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Clients are too dangerous to give good advice to!   The following all-too-true story is a case in point.  It contains kernels of wisdom for those who wish to see. For the last few years I’ve known a man, in his early 60s, who was an international trader.  Booze, cigarettes, you name it.  Naturally, not saying Freud was right, the man was an alcoholic and chain smoker!  I’d taken him to the hospital more than once to dry out and give his liver a few weeks to heal and let the antibiotics cure his perpetual emphysema.  He’d served a few years in prison when one of his deals had gone bad and the feds scarfed him up.  After I’d known him for a few years and watched the footloose fashion he went about doing business, I suggested that he apply to Switzerland for a passport since his mother had been born there.  I knew that the Swiss would not extradite one of their own citizens and it would be a good place of refuge if he messed up again.  (One of the southern cantons also happens to be the cigarette trading capital of the universe). I suggested that he quietly change his name to his mother’s family name or a variation thereon in some jurisdiction in the States where no one would ever know except that he could have his new Swiss passport issued in that name. Maybe once every few months for three years I gave him this advice.  We were talking a Swiss passport in another name for less than $500.  An item that is impossible to get for any price. During this time he spoke with me about how to move funds here and there to avoid taxation and to protect assets.  I explained to him that he just happened to engage in one of the few lawful businesses that can use offshore company ownership and banking without having a duty, as a U.S. citizen, to report ownership or account numbers to the U.S. government. It’s a loophole to avoid tax if you do it right.  (Please read the last part of that sentence again.  If you do it wrong it’s a felony.)  This had a great deal of appeal to him but he never put it in place.  Instead he brought me lots of hair-brained schemes for how to hide money.  Like accounts in the Caymans and the Isle of Mann.  I said the Isle of Mann might be great for Europeans, especially UK residents, but it was difficult for Americans to routinely bank there.  It was also expensive per transaction. As for the Caymans, it’s at the top of everyone’s list of dirty money countries -- avoid it like the plague unless the money’s been there a long time or unless the person putting the money there is not you, and not American, if you get my drift.

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About a year ago he was indicted by the U.S. government for defrauding other international traders.  He had been recently hired by a company in San Francisco which, unknown to him, had been the target of a federal undercover operation for a number of years.  Talk about bad timing. My friend, as part of his job, helped the company principals set up a Nevada corporation and get a Nevada mail drop address and Nevada bank account to receive funds from clients.  The company, allegedly unknown to my friend, was keeping the deposits of traders from Asia and not sending the three cargo ship full of cigarettes the Asians had paid a deposit on.  My friend,
along with the principals of the company, was accused of stealing $4-million and money laundering and structuring.  Twenty years minimum.  Since he was living in the Tenderloin District of San Francisco (skid row) and under various trees and bushes around town, I knew that he didn’t personally profit much, if any, from the company’s piracy.

I also knew that he was still in prison while the lion’s share of the investigation was underway and couldn’t have been involved.  Did this stop the feds from arresting him?  Of course not!  Under the “Let’s shake the tree and see what falls out” theory of law enforcement.  He was released on bail with help from an ex-wife and daughter who pledged their houses in case he jumped bail.  He was appointed a very good federal public defender. Investigations dragged on.  The counts against him were amounting to less and less except the money laundering charge for helping the company set up a bank account.  Even if everything else went away, he’d owe them a minimum of 7 to 10 years on money laundering.  Even though I wasn’t his lawyer, I  helped him formulate a plea bargain that would allow him to plead guilty to some lesser charges and look at maybe 18 months at a federal camp.  A camp is still prison, but there are no fences or armed guards and you get to be outside and spend time with the best and brightest this country has to offer.  It’s a real finishing school.  Should be a requirement on any decent job resume just like a Harvard or Stanford MBA.  Besides, the federal camp would have better living conditions and food than he had been able to earn for himself for the last few years.  The plea bargain eliminated the money laundering charge and still allowed him to argue minimum participation inthe big conspiracy during his sentencing hearing. While he was out on bail, he tried every scheme imaginable to raise money so he could escape his fate.  I advised him against running if he was looking at minimal time since he’d never be able to talk to any of his friends or family or former trading partners again.  I knew he would “cheat” because that was the kind of guy he was, and that would lead to his recapture. 

