Two Canadian money launderers living in paradise tried to “stay good” but couldn’t because they were addicted to cash

By Christine Duhaime | August 7th, 2020
Listen to this story

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, Spain
Hua Hin, Thailand

Marr allegedly mastered the art of using 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 formula used for selling securities was the so-called Wolf of Wall Street.

Excerpt from Wolf of Wall Street film (Source: YouTube)
Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email

Jack, Butchart Gardens and the Sinking of the S.S. Algoma

By Christine Duhaime | August 4th, 2020


It was November 7, 1885.

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 (“CPR”). 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.

S.S. Algoma at Owen Sound, 1885 (Source: Maritime History of the Great Lakes)

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.

Recovery of the S.S. Algoma, November 1885 (Source: City of Thunder Bay Archives)

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.

Scuba diver at S.S. Algoma shipwreck site (Source: Thunder Bay National Marine Sanctuary)
Porcelain from the S.S. Algoma shipwreck site (Source: Thunder Bay National Marine Sanctuary)


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.

And so, too, was Jack.

This story is part of a series “In Search of Jack”, which explores the life and impact of prominent Canadian financier and banker, John Worth Mitchell, an original shareholder of The Dominion Securities Corporation Limited in 1906, who financed and fund-managed many of Canada’s critical infrastructure projects and led the Toronto Victory Loan drives for the federal government from 1917–1919 and 1941-1942, raising the bulk of the funds that financed Canada’s involvement in WWI and WWII. He co-founded the Investment Dealers Association of Canada and was an early investor and supporter of many companies including a then-controversial startup founded by an American woman. Its name? Tampax.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email

SEC announces US$45M settlement with large British Columbia pubco, CPA, CEO and CFO for securities violations

By Christine Duhaime | July 31st, 2020

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.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email

Two foreign men from a digital currency exchange murdered in Mexico

By Christine Duhaime | July 16th, 2020
Mazatlan, Sinaloa, June 2020.

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.

Almost two years ago, Giuseppe Bugge, a man from Vancouver who police said had ties to the Hells Angels, was gunned down in Mexico in CJNG cartel territory. He too was in the digital currency exchange business. You can read about his murder and the CJNG cartel here.

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.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email

“You’re killing an innocent man” said Daniel Lewis Lee.

By Christine Duhaime | July 14th, 2020

“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 5–4 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 O’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.

The dissent is longer than the majority opinion.

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.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email

A gruesome murder for $70

By Christine Duhaime | July 3rd, 2020

It was 1998.

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.


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.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email

Alberta Securities Commission issues temporary halt trade order against Vancouver’s Softlab9; and warns against Bitcoin binary financial asset recovery scam

By Christine Duhaime | June 29th, 2020

(1) Claim Central

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.

Asset recovery is only possible in Canada as a result of a Court ordered process (a litigation, for example) or by a regulator exercising its powers under statute. A private non-law company is not authorized to recover for victims of fraud absent one of the above authorizing the activity.

(2) Softlab9 Software Solutions Inc.

The second notice from the ASC was of a temporary halt trade order against a British Columbia incorporated reporting 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 erected in Alberta.

On SEDAR, the auditor of Softlab is listed as 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 incubator. 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 to fairly value its securities.

The company appears to have no office in British Columbia, despite being an issuer there. It has what is called an R&R in British Columbia.

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 at this time 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 created to streamline an alleged due diligence and compliance process with data intelligence allegedly obtained from 200 global parters with proprietary technology.

The issuer had also announced something called CatchCoin that is or was allegedly a Blockchain app with agreements allegedly entered into for the provision of services to catch coins. It says it raised $1.9 million to acquire that app. The app does not appear on the download pages on 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 was not disclosed in that particular press release.

A website 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 because it is a hot market.

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 an average investor 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.

And its accumulated deficit? – $7,474,729.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email

Growing risks for AML compliance officers – client threats, intimidation and expanding personal liability

By Christine Duhaime | June 28th, 2020

Threats and intimidation

The story of how two reporters in London investigating the FinTech Wirecard were pursued by a government regulator in Germany, which commenced a bogus criminal investigation against them, and how those reporters were followed and intimidated by Wirecard and its lawyers, is reminiscent of what can happen to anti-money laundering (“AML“) compliance officers that work for problematic registered entities (reporting entities).

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 (who is, as a matter of law, an employee), must do so.

