A very long time ago, July 2007 to be exact, a Shaughnessy mansion located at 1178 Laurier Avenue in Vancouver, Canada, was shot up. No one was hurt. People said that the shooter was a member of the Hell’s Angels, angry over losses he incurred from a pump and dump stock scheme that dumped too early, before he could liquidate his shares.
Scott Marshall
The owner of the mansion, now worth $14 million, was Canadian Scott Marshall, who was alleged by both the RCMP and the SEC to be a pump and dumper of at least two microcap companies. People say that after his mansion was shot at, Marshall fled to the US.
Typology of pump and dumps
Pump and dump activities are a different breed of financial crime. In terms of typologies, they more closely resemble acts of terrorism because they involve actors who engage in a variety of preparatory criminal conduct prior to the commission of the crime. In terrorism, these acts could include crimes related to the creation of false identities for group members, thefts to procure funding for the group and thefts of weapons or explosive materials. These behaviours may ultimately culminate in acts of terrorism.
The preparatory behaviour of pump and dumps is sophisticated – it involves a lot of planning with co-conspirators and can often take a year or more and involve domain name registration, offshore shell company formation, the issuance of fake stock certificates, opening of offshore bank accounts, locating a lawyer to unwittingly write false legal opinions to release restricted shares, and the recruitment of touters and promoters. Like terrorism, it is the preparatory activities that can lead more quickly to the detection of the criminal activities, rather than the commission of the predicate culminating offence.
House of fraud
Sometimes a particular pump and dump does not involve a significant ramp up of preparatory activities. In those cases, it’s because the same facilitators are already in place. These guys build a house of fraud and simply run different companies through the front door and out the back.
Intertech Solutions, Inc.
According to the SEC, Scott Marshall undertook preparatory activities from his office in Vancouver, to line up a pump and dump scheme tied to an issuer named Intertech Solutions, Inc., which raised US$7 million from investors fraudulently.
One of the touters that Marshall hired to solicit investments from the public was a man by the name of Clinton Maurice Tucker II.
Clinton Tucker II
Tucker II is reclusive. Since the shoot-out in 2007, he has gone a little off the grid. But not entirely.
From December 2014 through at least May 2019, the SEC says he became re-activated and began to assist in the fraudulent pumping and dumping of the stock of different companies using the same techniques, mostly from the area around Trabuco Canyon, California. Some of the investors Tucker II pumped stocks to, were from Canada. The SEC says he pumped stocks for Scott Marshall.
In May of this year, the SEC filed a complaint against Tucker II, charging him with various serious violations of US securities laws. Tucker II stayed hidden and did not participate in the SEC action. Today, the SEC obtained a default judgment against him and asked the Court to impose sanctions that could exceed US$1 million.
The SEC had pursued Scott Marshall as well, together with another Vancouver man, a CPA named David Michael Naylor, in connection with Intertech Solutions Inc. They settled with the SEC and agreed to pay US$7.4 million.
During the course of those years, a number of reporters covered stories of the alleged infiltration of the Hell’s Angels in the capital markets of Vancouver. For example, here and here.
The RCMP, together with the British Columbia Securities Commission, took action against Scott Marshall in respect of pump and dump activities but some of those efforts did not succeed in a British Columbia Court.
A “snake pit“
Back then, a reporter wrote that people should worry about the number of Vancouver companies trading on the OTC markets because it was a “snake pit” and those people with companies listed on the OTC markets make “lousy neighbours, some representing a clear and present danger”, to which he meant of course, the danger of living beside Scott Marshall.
According to the SEC, Marshall and Naylor both have homes in Los Cabos, Mexico. It is a seaside town favoured by Vancouver and Mexican transnational criminal organizations.
In this interview with a Quebec chapter of the Hell’s Angels, its members say that while lots of their members have criminal records, they are simply a marginalized group in society.
Morrie Tobin, the Canadian financier who tipped authorities off about the college admissions scandal, was sentenced today to a year and a day in prison after pleading guilty to securities fraud for pumping and dumping stocks.
Despite his crucial tip and his cooperation in the investigation that led to the college admissions prosecutions, the judge in Tobin’s case today rejected the recommendation by the US government for no jail time, saying that he could not allow a felon who admitted trying to fleece investors of US$15 million to avoid prison.
EPTI touters touted that your billions in EPTI will become allegedly even BIGGER!
Tobin is a wealthy financier – although Canadian, he lives in Los Angeles. In 2017, he participated in a scheme with others to falsely promote a microcap company whose shares he secretly controlled in a shell company. He participated in causing the shares to be artificially pumped, with others, to increase the share price and then when the share price was high, he dumped his shares.
Pump and dumpers benefit from the increase in the price of shares of a public company at the expense of innocent investors. In the case of Tobin, the company he pumped was called Environmental Packaging Technologies Inc. and he pumped it by representing, among other things, that the share price was going to go up by 1,118%, it had a patent pending that could forever change the packaging industry; and that as a result of President Trump, an investor in EPTI would gain whopping profits – for example, every US$2,000 invested would become US$22,360.
The EPTI pumping newsletter
According to the Sentencing Memorandum filed by the lawyer for Tobin, two lawyers were part of the pump and dump scheme. At least one of the lawyers was charged.
The Tobin case is also very important – it crossed-over with Roger Knox, who is part of another SEC case with ties to Vancouver.
Tobin’s conviction means he will likely be deported to Canada at the conclusion of his federal incarceration in 2021.
Tobin was personally part of the college admissions scandal as well – he was in the process of bribing an athletic coach at Yale University an amount of US$450,000 for one of his children to be admitted to Yale who didn’t qualify, when he gave the tip to authorities.
The tip led to the discovery of Rick Singer, who brokered deals for wealthy teenagers to attend Ivy League schools who could not enter under their own steam. Singer pled guilty. Over thirty people were charged in the US college admissions scandal, including Vancouver’s David Sidoo.
But for the tip about Tobin, the college admissions scandal, and the Roger Knox file, all tied to Canada, may not have been discovered.
The US Attorney in Florida today announced that a Canadian, Brooks Thomas Nesbitt, was sentenced to 10 years in jail after pleading guilty to wire fraud in connection with a money laundering securities fraud scheme.
Nesbitt, originally from Thornhill, Ontario, ran several boiler room operations with another Canadian, Mary Kathryn Marr, which took in over US$14 million from the public in fake sales of shares of public companies.
According to affidavit evidence filed by US law enforcement in connection with the case, Marr and Nesbitt defrauded several people around the world, laundering the proceeds of crime mostly through TD Bank and into end point banks in Thailand, Spain and the US using shell companies and nominee shareholders.
Nesbitt operated from Thailand, from where he was extradited. Marr was extradited from Serbia.
In a series of WhatsApp chats obtained by HSI, it seems like the pair hesitated before commencing their fraudulent activities but were addicted to cash:
Marr: “I’m trying to stay good.” Nesbitt: “Me too … but cash is my crack.” Marr: “Me too … I never have enough.” Nesbitt: “We gotta make shitloads this year … I borrowed lots of cash … just booked a 3 bedroom suite in the Trump.”
