The Red Syndrome (6 page)

I called Jim Lion, a postal inspector assigned to FinCEN in Vienna.
Jim and I went back a few years, and he'd always been helpful. I remembered him telling me about his work on a case in the South Pacific, but I
couldn't remember if it included Australia.

"Jim, I need some help in Australia. Got any connections?"

"Not personally," he said. "But tell me what you need, maybe I can
direct you."

"I need to get info on an Australian company. You know, shareholders,
directors, managers, bankers ... the works."

"Funny you should ask, because FinCEN has recently completed a cooperation project with AUSTRAC. That's Australia's anti-money-laundering
regulator and specialist financial intelligence unit."

"Would they help?"

"I think so. Let me check. In the meanwhile, fax me the details you
already have about the company."

Fifteen minutes later Jim was back on the line. "The cooperation agreement is between FinCEN and AUSTRAC, so all requests must emanate
from us. I'll place the inquiry once I receive it from you."

I thanked him and went back to the file. Sling & Dewey was the only
solid lead I had so far. Its name had come up in the audit. Just a name,
nothing else. I was hoping that this narrow window of opportunity would
not be shut in the end.

The following day Jim called. "It took AUSTRAC only twelve hours to
come up with a response."

"I'm impressed," I said, thinking how long it would take our own
bureaucracy to react in a similar situation.

"Let me read you what they say .'We attempt to ensure that financial service providers, such as banks, identify their customers to reduce
the occurrence of false name use - "'

"Jim, spare me the niceties," I cut in impatiently. "Do they have anything?"

"Yes, they do," he said coolly, refusing to be pressured. "I'm faxing you
their report."

I walked down the hall to the office fax machine as it started spewing
the report. It was captioned "FTR Information." Below the Australian
agency's emblem it said, "This report is generated in accordance with
Financial Transaction Reports Act 1988 and pursuant to AUSTRAC's
agreement with FinCEN."

I quickly perused the preamble and the caveats and then went straight
to the jugular. Sling & Dewey Goods and Services, PLC, had been incorporated in New South Wales, Australia, on May 12, 2ooi. The company
listed two shareholders: Advanced Liquids, Ltd., and Regency Portfolio,
Ltd. The company's directors were H. G. Andrews and Sheila McAllister.
Its registered address was Post Office Box 7166, Bondi Junction, New
South Wales. The purpose of the company: international trade. A short
narrative followed.

Sling & Dewey Goods and Services, PLC, is believed to be a
shell company. Our enquiry has shown that said postal box has always been owned by a reputable bookstore which has no connection to any of the listed names. We believe the use of the box
was fraudulent. Only Regency Portfolio, Ltd., is registered in
Australia. Advanced Liquids, Ltd., is a foreign company registered in the Seychelles. We were unable to find additional local
registration in Australia. Regency Portfolio, Ltd., is also a shell
company with fake directors. The actual registration of Sling &
Dewey Goods and Services, PLC, and Regency Portfolio, Ltd.,
was made by a service which files, for a fee, the necessary incorporation papers with the local company registrar. Following an
enquiry, the service claimed that they were asked over the phone
to incorporate the two companies. A messenger brought them
the papers ready for filing, with both a money order made out to
the company registrar and $75o in cash for their service fee.

That was smart, I thought. Two companies were incorporated in
Australia and one in the Seychelles, as an "international company" - one
whose shareholders, directors, and beneficiaries were almost impossible
to identify.

The Australian service company claimed they had no idea who
the clients were. A search in our database of the two names listed
as directors of the two Australian companies showed that there
are 57 individuals named H. G. Andrews and 23 individuals carrying the name Sheila McAllister. We should interview all these
people in the near future.

A waste of time, I muttered to myself. It was all bogus. I'd been there
before. These guys knew how to hide their traces. The report concluded
by saying that the banking information would follow in a few days. I gave
the report to Lan, the office secretary. "File it in the new Eagle Bank file
... in the cemetery section."

She raised her eyes and smiled. "Dead end?"

I nodded.

Two days later another fax came in from Jim Lion attaching another
report from AUSTRAC. On May 13, 2001, two men had come into the First
Caledonian Bank of Australia in Sydney to open a commercial account
for Sling & Dewey Goods and Services, PLC. The bank's officer handling new accounts demanded picture ID from the two men, which was
standard procedure. One man showed him an Australian ID card that,
upon later investigation, was determined to be a forgery. The address
printed on the card, it turned out, was an empty lot. The second man presented the U.S. passport of one Herbert George Andrews, born in
Denver, Colorado, on January 23,1950. Passport number G967781117. No
address was given to the bank.

At last, here was something to work on. I called the Bureau of Consular
Affairs at the State Department. Once I'd given them the passport
number, I was transferred to Security. Following a quick computer search,
a courteous woman told me that the number was a fake. I was about to
thank her and hang up when she added, "You may want to check this out
with the FBI. I've got a computer message here that all inquiries
regarding this passport should be referred to them."

Next, I was on the phone with Donald Romano, FBI special agent. I'd
never dealt with him before, and he sounded very reserved.

"Yes, we have a record of this passport as being forged."

"Is there an ongoing investigation?"

"I can't tell you that," he said, cordially but firmly.

"Why?"

"It's classified. Need-to-know basis."

"I need to know. I'm an investigating attorney for the DoJ."