But often employees of reporting entities are not made to understand that they owe a duty to the FIU to report, irrespective of their relationship to their employer. 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. That’s part of where they run into trouble as AML compliance officers when a prosecutor or regulator looks at their conduct because at the end of the day, the AML compliance officer who did not file a requisite report as an employee when the law requires it, is also non-law abiding and such a person will not be able to inculcate a culture of compliance at the organization.

The Cathy Scharf case

The most well-known case of an AML officer who battled a reporting entity with a non-law abiding and 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 (to use the words of an FBI officer back then), the take-down of PokerStars and 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 under the Criminal Code of Canada and is done so that high risk or illegal businesses such as digital currency exchanges, prostitution, cannabis sales 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 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, including by stalking and threats that the bank would take action against her on trumped up charges. She stayed at the bank to assist law enforcement with their undercover criminal investigation. Similar to Wirecard, she was often followed by the reporting entity – once all the way to Las Vegas.

There are a number of common denominators in the Wirecard and SunFirst Bank cases, including the use of lawyers who appeared willing to break the rules for their clients to prevent the reporting of financial crime. Lawyers are prohibited from knowingly assisting a client’s dishonesty or fraud or doing anything that the lawyer ought to know assists in respect thereof. They also cannot assist a client to pursue or file, a claim that has no merit or that is based on untrue or unsubstantiated facts. It is a form of obstruction of justice to advance untrue facts in a matter associated with financial crime. Here is a case where a lawyer properly withdrew from a file that was plagued with statements made by a client that were inconsistent and untrue.

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 (“US Bank”) 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 Attorney’s 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 that will cost them reputationally or financially in the future.

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, cannot recover reputationally. Staying for the pay cheque is precisely what AML officers are not permitted to do because it conflicts with their duties.

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.

Several law associations have looked at the issue of the increased personal liability imposed upon compliance officers at financial firms and have noted that compliance and AML officers are often isolated culturally at a company because of the “cop” role they must take on, with a growing risk of liability arising from the failure to prevent the misconduct of those at the top. One solution being bounced around the legal community to assist AML officers with compliance obligations who may not be lawyers, is to have platforms of open dialogues with regulators and prosecutors on the development of the law of AML.

The loudest AML voice is a deflection

Perhaps one lesson we can learn from the Wirecard debacle, and what happened to the FT reporter, is that AML compliance professionals in high risk sectors who jump up and down publicly promoting their AML prowess and the reporting entity that hired them, and who attack other people in the ecosystem with made-up allegations, may be deflecting away from their own acquiescence in unlawful conduct or incompetence. The investigations light ought to shine on them more brightly.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email

Canadian ‘serial scammer’ and fake ICO issuer sentenced to jail in Dubai

By Christine Duhaime | June 25th, 2020

He called himself a serial entrepreneur. A Court found him to be a serial scammer. Aziz Com Mirza, a Canadian dropout from Montreal was convicted of fraud in a Dubai criminal court this week, sentenced to six months in jail and fined US$75,000. A few days earlier, he had been sentenced to a term of incarceration of six months for a second instance of fraud and fined US$140,000, for a total of 12 months in jail, not including time spent in remand. There is also a deportation order in place to remove him from Dubai at the conclusion of his sentences and return him to Canada. There are still several civil cases against him in Dubai.

Mirza was arrested in October 2019, after several people who invested into one or more of Mirza’s schemes filed complaints with authorities.

Com Mirza wearing HabibiCoin hat merch

Mirza ran a number of investment schemes including a digital currency launched as an initial coin offering (“ICO“) called HabibiCoin, touted as the Bitcoin of the Middle East. Each coin was alleged by Mirza to be backed by real estate in Dubai and because of that, the price could not decrease, Mirza alleged. Each coin was priced at US$0.05, and was alleged to have been created using the ERC20 standard. According to Mirza’s own representations online, he raised US$39 million in pre-sales of the ICO. Where that US$39 million is remains a mystery.

HabibiCoin was a fake digital currency that did not exist.

Mirza appears to have ran or led other investment and securities related projects including one called Leverage Program and a so-called entrepreneurial retreat program where he charged people money to take master classes on how to be a successful entrepreneur like him under various brand names such as the Dream Chasing Family and the Intentional Success Group.

We wrote about him earlier here – which is where you can see his US$1.2 million diamond watch, his horse, his luxury cars and his penthouse in Dubai.

Mirza says he got his business start in life allegedly selling lemonade at the age of seven, before becoming a multimillionaire and allegedly feeding 18 million starving people in Pakistan.