Nesbitt had a place in Marbella, Spain, as well as in Hua Hin, Thailand.
Marbella, SpainHua Hin, Thailand
Marr allegedly used buffer bank accounts to obfuscate the origin of proceeds of crime. A buffer bank account is an intermediary account – a bank account used in second place before an exit wire, meaning its the second bank account used before proceeds of crime are wired to bank accounts held in the name of entities registered in offshore AML lax islands or countries.
Some of the fake shares of public companies that Marr and Nesbitt sold using boiler rooms include Nexflix, Box and Twitter. People who wired money to buy shares never received the shares and never received their funds back.
After one person had sent US$392,285 to TD Bank for fake Twitter shares, Marr bragged that she was going to “light him up for a M” meaning they were going to take him for US$1 million.
The boiler rooms allegedly used a number of well-known fraudulent obstacle techniques to avoid repaying funds owed – for example, demanding that people pay taxes upfront or pay bank fees upfront to get their money back. Typically, these secondary little cons keep going until the person has no more money left and then the boiler room sales team ceases to respond to them altogether.
Marr is in jail in Florida, awaiting trial. In addition to his sentence, Nesbitt was ordered to pay US$14 million in restitution.
The most well-known boiler room scene in film, is the one below from the film “Wolf of Wall Street”.
Excerpt from Wolf of Wall Street film (Source: YouTube)
Second place is the “always be closing” scene about selling securities to investors over the phone in the film “Boiler Room.”
John Worth Mitchell -Jack to his friends – was 8-years-old and living in Port Elgin, Ontario, when he heard from his parents that the unsinkable S.S. Algoma had shipwrecked and sank crossing Lake Superior.
Headline, Port Arthur Herald, November 11, 1885
At least 48 passengers and crew had been washed away at sea and were presumed dead.
The ship’s voyage had started in Owen Sound, Ontario and many who lost their lives were from towns along Lake Huron.
Jack’s parents recognized two names among those who perished at sea – Edward Frost and Mary Jane Butchart.
Port Elgin, Ontario, 1880s
Frost, Williams, Butchart
The Frost family was well known all around Ontario’s Bruce and Grey counties. Edward Frost was the son of John Frost and Mary Williams.
The Frosts were a prominent family in Owen Sound who owned a number of businesses. The Frosts were better known, though, as vocal abolitionists who operated the end point of the Underground Railroad in Owen Sound, sheltering former enslaved African Americans on the outskirts of town.
Edward’s Welsh mother, Mary Williams, left what must have been a life of luxury as the granddaughter of an Earl, and with her parents and three siblings, emigrated to Canada in 1817 and was one of the first European settlers in Bytown (now Ottawa). She married John Frost, from another Ottawa European settler family and in 1844, they moved to Owen Sound.
Mary Jane Butchart was the daughter of George McLauchlan Butchart, who had a business presence in Port Elgin and Owen Sound.
Edward and Mary were married in 1884 and had boarded the S.S. Algoma with their infant, Baby Butchart-Frost.
Jack didn’t know it then but he was fated to cross-over with both the Frost and Butchart families in the years to come.
His family and the Frost family would cross-over in marriage, and that cross-over would play an important role in the election of Margaret Thatcher, once the most powerful woman in the world; and he didn’t and couldn’t know either that he would eventually co-found and finance a portland cement company that became Butchart Gardens in Victoria, Canada.
Back then, he only knew that the child of two prominent families from the area had drowned in the worse shipwreck on Lake Superior, and so had its parents. He and many others along the Great Lakes wondered how the unsinkable ship had sank.
The unsinkable S.S. Algoma
The S.S. Algoma was built in 1883 by the Canadian Pacific Railway. It was a luxury 263 foot steam ship that took passengers through Lakes Huron and Superior from Owen Sound to Port Arthur to connect with the railway to Toronto.
Owen Sound to Isle Royal (Source: Google Maps)
The Great Lakes had thousands of shipwrecks, especially in Lake Superior.
A storm on Lake Superior, 2017 (Source: YouTube starting at 10:16)
Knowing that, the S.S. Algoma had been built to be safe and unsinkable with many novel features for the era, including the first electric lighting on a vessel to eliminate fire hazards from oil lamps, the first steel hull in a Great Lakes vessel, and watertight compartments so that in the event of a collision, passengers would be safe from incoming water.
The S.S. Algoma was built in separable halves in Scotland so that it could travel across the Atlantic ocean to Canada in one piece under its own power. In Canada, it was then separated into two pieces and towed through the canals. It was then reassembled and the passenger compartments were built, before it continued its journey to Owen Sound, where it was put into service in May, 1884.
November 5th
On its fateful last trip, the S.S. Algoma left Owen Sound on November 5, 1885.
The highlight of the trip for passengers was passing through the locks at Sault Ste. Marie. Lake Superior is 21 feet higher than Lake Huron, and the Soo Locks elevate upbound vessels from Lake Huron to the height of Lake Superior so they can continue traveling the Great Lakes.
Weitzel Lock, Sault Ste Marie, 1885
The next day, Nov. 6, 1885, the S.S. Algoma passed through the Weitzel Lock on time at 1 p.m. and then entered Lake Superior for the last leg of its journey.
The Frosts had their dinner and retired for the night.
November 7th
Halfway through Lake Superior, the ship ran into a blinding snow storm. The waves and the wind pumelled the ship for several hours as it made its way across the lake to Port Arthur. Soon, gale force winds and driving snow made it impossible to see much further than a few feet in the dark night.
By 4:30 a.m., the snow storm had turned violent.
Suddenly, passengers were thrown from their beds, woken by the searing sounds of the ship’s steel hull grinding over unyielding rock.
S.S. Algoma struck a reef
The S.S. Algoma had struck a reef off Isle Royale and started breaking up. Its rudder was broken.
The ship’s chief officer, Joseph Hastings, was stunned to see waves pouring in through the broken hull and washing away furnishings and parts of the forward ship.
He could hear the screams of women and children above the fury of the wind and the crashing waves.
Two sisters swept away
He started to make his way to the upper deck. Along the way, he found two young sisters sobbing in the ship’s saloon. They were wearing only nightdresses. The ship was swaying from side to side. He grabbed their hands and walked them forward, trying to steady them, battling the gale force winds, looking for shelter.
Just then, a wave smashed over one side and swept the sisters from his grasp and out to sea. He heard them scream until they were engulfed by the waves.
Hastings managed to make his way to the deck.
Passengers prayed for salvation
He saw passengers get down on their knees, and start loudly praying to God for their salvation.
The sea spared none of them – wave after wave washed them each away.
The ship’s purser, Alexander Mackenzie, was in the ship’s forward with the second officer and steward. They made an attempt to reach the other part of the ship to safety. The forward part of the ship broke off. Mackenzie was struck by a large wave and carried overboard. The forward portion of the ship disappeared into the icy waters.