"You still need clearance," he insisted. There was no point in arguing
with him. I had been through this bureaucracy before. I called David
Stone and asked him to get me a clearance. I told him about the progress
I'd made and he said, "I'll get back to you."

Several hours later David called. "You've stepped into a highly sensitive
matter," he said in a telling-you-a-secret tone. "I had to do a bunch of haggling to get you access. And you have to come to Washington to do so, because they refuse to allow the file to be photocopied or removed from
the building."

"Okay," I said, wondering why a forged passport was highly classified.

The following morning I went to the J. Edgar Hoover FBI Building.
Located on E Street between Ninth and Tenth, it's a huge building occupying an entire city block.

Special Agent Donald Romano met me at the entrance, checked my
ID, and walked me through security. He led me to an empty conference
room, left me sitting there for a minute, and returned with a governmentstock brown file. On its top was a large-font red stamp: TOP SECRET:
EYES ONLY. He recorded my name and other details on the inside cover
and said, "I hope you understand that you cannot make copies, take notes,
or remove anything from this file."

"Sure," I said, with mounting curiosity. I signed a confidentiality statement and was finally handed the file.

A summary of the contents lay on the top. A Cincinnati field office
special agent had received a tip from informer GFir2-00 that Gregory
Lermontov of Evanston, Ohio, was running a home printing facility. A
search had turned up eleven blank U.S. passports, fifty-four blank Alien
Registration Cards (better known as green cards), and 122 blank social
security cards. The FBI forensics lab concluded that the forged passports
were almost perfect. Lermontov was arrested and later released on
twenty-five thousand dollars' bail.

I went through all the documents, which included several lab reports
and affidavits from FBI agents. I paid special attention to a top-secret
memo from the assistant special agent in charge in Cincinnati to the
assistant director of the FBI. During his interrogation, Lermontov agreed
to give up the names of individuals who routinely purchased forged U.S.
travel documents from him. In return, he demanded immunity from
prosecution and placement in WITSEC, the U.S. Marshals Service's witness protection program. Further investigation by the FBI had unearthed
strong ties between Lermontov and Russian mob figures in New York.

In the attached envelope was an FBI internal memo that named
Lermontov's main clients: Boris Zhukov and Grisha Grigorev. The same memo went on to note that Lermontov had disclosed the names in an
oral interview, but had refused to sign a statement until the immunity
agreement was finalized.

The file also described Zhukov's and Grigorev's criminal activity in the
United States. It described them as the leaders of two major rival mobs,
based in New York, that controlled significant portions of organized
crime activity in the Northeast. The report concluded with a recommendation to classify the information because it concerned "two of the most
brutal crime gangs in U.S. history."

So that was the basis for the ultrasecrecy: organized crime. The reasons
why the mob would need a fresh supply of U.S. passports and other official documents were obvious: smuggling prostitutes, hiding the identity
of couriers carrying drugs or cash shipments, and opening anonymous
bank accounts, to name just a few opportunities.

Another report tied Zhukov and Grigorev to three additional individuals: Igor Razov, Alexei "Lonya" Timofeev, and Nikita Arkhipov, known
members of a Russian gang in New York. The current whereabouts of
Timofeev and Arkhipov were unknown; they may have been using forged
travel documents. Igor Razov was infamous because of his ruthlessness
and his wont for following orders without hesitation. Razov was Zhukov's front man for mob-related financial transactions from which
Zhukov wanted to keep a safe distance. He was currently being held in a
German maximum-security prison in Stuttgart, awaiting extradition to
his native Belarus.

I memorized these names and quickly wrote them down on a small
piece of paper as I left the FBI building, heading back into the busy DC
streets. The Treasury Department agent's first instinct - supported by
David Stone - that this was more than just a violation of banking laws
was gaining momentum. I had a hunch it went beyond money laundering. Were the movements of huge amounts of money into and out of
Eagle Bank just routine transactions made by a bona fide corporation in
the normal course of its business? Were they illegal proceeds of crime
deposited in an unsuspecting bank? Or did the Russians have someone
inside the bank paving their way - or even the bank itself on their side? Why? Were they maintaining their huge credit balance for a major crime
still on the drawing board?

It had to be a mammoth plan if they intended to spend sixty million on
it. The funds were in a checking account, not a savings account, and no
securities had been purchased with them. That meant the money had to
be available immediately, and for an impending purpose. Clearly these
people couldn't have cared less about managing the money, preserving its
value and earning interest. This was not how a profit-oriented corporation conducted itself. Further, the bank's conduct raised serious questions;
avoiding the reporting was stupid, and banks don't regularly make such
foolish mistakes. Something was very wrong. I went directly to David
Stone.

David worked in the corner office on the eleventh floor of the Justice
Department building. Through his office windows, you could see the redbrick houses of Washington's east side, with high-rises mushrooming
through the area.

David took off his glasses and absentmindedly wiped the lenses with
his crocheted tie. Although he was nearing his sixtieth birthday, he had
almost no gray hair. His calm demeanor masked a bright, quick mind. In
his thirty years at DoJ, he had slowly climbed to positions of influence
where tenacity and boldness were important assets.

He listened conscientiously to my interim report, scribbling on his pad.
He then raised his eyes to mine and grinned. "You thought this case
would take you to exotic islands?" he said. "Try Germany. In the dead of
winter. In a prison." He couldn't help laughing. "Pack your bags!"

hree days after my return from Germany to the United States, David
Stone asked me to go back to Washington to discuss developments
on the Eagle Bank case.