Mirza pumped HabibiCoin and some of the other schemes with the help of at least four other Canadians who are in the Bitcoin space, one who has a criminal record for defrauding millions of dollars from the elderly in the US, who is now in the cannabis space in Vancouver.

One of those four Canadians in Montreal posted numerous photos on social media of his piles of cash, and trips made to Panama and Dubai with Mirza, including a photo below of US$1 million in cash.

Approximately US$1 million cash in the custody of Montreal man who helped Mirza promote the fake HabibiCoin around the world

Another of the four Canadians who pumped HabibiCoin with Mirza recently spoke at something called Futurist in Toronto for Bitcoin people.

US$90,000 used to spell IVC, an alleged VC fund to help entrepreneurs that Mirza and a Montrealer launched.

Coming Soon!! Exciting News

Posted by SuperHero Trainer on Thursday, August 17, 2017

Mirza on Facebook with #family

In Canada, one or more of the Canadians tied to Mirza also crossed over at something called a Blockchain boat event in 2018 in Vancouver.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email

Six eBay workers charged with cyberstalking for conduct that included online hate against a woman, working on false police report and witness tampering

By Christine Duhaime | June 16th, 2020

The US Department of Justice has charged six former workers of eBay Inc. with cyberstalking and witness tampering over an online harassment campaign they are alleged to have launched against a woman blogger in Massachusetts. The federal crime of cyberbullying involves, among other things, harassing a person by means of a computer that causes emotional distress to that person.

According to an affidavit filed by the FBI in respect of two of the accused, the six employees appear to have been motivated to ensure that the woman’s reputation and business prospects were harmed. They are alleged to have established a plan to “take her down.” To operationalize that plan, they allegedly began sending anonymous negative messages and posting negative content directed at her on social media, calling her a “bitch”, among other things. They also allegedly threatened to show up at locations where they knew she would be located, and stalked her offline as well as online, for a number of weeks.

In a private social media channel, the eBay workers allegedly shared screenshots of her and of their activities so that they were kept up to speed on their harassment activities, and allegedly were proud of the damage their conduct was having on her. They then came up with a plan to embarrass her in her sphere of influence.

Former eBay workers charged (Source: CNBC TV YouTube Channel)

According to the FBI, the harassers became more aggressive and looked into the woman’s personal information, which they shared among each other in the private social media channel and then posted online. They allegedly created an anonymous twitter account with a picture of a skull as the account profile to use to send tweets to the victim, which the FBI says was done to intimidate her.

The harassers allegedly were aware that their online harassment was distressing the victim but they kept going anyway, and even sent her items in the mail.

They then are alleged to have created a file to report her to the police, having no evidence at all that she had committed a crime. The FBI affidavit states, in summary, that they worked on the creation of non-substantiated facts to create a report to falsely report her to the police, while they themselves were committing the cyberstalking crimes against her on Twitter and on other social media platforms as a way to harm her, and also so that if she reported the conduct to the police, they would have a fake justification for their actions.

The FBI says that when the six former employees learned that the victim had informed law enforcement of what was happening to her, they deleted their communications in the private social media channel, and wiped their phones to obstruct a federal investigation and obstruct justice.

The alleged stalking and online hate began in April 2019 and became a police matter shortly thereafter. According to the filings, a significant amount of IP investigations work was conducted to tie the online activity to the owners of the computers and devices used to send the anonymous online content, log in to the private social media channel and log in to social media platforms.

The defendants, James Baugh, David Harville, Stephanie Popp, Brian Gilbert, Stephanie Stockwell and Veronica Zea, if convicted, face a term of imprisonment of up to five years for the cyberstalking charges, twenty years for witness tampering, and an additional five years for conspiracy in respect of the harassing conduct and witness tampering.

eBay terminated the employees, but is likely to be held liable as a civil matter to the victim because the harassment occurred on company time, using the resources of eBay, including its email system, its Internet, company iPhones and company computers. By all accounts, the employer was not monitoring the activities of these employees, or trusted them too much. The employer is also likely to be held liable for economic damages for intentional interference with the woman’s business.

It’s possible that more charges may flow. If they made a statement to the police about the victim, filed a police report or aided or abetted someone else to file an unsubstantiated false police report, they may be subject to imprisonment on conviction of making a false statement to a federal investigator. The employer, eBay, is also likely to take action for the use of its corporate resources to commit the alleged crimes.

Share this Post:
  • Facebook
  • Twitter
  • LinkedIn
  • Print
  • email