Hastings and eleven other members of the crew gathered in the remaining part of the S.S. Algoma left afloat, wondering if the ship would hold; if they would be spared.
They were.
The next day, they made a makeshift raft and made their way to shore. They were rescued on Isle Royale.
Worst shipwreck on Lake Superior
In all, it is believed that 48 passengers and a handful of crew drowned at sea. It was the worst shipwreck in terms of loss of life on Lake Superior. The only passenger list was lost during the shipwreck. There was no way to confirm how many passengers were on board, leading to suggestions at the time that a hundred perished.
S.S. Algoma wreck, November 9, 1885
Parts of the S.S. Algoma sank that night and other parts were widely scattered along the lake and shoreline.
American fishermen recovered four bodies on the shore of Rock Harbour and reported that over 300 tons of freight, furniture, luggage, equipment, mail, a piano and barrels of brandy and beer were strewn about the rocky shore.
The body of Edward Frost was recovered among the rocks of Isle Royale. The bodies of Mary Jane Butchart and Baby Butchart-Frost were never recovered.
Prime Minister’s nephew
The purser who had perished when the ship’s forward washed away, Alexander Mackenzie, was the nephew of Canada’s 2nd Prime Minister (from 1873 to 1878), also named Alexander Mackenzie. Mackenzie demanded an inquiry immediately into the sinking of the unsinkable ship and got one. It was convened in Toronto. The great distance from Owen Sound to Toronto meant that none of the affected families could participate, give evidence or hear the testimony.
Prime Minister Alexander Mackenzie (Source: McCord Museum)
The inquiry heard that the S.S. Algoma had diverted miles off course during the storm and smashed into the reefs off Isle Royale at a speed of 16 miles per hour. On impact, it started to break apart at its centre seam – precisely into the two pieces that had been bulkheaded through the canal system to Owen Sound. The captain failed to assign a look out, even after visibility decreased. The inquiry held the captain negligent for having caused the loss of the S.S. Algoma and of 48 lives. His licence was suspended.
In 1885, CPR paid out $40,000 for claims of loss of cargo but the records indicate that it did not pay the families anything for the wrongful deaths.
Shipwreck now a diving sanctuary
Today, the wreck of the S.S. Algoma is a scuba diving site off the coast of Michigan, administered by the Thunder Bay National Marine Sanctuary. Among the wreckage, divers have found artifacts, dishes and the personal property of passengers, as well as some human remains of those who perished.
The tragedy of the S.S. Algoma impacted the lives of many in the Port Elgin and Owen Sound area.
James Tucker, 1900
One of them was James Alexander Tucker, an Owen Sound native who moved to Toronto to study at the University of Toronto. In Toronto, his inner circle included another (future) Prime Minister, William Lyon Mackenzie King. Tucker went on to become a writer, poet and magazine editor.
He wrote a poem about the shipwreck of the S.S. Algoma called Fate. It was published posthumously in 1903, by his best friend and then Saturday Night Magazine editor, Reuben Butchart.
In Fate, Turner wrote:
The white-fanged waves went snarling by, When night had blown down from the northern sky, On a hidden rock from the harbour far, The ship plunged hard, and her tallest spar, Sank where the bones of dead men lie, When the sun rose, the ship and the men lay sunken there
Leading up to the turn of the century, Owen Sound Collegiate, a private high school in Owen Sound, had an unparalleled record for leadership and academic excellence among its students – students who crossed paths with each other later in Toronto.
Tucker was a turn of the century alumni of Owen Sound Collegiate. And so were Dr. Norman Bethune and Billy Bishop.
The Securities and Exchange Commission (“SEC“) today announced that it reached a settlement with a British Columbia company and some former key executives, in respect of charges of improper revenue recognition and the issuance of misleading public securities law disclosures in its securities filings as well as earnings presentations.
The issuer, Valeant Pharmaceuticals International, Inc., now known as Bausch Health Companies Inc. (“Bausch“), and a former CPA at the company and its former CEO and CFO all agreed to pay penalties to the SEC as part of a settlement agreement for US$45 million.
Bausch is a large multinational company, now headquartered in the province of Quebec, known by consumers for its contact lenses (Bausch & Lomb). It called the SEC investigation a “legacy” one, meaning it happened on someone else’s watch.
The former CPA, CEO and CFO are respectively, Tanya Carro, J. Michael Pearson and Howard Schiller. The SEC said that corporate executives must be accountable to investors for accurate and complete disclosure.
Perhaps the most surprising news of all is that Bausch, a multi-billion dollar company, is actually a British Columbia corporate entity. And one of the largest pharmaceutical corporations in the world.
Two more men involved in a digital currency exchange and a digital currency, were murdered in Mexico. Their bodies were recently found stuffed in suitcases in Sinaloa cartel land, according to this newspaper article.
The two, Oscar Brito from Chile and Ignacio Ibarra from Argentina, were involved in selling and promoting the digital currency called OneCoin and its alleged digital currency exchange called DealShaker.
Brito promoting the fake OneCoin exchange on Facebook, 2019.
Their bodies were found with thirty garbage bags in the area of El Venadillo in Mazatlan. They had been kidnapped two days before they were killed.
Those involved in OneCoin owe investors from around the world approximately $4 billion. Brito and Ibarra were in Mexico selling and promoting OneCoin, even though it has long been discredited. They are alleged to owe over 140 people money from OneCoin and affiliated MLM-type fraudulent schemes.
In Sinaloa, they would not have been murdered unless the cartel ordered or performed the hit.
A recent report from US federal law enforcement highlighted the large extent to which the Mexican cartels use Bitcoin exchanges to move proceeds of crime seamlessly and anonymously across borders, without impediment. In 2017, the DEA had flagged the growing problem, as well as the lack of visibility over transactions at digital currency exchanges which facilitate criminal activities, some of which tumble transactions in Canada as a business service built into the exchange.
A number of digital currency exchange owners and ICO creators have been killed in the past few years (you can read about those murders here) for various reasons – either because they owed money and the debt is collected in blood, a robbery went bad, or they became entangled with transnational criminal organizations.
Pavel Nyashin, beat up and later murdered, 2018.
OneCoin is a scam in the sense that it was sold as a digital currency on a Blockchain (it was not a digital currency on a Blockchain), and was represented to have an exchange (DealShaker) with liquidity to trade OneCoin for goods, services and money, which was fake. It was sold using MLM techniques.
Ignatov and Ignatova from OneCoin
One of its co-founders has disappeared and two others are in jail in the US. The express OneCoin exit strategy was as old as the hills – to take the money from investors and run, and blame other people for it as a diversion.
“You’re killing an innocent man.” Those were the last words spoken by Daniel Lewis Lee on July 14, 2020, before he was executed to death in the Terre Haute, Indiana prison. He was pronounced dead at 8:07 a.m.
The execution was the first US federal execution since 2003. The decision to execute Lee was twice appealed to the US Supreme Court; the last appeal heard at 2 a.m. on July 14, 2020. In a 5 to 4 ruling, the Court ruled that the execution could move forward. The victim’s family opposed it.
