Taking the Confidence from the Con Man: An Associate’s Response to Fraud
The origin of the term “con man” stems from the 1849 arrest of William Thompson, a swindler in New York, who would dupe strangers he encountered on the street by making them believe that they were acquaintances. The New York Herald described his ploy as follows:
For the last few months a man has been traveling about the city, known as the “Confidence Man,” that is, he would go up to a perfect stranger in the street, and being a man of genteel appearance, would easily command an interview. Upon this interview he would say after some little conversation, “have you confidence in me to trust me with your watch until to-morrow;” the stranger at this novel request, supposing him to be some old acquaintance not at that moment recollected, allows him to take the watch, thus placing “confidence” in the honesty of the stranger, who walks off laughing and the other supposing it to be a joke allows him so to do. Arrest of the Confidence Man, New-York Herald, July 8, 1849.
Over 150 years later, fraud continues today in many forms. However, as in the case of Mr. Thompson, it entails this same ability to gain, and then exploit, the trust of the unwitting through the making of false statements. To be sure, the currency in which fraudsters continue to transact their trade is trust. Fraudsters (e.g., Bernie Madoff), empowered by grandiose self-perception of their charisma and intelligence, operate by winning the favor of others to engage in their schemes.
As a former prosecutor, my response to fraud is to pursue the facts. Indeed, a guiding philosophy of the Freeborn & Peters Fraud Team is that fraud cases are won outside the courtroom. Fraudsters, knowing time is on their side, often attempt to manipulate the discovery process through delays, allowing them to remain a step ahead of their would-be pursuers. Moreover, obtaining reliable financial or corporate information from the possession and control of fraudsters is often difficult. While subpoenas, depositions, restraining orders, and receiverships can be powerful, they are effective only when properly directed. All of the forensic accounting in the world is useless if you have incomplete access to or understanding of a fraudster’s financial affairs and activities.
To this end, gathering intelligence in fraud cases is just as important for post judgment asset recovery as it is in prejudgment litigation. It should be self-evident that a fraudster who used deception to illegally obtain assets from his victims will be just as vigilant in hiding these assets from his creditors. Your post judgment asset recovery attempts may result in your target fraudulently transferring assets, or seeking to overstate his or her insolvency in bankruptcy court. Therefore, whatever arena in which attorneys prosecuting fraud find themselves, the focus must be the same: the dogged pursuit of facts.
With fact-finding established as the focus, an attorney’s search starts with legal research portals such as Westlaw or LexisNexis. Firm internal investigators should run a search of your target and his or her business associates and family members through these databases to pan for the all-important nuggets that jump-start the intelligence gathering process. The goal of the public records search is to uncover alias names, dates of birth, professional licenses (“I didn’t know our target has a realtor’s license”), vehicle licenses (“If our target is insolvent, how does he maintain his pilot’s license?”), real property ownership (“He has a second home?!”), UCC filings, relatives, business associates, business entities, employers, neighbors, tax assessment records, and archived news articles. This phase of investigation is crucial to begin your unpeeling of the proverbial onion to guide further searches. As these databases can merely report on the fraudster’s past activities, they provide only a launching point to a more intensive investigation.
Hence, it is important to deeply review each new find. Using internet search engines, one should next scour the Web and other public databases for any further clues of financial activities or assets of the fraudster. It is even prudent to Google your target’s home address, phone numbers, and family members’ names. These searches uncover ammunition such as blogs (is your target working a separate business on the side?), Craiglist.com ads (is your target profiting by selling his or assets?), YouTube videos, and often unsecured Facebook, Twitter and LinkedIn accounts. Inevitably, fraudsters leave Internet footprints.
To illustrate, below are a few colorful examples of the types of facts that our team has discovered during the fact-finding process:
Newspaper Archives. As a vast majority of archived newspaper articles are not stored in free online repositories, they are beyond the reach of a simple Internet search. Legal research portals, however, allow for a search of old headlines that may provide information on your target or his or her cohorts. Using archived newspaper articles, it is possible to learn of prior bad acts and, in some cases, court cases and criminal conduct of your targets.
Undisclosed Corporations. In one instance, not only was the supposedly insolvent fraudster running his own business, but he also was creating transplant entities around the Chicago suburban area, each of which used the same cookie-cutter website layout. Further, he was also the president of a corporation that he failed to list on his bankruptcy schedules. In a separate case, a fraudster was actively running two businesses in a tourist destination outside the United States. With this information, the investigation led to the discovery that the fraudster was advertising these entities online via YouTube videos. Remarkably, these videos captured footage of valuable personal assets owned by the fraudster located in another country. Accordingly, comprehensive searches of corporate databases is key.
Social Media. While the targets may be wary enough to avoid leaving a digital trail, it is unlikely that they can completely stem the flow of information about themselves from finding its way online. In one instance, although the fraudster was careful to abstain from using social media, the investigation revealed photographs of him on a swanky vacation. This information was located by browsing through Facebook photos by his much less cautious relatives and associates. In a separate case, the investigation located the fraudster’s out-of-state business contacts by browsing his publicly available Facebook “friends” list.
Residences. A wealth of information is available to the public on websites such as Zillow.com (approximate residential value) and Google maps (aerial or curbside photography). Google maps, particularly where street-view has been captured, can reveal such specifics as the size of a garage (and possibly the number of cars therein) to the attention spent on lawn care. A satellite view of the fraudster’s property may reveal information on valuable personal property, such as aircraft, pools, vehicles, horse barns, and putting greens.
Motor Vehicles. In one case, the fraudster claimed to have sold a vehicle for a mere $7,000. However, photographs publicly available online revealed that the vehicle was a remake of an American classic and was far more valuable than the fraudster disclosed. The investigation discovered that in fact similar remakes had a market value of over $150,000.
Using these techniques with others, such as field interviews, you will begin to develop the story of the fraudster in the present tense, rather than the past tense. Combining these techniques with a careful review of traditional discovery such as bank statements and accounting documents, you will gain a better understanding of the fraudster’s current activities and source of cash.
In sum, a focus on intelligence gathering is crucial in prosecuting civil fraud. It will guide your discovery process and inform where you should direct subpoenas, depositions, or other more aggressive court remedies. To reveal to the fraudster the fruits of your intelligence searches is to remove his or her most prized-possession — the ability to win the trust of others in the present. In essence, you will have sufficient information to state to the modern day Mr. Thompson, “No, good sir, I have no confidence in you. I know far too much about you now. Soon, everyone else will too.” Once you have removed the confidence from the confidence man, you are on your way to winning your case.