000 he charged clients for each of the offshore companies he registered, his credit card statements revealed that a Bedford, Texas, outfit took care of the paperwork for a flat fee of $595.

“Cesar told his clients he had an arm’s-length relationship with Badische. That was bullshit. We proved that he received money from the baron. That he sent money to Sherry’s mother. That he took out an AmEx card in the colonel’s name. That he paid their bills and that they paid his.

“And there was the matter of the retainer check Sherry wrote to Rogers & Wells.”

“You lost me.”

“It had
Cesar’s
home address in the corner. That made it kind of tough for Cesar to claim ignorance of the fraud.”

“Did you establish the nature of his relationship to Sherry?”