Lee was strapped to a gurney for four hours in the death chamber while the wheels of justice turned.
Chevie Kehoe
The story of Daniel Lewis Lee (Lee) begins with a person named Chevie Brian Kehoe (Chevie).
Chevie Kehoe, 1997.
Chevie was the oldest of eight boys of Kirby Keith and Gloria Kehoe. One reporter did a deep dive into the case of Chevie and Lee, and interviewed acquaintances of the Kehoe family and some of Chevie’s teachers and employers for a radio documentary.
The reporter learned that, by all accounts, Chevie was a polite, personable, hard working and competent young person. He was an honor student in the gifted program at junior high. He wanted to be a pilot. That is, until Gloria Kehoe removed him from school at 14. His parents believed schools were a threat.
Kehoe parents
Kirby and Gloria Kehoe, unknown date.
The parents, Kirby and Gloria Kehoe, were anti-government in the extreme – they forbid Chevie from applying for a social security number or a driver’s license so that he would be kept off the grid.
In 1985, the Kehoes moved into a rustic cabin in Deep Lake, near Colville, Washington. They had no electricity or running water, or access to knowledge and information.
In the documentary, people in Colville described Kirby Kehoe as an arrogant, controlling schemer who attempted to convert people in town to a white supremacist view and handed out racist material.
Father Kehoe ordered one child to kill the other
A flavor of their parenting can perhaps best be inferred from a family incident in which Kirby Kehoe once ordered Chevie to kill one of the younger Kehoe children. Chevie refused, sending Kirby Kehoe into a rage. No Kehoe reported their parents to the police over this incident.
Chevie did consider turning his parents in to the police.
In 1989, when he was 16, he left his parent’s cabin and set out on his own. He defied them and went on the grid. He registered for a social security number. He took on odd jobs, including at McDonalds. He paid taxes. During that time, he sought the help of a former school teacher to report his parents to law enforcement. He thought his younger brothers ought to be removed from his parents. Ultimately, he lost the courage to turn them in.
White supremacists
Over time, Chevie adopted the white supremacist views of his parents and began to advance the idea of white separatism. He formed an informal association of like-minded persons who advocated for violence and intolerance to achieve their goals.
In 1994, the Kehoe family moved to the wilderness of the Ozark Mountains in Arkansas.
Mueller family
In the Ozarks, the Kehoe family became friends with William and Nancy Mueller who lived in the area. Like Kirby Kehoe, William Mueller was a vet and an amateur gun dealer with strong anti-government views.
On or around February 12, 1995, while Chevie was visiting his family in the Ozarks, he and Kirby Kehoe went to the Mueller house.
There are different accounts of what happened next.
Guns disappear from the Muellers
Gloria Kehoe says she was told that Chevie and her husband robbed the Mueller house while they were at a gun show, stealing approximately $50,000 in coins and guns, which Chevie took to Washington.
Chevie says that Kirby Kehoe and William Mueller were involved in an insurance scam together that went badly, and they concocted a scheme whereby Kirby Kehoe would take guns and other items from the Mueller home and Mueller would report it as a fake robbery to collect insurance.
The police later asked Gloria Kehoe whether the Mueller robbery was “staged.”
“It crossed my mind,” she said.
Apparently, there was an insurance claim by Mueller which the insurer refused to pay.
After the break-in or insurance scam, Gloria and Kirby Kehoe traveled back and forth by car between Arkansas and Washington.
They sold property in Arkansas and registered the sale under a fake social security number to avoid the payment of taxes and remain off the grid.
Daniel Lewis Lee
Enter Daniel Lewis Lee.
He met Chevie in 1995 in Washington. There is little information about Lee. We know from the trial that, at 17, he pled guilty to taking property from a teenager who later was murdered by someone else. Lee shared in the Kehoe family vision of white separatism and supremacy.
Daniel Lewis Lee, 1997.
In January 1996, Lee asked Chevie to drive him to Oklahoma so that he could visit his mother who was in hospital recovering from surgery.
The Mueller murders
Here too, there are different accounts of what happened next.
According to Gloria Kehoe and her second oldest son, Cheyne Kehoe, at the end of that trip, on January 11, 1996, Chevie and Lee detoured to the house rented by the Muellers. The Muellers were not home so they broke in but couldn’t find anything of value so they waited for the Muellers to return.
The Mueller family, unknown date.
When the Muellers returned home, Lee and Chevie emerged from hiding. They were dressed in police gear. Lee was wearing an FBI cap. They overpowered the family, handcuffed them and demanded that William Mueller hand over his valuables.
After finding cash, guns and ammunition, they placed plastic bags over their heads. They used duct tape to hold the bags in place until they suffocated to death.
Lee refused to kill eight year old Sarah Powell, so Chevie killed her by himself.
The vehicle used for the murders was a 1985 GMC truck owned, at that time, by Kirby Kehoe.
After killing the Muellers, they took their bodies in the 1985 GMC truck to Pope County and threw them, weighted down with rocks, into the Illinois Bayou.
Lee and Chevie drove back to Washington with the proceeds of crime.
Gloria Kehoe told the police that Lee and Chevie confessed the murders to her a month after they had occurred and gave her details of how the murders were carried out.
She would wait two years before telling the police about the murders.
Chevie says that they never went to the Mueller home and that his parents, who had a relationship with the Muellers, were responsible for their murders.
Back in the Ozark Mountains, no one knew what had happed to the Muellers but foul play was not suspected at first.
Seattle gun sales
The Kehoe family began selling guns taken from the Muellers. One of the guns registered to Nancy Mueller was sold by Kirby Kehoe in Seattle, triggering an investigation into him. A second gun belonging to William Mueller was found in the possession of a Seattle man who said that he bought it from Chevie.
Bodies discovered
Then, on June 28, 1996, a woman fishing near a bridge that crosses the Illinois Bayou snagged her fishing line on two tennis shoes tied together. She yanked and reeled in her line and saw there was a leg bone attached. She went to the police. The police drag-netted the water and recovered parts of the bodies of the Muellers.
When two guns belonging to the Muellers sold by the Kehoes surfaced in Washington state, and bodies surfaced in the Ozarks, the Kehoe family, except Chevie, moved to Yaak, Montana.
Police shoot out in Ohio
Several months later, on February 15, 1997, Chevie and Cheyne Kehoe were driving to a campground in Ohio. Chevie was driving his car – an older blue Chevrolet Suburban. They were stopped by state troopers in Wilmington, Ohio. The truck had an expired license plate.
Chevie exited the truck and while he was talking to the troopers, Cheyne Kehoe jumped out of the passenger side of the truck with a loaded gun and started shooting at the troopers. Fortunately, they were not injured. Cheyne Kehoe then fled on foot and Chevie drove off in the truck.
Hours later, Chevie shot at two Wilmington police officers who pulled up behind the truck in a parking lot, and then fled on foot. A passenger was injured in the shoot out.
The dramatic shoot out was aired on several news stations across America. The police seized the Chevrolet Suburban.
