Investigations via Collateral Requests
By: Bill E. Branscum
© Copyright 2000
Unlike the image portrayed on television, federal
agents rarely travel hither, thither and yon in pursuit of the facts.
In actuality, it makes no sense to have agents shuffling from place
to place to pursue investigative information, when the agencies
involved have assets "on the ground" in those areas. Instead,
federal agents initiate collateral requests, which are forwarded
to the appropriate field offices to be assigned to local agents
who are best able to develop the necessary information.
The Internet makes it possible for the properly networked private
investigative agency to operate in much the same way. Having worked
under both systems, I appreciate the control and flexibility enjoyed
by the private sector. This article is proffered as a case study
to demonstrate the effectiveness of networking and collateral requests.
I was recently approached by a client with an interest in a local
investment expert, who was reported to be soliciting investment
capital for "hedge funds." My client reported that this
individual represented to potential investors that he is one of
the nations foremost authorities on hedge fund management. He reportedly
claims to have developed a proprietary computer program that makes
it possible for him to capitalize on market fluctuations, whether
the market moves up or down.
Several sources have estimated that this individual has in excess
of $100M under management; there are those who believe he may manage
several times that much. His investors bear witness to his remarkable
success, as evidenced by their account statements reflecting incredible,
and consistent, rates of return. Curiously, I have heard that he
does not provide the associated K1 tax statements.
Curious though it may be, it is an undeniable truth that our subject
has a large, dedicated and vociferous local following. Active in
church groups, and very involved in a number of local charities,
he is generous, charismatic and conducts himself in a manner that
defies reproach. Investors claim to have averaged an annual return
on investment of 29-65% after his 30% fee is deducted and, insofar
as I am aware, nobody has ever reported losing money in one of his
Nevertheless, being possessed of an inveterate skepticism regarding
such things as "secret" investment strategies and "mysterious
proprietary software programs," I accepted the assignment.
I contacted the Florida Division of Securities and requested information
regarding licensure status, prior employers and disclosure history
as would be reflected on any broker's CRD. They advised me that
this individual had no licenses, no history of ever passing (or
taking) a securities related exam and no history of employment with
any broker dealer.
I contacted the National Futures Association to see if he was involved
with futures and commodities. They reported that they had no record
of him either.
It seemed curious that an individual who had never been registered
in any capacity, and had never taken any of the NASD/NFA exams that
would establish his qualifications, would appear in Naples, Florida
with the investor's "Holy Grail."
I set out to discover where he had been, and what he had done in
the past. Basic investigative inquiries revealed that he had previously
lived in a relatively small town in the Midwest. Inquiries there,
and in surrounding counties, revealed that he had a criminal history
related to embezzlement, had filed bankruptcy, had been charged
with writing bad checks and had been involved in civil litigation
related to fraud. One law enforcement source I spoke to referred
to him as a "two-bit con artist who hustled church groups."
I contacted the Complainant in the case that led to his arrest.
He claimed to have been victimized in an investment scam that transpired
in 1990. He reported that he had entrusted our subject with $20,000
that was to be held in an escrow account for the purpose of real
estate development. Investigators subsequently determined that there
had never been an escrow account and that the funds had been deposited
into his personal bank account and misappropriated for his own personal
use. An arrest warrant was issued March 19, 1992.
At this point, I contacted Gary T. Ericson, a former federal probation
officer and contract investigator for the Drug Enforcement Administration,
currently employed as a private investigator in the Midwest. I provided
him with the information I had developed, and he assumed responsibility
for the investigative inquiries to follow.
As those investigators who pursue cases of this nature are aware,
"responsibility" is a significant issue. Woe be unto the
investigative agency that accepts this sort of assignment and provides
their client with an inaccurate report. Whether your client invests
in a scam, or declines to invest in what turns out to have been
a "once in a lifetime opportunity," there is a potential
for liability. It is not advisable to send a collateral request
to the first name listed in the yellow pages, or the agency with
the biggest ad. Many of the world's most successful investigators
do not advertise and many are not listed at all - that is the advantage
of investigative networks.