Then the money laundering charges would be heaped on him again as well as every single count of every element of his crime and he’d spend the rest of his life in prison.   He just didn’t know how to do anything straight and this is a bad candidate for being a fugitive. You really can run and live to fight another day, but you have to have absolute control over your behavior and be willing, for the most part, to say good bye to friends and a life you have known.

You’ve also either got to have a bunch of money or have a portable trade or occupation to support yourself without cheating people.  In short, you’ve got to be ready to die and be born again as an honest man. It’s a time honored plan, well known to our forefathers. And it’s a small price to pay for a second life.

He finally weaseled an irrevocable letter of credit out of Tenerife, Canary Islands, Spain for $1-million for number of sea-going containers of Marlboro cigarettes manufactured in Argentina.  Payable as soon as goods were delivered to a shipping port in South America.  He asked me to handle the paperwork.  His health gave out in the middle of the deal and I had to take him to the hospital.  I got him to sign a power of attorney before he collapsed which left me in charge of seeing the project through.  As usual, I was to be paid handsomely for my services “as soon as the deal closed.”  While he was drifting in and out of consciousness, I was putting the finishing touches on this “gray” market deal -- the cigarettes were for consumption only in Argentina but were being diverted to Paraguay, the South American smuggler’s paradise, and thence to the sea coast in Brazil and out of the country to Tenerife.

While the Argentine distributor was no doubt violating his contractual duties to Philip Morris not to sell outside his authorized area, there was nothing criminal about the transaction.  Historically, cigarette manufacturers and distributors transact a small amount of business out the back door of the warehouse at prices below the unspoken cartel price, basically profiting from not paying the license fee to the owner of the trade mark.  In the midst of all this, I was presented with a flattened Marlboro box as proof of what the buyer was getting.  The health warning, in Spanish, referred to an Argentine health law.  Hmmm, I said to myself.  How is this going to fly in Spain?  I contacted the buyer’s agent in the UK. No, he said, you don’t understand, the label is to be to Spain’s regulations -- just like the xerox in the amendment to the contract.  Back I went to the seller’s agent in California.  No, he said, you don’t understand, the cartons are to be labeled identically to the xerox attached to the contract.  Since I’m not a famous international trader, it took me less than five minutes to discover that my friend had xeroxed the xerox of one and added it to the other because he was obviously planning on negotiating the irrevocable letter of credit as soon as the goods were aboard the ship and splitting.  The buyer would eventually get a ship full of goods he couldn’t sell except for the fact that Tenerife is known as a smuggler’s island and the buyer might have been able to bribe a customs official $5,000 to overlook the defective health warning.  Or he could have smuggled them into Morocco by fishing boat.   Well, despite the fact that I was to have been paid handsomely, I killed the deal.  It was a very sad day since I also had to admit that my friend not just a trader down on his luck, but a con man. I also learned that there is no such thing as a straight liquor or cigarette deal at least at the level my friend was doing them.  Definitely pirate and shark infested waters.  My friend never forgave me for quashing the deal and we spoke only sporadically afterwards -- despite the fact I was a lawyer, I was a lousy crook.

One day, as his sentencing day approached, I got a call from a contact in the federal government.  “Did you know your friend died?”   I was shocked.  I hadn’t talked to him for a month.  He was living at his ex-wife’s house in the San Francisco area.  I wondered if he had arranged his own “death” and vanished, but it was not my job to ask questions.  I took all the files of his I had been holding for him, and put them in the trash.  Then, a few days later, I got a call from a trader in Singapore.  I had seen the trader’s name on documents, but had never spoken with him.  He advised me that my friend had tricked him out of a $40,000 deposit on some cigarettes.  He was to have taken delivery in Hong Kong via a Manila port.

Could I help him get his money back?  Where were the funds now, I asked?  He didn’t know, but he had wire transferred them to the bank account of my friend’s ex-wife. I have been back and forth in touch with the ex-wife.  Word on the street is that she’s perfectly capable of doing everything from killing my friend to stealing the money.  What a web we weave.  I called the coroner’s office and there is a hold on the body pending further investigation.  How did they I.D. the body?  By identification found on the person.  Hmmm.  Not fingerprints.  Not by the ex's identification.  Not reassuring.  In response to a letter to her requesting return of the funds, I have received a number of messages from her on my answering machine.  She tells me that she has
hired a private detective who has traced the funds to the Cayman Islands and the Isle of Mann.  And another message that they found an account in Mexico.  Will wonders never cease.  She reports that my friend must have been planning on running.  Really!  And he never did get his Swiss passport.

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