Chevie exits left; then Cheyne Kehoe exits right with loaded gun and shoots at police, February 1997.
The FBI cap
In the Chevrolet Suburban, the police found law enforcement gear, guns, ammunition, handcuffs, duct tape and FBI caps.
Following the police shoot out, Chevie and Cheyne Kehoe became wanted fugitives. Their parents helped them flee.
Kirby Kehoe suggested Chevie pay him money for his truck – the 1985 GMC – to flee, which he did, and he then transferred the vehicle registration to his name. That was the truck used for the Mueller murders.
Ranching in Utah
Chevie and Cheyne Kehoe ended up in Beryl, Utah, where Chevie got a job managing a ranch. While in Utah, Cheyne Kehoe alleged that he became nervous when Chevie discussed murdering their parents.
Cheyne Kehoe stole Chevie’s GMC truck and left Utah. He drove to his parents’ place in Yaak, Montana.
A King Lear family
Chevie says that Cheyne Kehoe went to obtain instructions from the parents and that it was decided by them, in essence, that Chevie and Lee should take the fall for the Mueller murders, which would allow Gloria Kehoe and Cheyne Kehoe’s family to collect an award of approximately $50,000 each for turning them in.
Cheyne Kehoe lied to the police and at first, said that he had not gone to Yaak, Montana, to talk with Kirby and Gloria Kehoe before turning himself in and handing over Chevie. But he had.
End of the road
Cheyne Kehoe’s arrest, June 1997.
On June 16, 1997, Cheyne Kehoe turned himself in to authorities and told them that, in February 1997, Chevie had confessed to him that he and Lee murdered the Muellers. He provided them with the GMC truck he had stolen from Chevie and then driven to his parents place. He told law enforcement that they would be able to find evidence therein which would tie Chevie to the Mueller murders. The evidence? Duct tape which “had some paint on it,†he said, that would match. The jury must have wondered how Cheyne Kehoe could possibly know that duct tape on the three dead bodies recovered from the Illinois Bayou contained chips of paint.
The next day, the police arrested Chevie.
In September 1997, Lee was arrested in Oklahoma.
In March 1998, Chevie’s mother turned in her son. She went to the police and told them that two years earlier, Chevie and Lee had confessed committing the murders to her.
Gloria Kehoe led police to a storage locker rented by Kirby Kehoe that contained items stolen from the Mueller house. Kirby Kehoe also had 30,000 rounds of ammunition, an AK-47, assault weapons, grenades and large quantities of guns in his storage locker.
She led police to a second storage locker that she said was rented by Chevie which had items similar to those in the Mueller home. Forensic scientists found the fingerprints of Lee and Chevie on some items in Chevie’s storage locker. The fingerprints could have arisen from Lee and Chevie moving items into the storage locker for or from, any of Gloria, Kirby or Cheyne Kehoe.
Gloria Kehoe told the police that Kirby Kehoe was going to kill her because she knew too much. The jury must have wondered about this too – she had stated that her son, and not her husband, was a killer, so why would she be afraid that her non-killer husband may kill her and what did she know that was “too much?”
The indictments
On December 12, 1997, Chevie and Lee were indicted (with others) with several significant offences, superseded in July 1998, with charges that included racketeering and murder. The indictment alleged, among other things, that Chevie launched an enterprise designed to start a revolution in the US to create a new supremacist nation financed with the proceeds of crime derived from robberies, kidnapping and the murder of the Muellers.
Both Lee and Chevie denied involvement in the Mueller murders.
Lee and Chevie during their trial, 1999.
A strand of hair
The case in respect of the murders was mostly circumstantial, based on the testimony of Gloria Kehoe and Cheyne Kehoe.
But there were also two pieces of forensic evidence linked to the Mueller murders.
Experts testified that: there were paint samples taken from the GMC truck (owned by Kirby Kehoe at the time of the murders and later stolen by Cheyne Kehoe and driven to Kehoe parents where it was seized) that were consistent with paint chips found in duct tape removed from the Mueller bodies (linking the GMC truck to the murders); and that one of the FBI caps located in Chevie’s Chevrolet Suburban was used in the Mueller murders and contained a hair that an expert testified was similar to Lee’s (linking Lee to the murders).
The hair strand in the FBI cap was the only physical or direct evidence tying Lee to the Mueller murders.
No DNA testing was done on that strand of hair.
The jury was told at closing that it was Lee’s hair in the FBI cap.
Only it was not.
In 2007, long after the trial was over, the hair was DNA tested and was excluded from being Lee’s hair.
On May 4, 1999, a jury found Lee and Chevie guilty of numerous offenses. Lee was found guilty of three counts of murder, racketeering and conspiracy to commit racketeering.
Lee was sentenced to death.
Chevie was not.
An appeal Court later called the disparity between the two sentenced given to Chevie and Lee “troubling” and “unfair.”
Both appealed their sentences numerous times, all unsuccessfully.
Strand of hair DNA tested
Lee, in particular, as part of a broader set of appeals, appealed with the new evidence that proved from a DNA test that the strand of hair in the FBI cap worn by one of the men who committed the Mueller murders, was not his.
The argument, in effect, was that since it was proven that that particular FBI cap was worn to commit the Mueller murders and the strand of hair was not Lee’s or Chevie’s as the jury was told, there must have either been a third man in the Mueller home who participated in the murders, or there were two men, and Lee was not one of them. Either way, it was presumably argued, based on the DNA evidence, there was no longer physical evidence that tied Lee to the FBI cap, and therefore to the murders.
In 2008, the Court rejected the new evidence from the DNA test as a ground of appeal to vacate his sentence, finding that he was not prejudiced by forensic testimony that the hair in the FBI cap used in the Mueller murders was similar to his or by statements at trial that the hair was his.
Execution of Lee appealed
The execution of Lee was contested by some.
Members of the family of the victims did not support Lee’s execution. Neither did a prosecutor who prosecuted the case against Lee. The presiding judge over the case, now deceased, said that justice was not served in respect of Lee’s sentence. They do not doubt his guilt; their objections were over the inequitable result of Lee’s sentence compared to Chevie’s.
Lee and the victim’s family both filed last minute appeals to the US Supreme Court to stop the execution, which were unsuccessful. The US Supreme Court order to deny the stay of execution of Lee is here. Its written opinion is here.
In a 5-4 decision, SCOTUS allowed a federal execution to proceed for the 1st time in 17 years. Daniel Lee was executed at 8 am. @AHoweBlogger has the story on all of the complex emergency legal wrangling that culminated in the court's 2 am ruling. https://t.co/8SZBjk3hKK
Justice Breyer with whom Justice Ginsburg joined in dissent wrote: “Given the finality and seriousness of a death sentence, it is particularly important to ensure that the individuals sentenced to death are guilty, that they received full and fair procedures, and that they do not spend excessively long periods of time on death row. Courts must also ensure that executions take place through means that are not inhumane”, noting that Chevie was not sentenced to death.
Justice Sotomayor also dissented, joined by Justice Ginsburg and Justice Kagan, arguing that the resumption of federal executions was being carried out before any Court could consider whether the new drug protocol was unconstitutionally cruel and unusual.