While I pursued leads related to our subject's assets and more
recent activities, Investigator Ericson rapidly developed information
evincing a history of allegations of fraud and deceit. He provided
this agency with investigative reports tendered by state and federal
investigative agencies as well as information regarding complaints
by a number of people claiming to have been victimized by our subject.
Of particular interest, is the transcript of a phone conversation
recorded by one of the victims while talking to our subject's sister.
In this transcript, she claimed that her brother had defrauded her,
their mother and other members of his family as well. She described
various investment undertakings he attempted related to property
and referenced a number of cases where people lost funds entrusted
to him to invest. At the end of this transcript, she said:
"Well, if he ends up going to prison and in big trouble, we
all have to remember that he put himself there."
Investigator Ericson also located and interviewed our subject's
former wife. According to his report, she stated that they were
married out of high school. He worked for an automotive manufacturer
for a couple of years until he quit one day, "out of the blue,"
with no other job to go to. He tried selling fireplace inserts for
a while, attempted to established a business where he white walled
tires, and then started to sell real estate.
She states that prior to their divorce, he convinced her parents
to entrust him with $20,000 for investment purposes and then filed
bankruptcy. She reports that when they divorced in 1984, she was
awarded custody of their children, but he could not be counted upon
to meet his child support obligations. She describes him as a "very
callous crook that suffers from mental problems."
Investigator Ericson also interviewed the investigator who was
assigned to the investigation that led to our subject's arrest,
a veteran investigator of more than twenty years experience. He
reported that he first became involved through his church, when
the previously referenced victim, and member of his congregation,
alleged that he had been swindled out of $20,000. He stated that
he ultimately established that other members of his congregation
had lost funds entrusted to our expert to invest, and he has reason
to believe that members from other area churches were scammed as
He further reported that he developed evidence that our subject
had defrauded a local bank by securing a $300,000 home loan using
various properties as collateral which were represented as being
unencumbered. When he defaulted on his second mortgage payment,
the bank is reported to have discovered that a number of liens and
tax assessments had been filed against the properties.
Finally, he provided Investigator Ericson with copies of investigative
reports he had generated during the course of his investigation.
In addition to documenting the allegations and information delineated
above, his reports indicate that he interviewed a bookkeeper who
kept our subject's financial records. He reported that these records:
"Clearly show a pattern of irresponsible debt and criminal
intent with the money [he] secured from private individuals."
In a supplemental report, he indicated that on January 8, 1992,
he contacted Collier County authorities and advised them as to our
subject's propensity to perpetrate financial frauds.
As this information was developed by Investigator Ericson, local
sources reported that our subject bought property in Colorado. I
contacted Investigator Ryan Johnston, President of Night Moves of
Denver, and initiated another collateral request. He agreed to accept
responsibility for the Colorado related aspects of this investigation.
He provided information that may prove relevant to future litigation
so the details are not provided here.
With the concurrence of my client(s), some of the information developed
during the course of this investigation was provided to the appropriate
law enforcement and regulatory agencies. My report, as sent to the
SEC in February 2000 is here.
Agency Report to Securities Exchange
Other relevant documents are:
* * * * * * * *
The properly networked investigative agency can effectively operate
nationally, and internationally, given the appropriate contacts
and the necessary intel related resources. While many networking
lists are restricted to former federal agents, former law enforcement
officers, former insurance adjusters, etc., there are investigative
networks available to anyone with a valid license.
In the last few months alone, I have investigated internet investment
advisors, offshore financial programs, convoluted investment proposals
and self-proclaimed international financiers. These investigations
have necessitated the initiation of dozens of collateral requests,
nationally and internationally. Information is the essence of any
investigation; the key to success lies in a broad base of competent
contacts and effective communication.
Branscum is a licensed Private Investigator and owner of Oracle
International, an investigative agency he established in Naples,
Florida following his career as a federal agent. His experience
includes investigations related to narcotics smuggling, money laundering,
securities fraud, the unlawful exportation of critical technology,
the sexual exploitation of children and contract murder.
International maintains a web site at http://www.OracleInternational.com.
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