The majority held, among other things, that any further appeal by Lee was unlikely to succeed on its merits and that questions in respect of carrying out capital punishment are not matters for the Courts to decide; rather, they are questions for the people to decide (e.g., the Scalia view that the tree of law does not grow).
Justice Ginsburg was ill but stayed up until 2 a.m., fighting an infection, to deliberate on the Lee appeals. She was admitted to John Hopkins Hospital a few hours later.
Where are they now?
Chevie is in prison in the Florence, Colorado federal correctional complex serving a life sentence. The Green River Killer is at the same prison.
Gloria Kehoe disappeared after the case and is believed to have returned to Yaak, Montana, where she raised the remaining six Kehoe boys.
Kirby Kehoe and Cheyne Kehoe were both sentenced to terms of incarceration for various convictions related to their activities in the mid-1990s. Both were released and then predictably resumed their lives of serious criminality and illegal weapons collecting together.
Kirby Kehoe is currently incarcerated in California.
Cheyne Kehoe is at an unknown location, possibly released, although an Arizona Court held, as late as August 2019, that he posed a danger to the safety of the community.
In 2013, those two and several other Kehoe sons were living off the grid on 40 acres of land in Ash Fork, Arizona, where over a dozen illegal guns and 15,000 rounds of ammunition were located and confiscated.
40 acres off the grid in Arizona where some Kehoes lived, 2013.
These Arizona Kehoes were engaged in the production and commercialization of illegal drugs.
At that time, a Kehoe son told law enforcement that his father, Kirby Kehoe, was unstable, had extreme anti-government views and would act on those views.
Lee was executed on July 14, 2020. While serving his sentence in prison, he renounced his previous white supremacist views. Did he commit the murders he was convicted of? A jury thought so, but he always denied it and Chevie said that Lee had nothing to do with the Mueller murders. It is remotely possible that Justices Breyer and Ginsburg in their dissent that would have stopped Lee’s execution, had a measure of reasonable doubt in their minds when Breyer wrote (in respect of Lee on the eve of his execution): “it is particularly important to ensure that the individuals sentenced to death are guilty.”
An unsolved mystery
We are left with the DNA test of the strand of hair proven not to be Lee’s.
The identity of the person whose strand of hair was taken from the FBI cap that was used in the Mueller murders remains an unsolved mystery.
Wesley Ira Purkey was an ex-con recently out on parole and living in Lansing, Kansas. He had a lengthy criminal record for numerous violent crimes and had spent years in prison getting an education, and trying to improve his attitude for release.
Over the years, prison psychologists who evaluated Purkey labeled him “amoral … bright … manipulative” … a “classic psychopath” but their opinion was that his prison education and intelligence tempered his psychopathic nature.
A psychopath paroled
In March 1997, a state parole board felt that after more than a decade in prison, he was rehabilitated and ready to be a responsible citizen. He was released. He was 45 years old.
Like all parolees with a criminal record, Purkey had difficulty getting a job. After ten months, he got a job interview that seemed promising – to be a plumber across state lines.
On January 22, 1998, Purkey said goodbye to his wife and stepchildren, got into his white Ford pickup truck and drove from Lansing, Kansas, to Kansas City, Missouri, for his job interview.
After the interview, Purkey parked his truck and smoked half a rock of crack cocaine. He wasn’t allowed to use drugs and alcohol but, as would later emerge, he had started using drugs almost immediately after he got out of prison.
Kidnapping Jennifer Long
Purkey began driving around Kansas City. Eventually, he came upon a teenager on a sidewalk walking home from school. It was Jennifer Long (“Jennifer“). She had just turned 16 and was going for a test for her first drivers license with her stepfather later that afternoon.
Purkey slowed down his pickup truck, rolled down the window and talked to Jennifer. He had a boning knife and showed it to her. A boning knife is for removing bones from poultry, meat and fish. It isn’t meant to be used on teenage girls.
~ He had a boning knife and showed it to her ~
Purkey kidnapped Jennifer and drove for 30 minutes back to his house in Lansing, across the state line.
No one has seen Jennifer since, except Purkey.
When they arrived at his house, Purkey forced Jennifer into the basement. His wife was at work and his stepchildren were at school. Purkey sexually assaulted Jennifer. Afterwards, she tried to escape. He grabbed her legs and forced her to the ground.
They struggled. Purkey grabbed the boning knife and repeatedly stabbed her in the face, neck and chest until she quit struggling.
Murder of Jennifer Long
She was dead.
He stabbed her so many times, the blade broke inside her body.
“It’s not like in the movies. They don’t die right away”
He later described killing Jennifer and said: it’s not like in the movies. They don’t die right away.
Purkey stuffed Jennifer’s dead body into an industrial 60″ by 24″ steel toolbox – the type you see in the back of pickup trucks in a hundred towns across America. He hurriedly cleaned up the basement. He then went to drink at a local bar for several hours.
He left the bar and made a stop on his way home – to buy a chainsaw.
Thirty minutes away in Kansas City, Jennifer’s mother was frantically trying to locate her daughter. She went to the police; she put up posters around town; she sent flyers around; she listed her daughter on the national missing and exploited children’s website.
Nothing.
Not a tip, not a sighting was reported. Jennifer had vanished.
Meanwhile in Lansing, Purkey had a body in his basement he needed to do something with. He needed the house to be empty. It would have to wait until morning.
The gruesome clean-up
In the morning, when Purkey’s wife and stepchildren had left for the day, he went to the basement. He took his new chainsaw out of its box and began cutting Jennifer’s body up inside the steel toolbox.
Purkey hadn’t anticipated that the blade would send blood and human flesh flying in every which direction. He had to stop often to clean the chainsaw when it became too clogged with blood and body parts and quit rotating.
He did this for several days.
~ When he got to her heart, he stopped and observed the two stab wounds he had made ~
When he got to her heart, he stopped and examined it and observed, perhaps even marveled, at the two stab wounds he had made in Jennifer’s heart.
Once he finished chainsawing her into pieces, he placed her body parts in several plastic bags. He carried them outside and added leaves and debris from his yard to each plastic bag to obscure what was inside.
Purkey’s crime left a bloody mess in the basement and in the large toolbox. He went to buy cleaning supplies and bleach and forced his stepchildren to help clean up.
He wasn’t done.
He then went to buy several days worth of chopped firewood.
~ He burned each garbage bag with Jennifer’s remains in the family fireplace ~
Day-by-day he burned each garbage bag with Jennifer’s remains in the family fireplace. The body parts didn’t burn as he expected.
He bought diesel fuel to keep the fire hot enough to cremate human remains. Even then, Jennifer’s bones did not burn completely so he crushed most of the remaining bone fragments. Her jaw bone was too hard to crush.
When he finished cremating Jennifer’s remains in the family fireplace, Purkey rented a wet vacuum and vacuumed up the ashes and residue in the fireplace, placing it in garbage bags.
He took the garbage bags of ashes and residue and drove 200 miles to Clearwater, Kansas, and dumped them in a septic pond. He then discarded her jaw bone and clothes in a field.
Months passed.
Jennifer’s mother kept looking for her. So did the police. No one knew she had been murdered except Purkey.
Purkey strikes again
Nine months after murdering Jennifer Long, Purkey struck again.
By October, Purkey had landed a job as plumber in Lansing.
On October 26, 1998, he answered a service call to repair a leaking kitchen faucet at the home of Mary Ruth Bales.
Mary Bales calls a plumber
Mary Bales was 80-years-old.
She had had crippling polio as a child and needed a cane to walk. Mary welcomed Purkey into her home and stayed with him while he looked at the leaking faucet in her kitchen. Purkey told her that he needed to buy a part to repair the faucet and asked her to give him $70 up front. She gave it to him.
Purkey left. He did not go buy plumbing parts for a leaky faucet.
He drove to the shady part of Lansing and used the $70 to hire a prostitute, buy crack cocaine and rent a cheap hotel room. He stayed overnight with the prostitute, taking drugs.
Murder of Mary Bales
The next morning, Purkey and the prostitute left the hotel and drove to Mary’s home. Purkey parked his truck, grabbed a claw hammer from his toolbox and entered Mary’s home.
He found her in the bedroom.
~ He smashed her head to smithereens with the claw side of the hammer until she was dead ~
He smashed her head to smithereens with the claw side of the hammer until she was dead. She put up a fight, to no avail. Purkey left Mary ‘s body on the floor.
Purkey went to his truck and invited the prostitute into Mary’s home, where they stayed for several hours, injecting drugs, smoking crack cocaine and eating Mary’s food.
Purkey stole Mary’s purse and a couple of watches to make the murder appear as if it was part of a break-in.
Purkey returned to the house again the next morning with two gallons of gasoline, intending set fire to the house to cover up his crime. A neighbor spotted him in Mary’s backyard and called the police. He was arrested when the police discovered Mary’s body inside the house.
Did he really murder Mary Bales over $70? He never did say.
Purkey was charged and held in remand in the Wyandotte County Jail in Kansas.
Deal-making for federal charges
After two months in remand, Purkey contacted a detective with the Kansas City police and offered to give him information about an unsolved kidnapping and murder that he had committed almost a year before.
He wanted an FBI agent at the meeting because he wanted a deal – he would confess to an interstate kidnap and murder they were not aware of and in exchange, they would let him serve his sentences in a federal prison.
Purkey met with the detective and the FBI agent and confessed to the kidnapping, sexual assault and murder of Missouri teen Jennifer Long. Over time, he provided more details of the crime and ultimately led them to the crime scene and where he discarded Jennifer’s clothes and jaw bone. Nothing was ever recovered.
Conviction for Bales murder
Eventually, Purkey pled guilty in a Kansas state court to the murder of Mary Bales. He claimed, at sentencing, that his wife put rat poison in his cocaine supply a year before the murder of Mary Bales, which he said had diminished his capacity. He was convicted on April 28, 2000, and was sentenced to life in prison.
Then, on October 10, 2001, the federal government charged him in connection with the kidnap, sexual assault and murder of Jennifer Long.
Conviction for Long murder
On November 5, 2003, after a lengthy trial, a federal jury in Missouri found Purkey guilty of interstate kidnapping, rape and murder of a child (Jennifer) and he was sentenced to death.
During the penalty phase of his trial, he affirmed earlier statements about sexually assaulting, killing and dismembering Jennifer but resiled from the kidnapping charge across state lines, saying that he fabricated the kidnapping to make sure he was prosecuted federally but had since changed his mind.
“I lost my house. I lost my job. I lost my husband. I lost a lot of things but most of all, I lost her”
Jennifer’s mother, at sentencing said: I lost my house; I lost my job. I lost my husband. I lost a lot of great things but most of all I lost her.
Execution scheduled
Purkey’s execution is scheduled for July 15, 2020. He has exhausted all appeals available to him. The execution is federal, which means that there is no prospect of the intervention of a state governor.
Before his execution, the US government intends to execute Daniel Lewis Lee for a series of murders in the Ozarks.
The US government has not carried out an execution in 17 years.
The Alberta Securities Commission (“ASC“) issued two notices today. The first was a warning about a company called “Claim Central” which purports to be an asset recovery agency claiming to be capable of recovering funds from the numerous binary financial scams that have targeted Canadians in the past. In order to activate a claim, Claim Central asks claimants to send them $550 in Bitcoin upfront. The ASC says that the scam is using the names of real persons in order to give it legitimacy.
Softlab9 Software Solutions Inc.
The second notice from the ASC was of a temporary halt trade order against a British Columbia issuer named Softlab9 Software Solutions Inc. (“Softlab“). The order prohibits the trading in all the securities of Softlab. No reason is given for the halt trade except that the ASC notice mentioned the ASC’s ability to halt trade when there are unexplained fluctuations in the trading of securities. To that point, Stockwatch noted that the price of its securities went to $1.39 from $0.39, and that it was promoting a disinfectant and alleged facilities being built in Alberta.
The auditor of Softlab is Saturna Group in Vancouver.
Its SEDAR profile says that it is in the business of industrial products. It’s press releases, however, say that it is a Blockchain company. There is no filing on SEDAR regarding a change of business to pivot into the disinfectant manufacturing industry, even though it appears that the existing disclosure record cannot be relied upon by investors to fairly value its securities.
The company appears to have no office in British Columbia, despite being an issuer there.
Despite filings of press releases announcing material events including deals, contracts, acquisitions, debt covenants, joint ventures and allegedly a contract for the manufacturing of disinfectants, including for Covid-19 purposes, there appears to be not one material contract filed on SEDAR from 2018 to the present.
It recently released a press release in respect of Covid-19 and a prospective deal with something called “clean go green go” which it represents creates a “new line of defence against viral and bacterial agents, including the human coronavirus” which allegedly can help “curb the spread of the Covid-19 pandemic,” which then quotes a car wash person in Canada.
There is no known cure for Covid-19 and there is no basis in securities disclosure for a car wash person to opine in respect of Covid-19 for an issuer.
Not too long ago, the Vancouver issuer stated that it was a “FinTech and Blockchain incubator,” and alluded to having a US entity that rented space in South Carolina to focus on Blockchain technology that it said it had created in order to streamline alleged processes for due diligence and compliance using intelligence from 200 global parters.
The issuer also announced something called CatchCoin, which it stated is a Blockchain app, and it alleged that it had entered into agreements for the provision of services to catch coins. It raised $1.9 million to buy the coin-catching app. The app does not appear on the app pages of any app stores as at today’s date. Apparently, it disposed of substantially all of the undertaking of the CatchCoin $1.9 million investment but there are no material contracts in respect thereof on SEDAR. To whom it was disposed of and for what consideration for shareholders has not been disclosed yet.
A website (link here) for different technology that it stated on SEDAR was fully operational and generating revenues does not open.
Subsequently, it announced it was getting into the cannabis space when that was a hot market.
And now the Covid-19 space.
Before the ASC acted, it is likely that the securities of Softlab may have been halt traded by market regulators in any event because of its announced foray into manufacturing of industrial disinfectants, which appears to be a change of business and a fundamental change.
As at December 31, 2019, according to its audited financial statements, Softlab had only approximately $7,000 in cash and had paid over $600,000 in consulting and management fees in the operating year. Its working capital as at that date was – $690,343.
At reporting entities, such as banks, casinos or accounting firms, the AML compliance officer’s obligations to report are obligations owed to the state that arise as a matter of public law. That’s why legislation requires reporting by the registered entity and its employees. If the reporting entity does not report to the FIU, the compliance officer must do so.
But often employees of reporting entities are not made to understand that they owe a duty to report. If an employer instructs an AML compliance officer not to file a suspicious activity report (“SAR“, known as STR in Canada), the filing of which is triggered under federal legislation, the employee must file the SAR regardless. AML officers sometimes believe they must listen to their boss and not the legislation.
The Cathy Scharf case
The most well-known case of an AML officer who battled a reporting entity with a non-compliant culture, was Cathy Scharf, a US AML compliance officer at a Utah bank named SunFirst Bank, whose evidence helped lead to the online gambling world’s Black Friday and the take-down of PokerStars, Full Tilt Poker, and several Canadian executives.
SunFirst Bank processed US$200 million in online illegal gambling payments in the US. The bank processed transactions from payment processors who manipulated merchant codes to obfuscate the type of merchant.
Merchant code fraud is a form bank fraud and is done so that high risk or illegal businesses such as digital currency exchanges, prostitution or online gambling transactions are not flagged by credit card companies or banks and flow through the financial system.
When Ms. Scharf realized that the activity and the clients were problematic, she was prevented from filing SARs by the bank’s officers and owners. She was also threatened by lawyers hired by SunFirst Bank if she reported their conduct, or reported the activities to law enforcement or cooperated in a law enforcement investigation.
Ms. Scharf went to the FBI anyway, which is always the right call, which led to an investigation of the bank and eventually the online gambling activities. During the course of her time there, she continued to be intimidated by the bank’s executives in various ways. She was threatened by the directors and their lawyers that if she reported them, they would take action against her and make up criminal allegations against her. They also stalked her. At the request of law enforcement, she stayed at the bank to assist them with their undercover criminal investigation.
There are a number of common denominators in this story and the Wirecard story, including the use of lawyers who appeared willing to break the rules for their clients to prevent the reporting of financial crime to law enforcement agencies.
Increased fines against compliance officers
The personal liability of AML compliance officers is increasing as regulators and prosecutors appear more willing to prosecute and fine AML officers who fail in their duties to the public. For example, on March 4, 2020, the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) announced a US$450,000 penalty against a chief risk officer, Michael LaFontaine, who worked at the US Bank National Association over, among other things, a failure to prevent violations of the Bank Secrecy Act and a failure to ensure its compliance function was financed, resourced and staffed to meet its AML compliance obligations. Fontaine put a cap on investigations and the filing of SARs, and did not hire enough staff to run a compliance department and fulfill the compliance function.
It’s not the first time that FinCEN has brought an action against a compliance officer for AML failures.
In 2017, FinCEN and the US Attorneys Office for the SDNY entered into a settlement for the payment of US$250,000 by the chief compliance officer of MoneyGram, Thomas Haider, for AML failures. Among other things, Haider failed to de-risk some clients, failed to conduct due diligence on some files and failed to file many SARs.
Criminal actions against AML officers
AML and compliance officers have also been prosecuted criminally.
In 2018, George Martin, an officer of Rabobank National Association, a US subsidiary of Rabobank U.A., was charged in connection with AML failures and took a plea deal admitting that he had aided and abetted the bank’s failures to maintain an AML program. The bank provided services for Mexican drug activities close to the US – Mexico border.
Instead of undertaking AML compliance work, certain employees of the bank worked to aggressively onboard new clients and resources were not invested in operating a functioning AML department or to support investigations and filings of SARs. Certain officers of the bank then obstructed justice by, inter alia, making statements about the bank’s alleged adherence to compliance, when they knew that the organization was not adhering to compliance and participated in the making of untrue statements during a supervisory investigation. Martin cooperated with the federal investigation and was not fined.
However, the bank’s general counsel, David Weiss, entered into a settlement agreement that included payment of a fine of US$50,000 plus a lifetime ban working in the financial services sector.
In 2017, the US Department of Justice Criminal Division took action against three officers in the matter of the Banamex USA bank for AML violations – each were ordered prohibited from working in the financial services sector in the future and to pay civil penalties to the US Treasury Department. The action was part of a criminal investigation over Banamex USA, which resulted in a Deferred Prosecution Agreement.
Securities regulatory action against AML officers
The Securities and Exchange Commission (the “SEC“), has also commenced action against those in the securities sector who fail in their AML obligations.
In 2017, it took administrative action against an AML officer named John Telfer, who was with Windsor Street Capital LP, over his failures to perform his responsibilities as an AML officer for a registered broker-dealer. Among other things, Telfer failed to file SARs in respect of over US$24 million in suspicious transactions. In a final order in the matter, the SEC said that Telfer was “personally responsible for ensuring the firm’s compliance with SAR reporting requirements.” Telfer was banned from future securities law work in the US.
The SEC also commenced administrative proceedings against Wells Fargo Advisors LLC in connection with AML failures. The proceedings against Wells Fargo arose from failures to file SARs, and failures to have formal training and guidance available to staff in respect of their AML legal obligations. The filing of SARs decreased, rather than increased, over time at the company. The company agreed to pay a US$3.5 million fine to the SEC and to undertake remedial AML steps.
In another file, the SEC also took action against an AML chief compliance officer named Eugene Terracciano who failed to file SARs and to act on numerous red flags at an investment advisor and brokerage firm in New York.
Compliance officers believe culture will increase exposure to liability
Most of the enforcement actions against compliance and AML officers stem from their inability to inculcate a culture of compliance at institutions, or their acquiescence.
In a survey dated June 2020, 73% of compliance and AML officers said that they believe that a regulatory focus on culture will increase their personal liability, suggesting that AML officers remain at institutions and companies when they are aware that there are cultural and structural blocks that lead to a failure to comply with the law.
Besides acquiescence by a compliance or AML officer, other factors given weight in respect of prosecutions include whether a bank or financial firm compliance or AML officer made a pre (and not post) voluntarily disclosure to, and cooperated with, an agency with law enforcement powers.
To protect themselves reputationally and financially, AML and compliance officers should depart from an institution where there are issues that speak to unlawful conduct, including unlawful AML failures, before, not after, it emerges in the public that the organization is not law-abiding, or has senior officers or management that are not law-abiding and/or who acquiesce in respect of violations of law. An AML officer who departs only when it is already known that there are issues in the public domain, for the pay cheque, is precisely what AML officers are not permitted to do because it conflicts with their duties.
