by David Lender
Rudiger said, “The fact that you’re keeping house with a prostitute and drug addict doesn’t exactly square with that, does it?”
Bemelman said, “Gabriele Stoltzberg is my stepdaughter, not my mistress.”
Whoa. Didn’t see that one coming.
Bemelman said, “I insist you not involve Gabby in any of this, and I consider your visit with her today to be a breach of any professional protocol, not to mention common decency.”
Katie said, “Mr. Bemelman, we didn’t know. We’re working on an investigation and are not attempting to harm anyone who is close to you.”
Rudiger said, “Yes, this is about Ducasse, not your personal life.”
Bemelman sat back in the chair and let out a long sigh. He hung his head for a moment, looked up into Rudiger’s eyes, then Katie’s. It was as if he was pleading. He said, “I have had this hanging over me for eight years, this sordid Ducasse mess that I allowed myself to become entangled in. Gabby had gone seriously astray, gotten involved with drugs, then prostitution in order to pay for drugs. My wife threw her out of the house and has had nothing to do with her ever since. It was after Gabby’s third or fourth arrest, I don’t remember, that Philippe Ducasse took notice of it in the newspaper and approached me. At that time he was raising their second fund. He was bold about it, made no pretense to conceal the fact he was aware of Gabby’s arrests, and that a simple banker such as myself could use extra money to pay for legal fees. He offered me .5% of client funds I brought him, with additional monthly cash payments that would be undisclosed. I told Ducasse I thought it was unethical and declined.”
Bemelman let out another long sigh. “Ducasse approached me again. He said he would only accept investors who fit a certain profile.” He looked up at Katie. “A profile with which I understand you are familiar. I agreed to read the fund documents. After I did so I was suspicious about the extraordinary performance of Ducasse’s first fund. I suspected what was going on. I declined again. He approached me yet again and offered me a $5,000 per month surreptitious cash payment in addition to the fees of .5%, with a $50,000 bonus paid up front. At that time Gabby showed receptiveness to entering a rehab facility. It cost $60,000. I returned to Ducasse and accepted his proposal, believing that it would be a short-term arrangement until Gabby was on her feet. I was wrong.”
Bemelman paused again and sighed. The air seemed to be coming out of him. Katie stood up and walked to the minibar, returned with a bottle of water. She gave it to Bemelman.
He smiled for the first time, opened it and drank. “Thank you.” He looked at Katie and said, “I must seem a rather pathetic man to you. But you have to understand, I raised Gabby from a child as if she was my own. She was just three years old when I married Hilda.”
Rudiger was afraid to glance over at Katie, for fear she might be tearing up. Bemelman was starting to get to him, too. He felt sorry for the poor schmuck.
Bemelman continued. “Gabby went through rehab but relapsed almost immediately. I was able to afford counseling for her, and reluctantly got her a license as a sex worker so the prostitution arrests would stop. Her life since then has been a succession of rehabs, counseling and relapses.” He looked at Katie again, then averted his eyes. “Her mother to this day believes I attend a regular card game on Friday nights.”
He took another sip of water and paused for a long time. Then he took a deep breath and seemed to find a new reserve of strength. He said, “In a way your appearance today was a blessing. It helps me to find an escape from this corrupt scheme I’ve become an integral part of. And it does so in a manner that assures a measure of justice will be served and stops Philippe Ducasse from continuing his sordid games with people’s lives. I’ll do anything you ask, as long as you leave Gabby out of it completely and as long as we are able to destroy Ducasse.”
Katie leaned forward and said, “Can you provide us with a list of your clients who invested in Ducasse funds?”
“Names, amounts and dates of investment,” Bemelman said. “I have detailed records.”
“About how many investors and how much money?” Katie said.
“Approximately 100, who have accounted for about 60% of funds raised by Ducasse PE Funds I through IV, or about $1.1 billion.”
Katie paused a beat, Rudiger detecting she was as surprised as he was. Then Katie said, “How many investors do you estimate were U.S. citizens?”
“About a third of them.”
Katie said, “Can you email that list later today?”
“When I return to my office.”
Rudiger said, “Has Ducasse ever disclosed to you the true nature of his Ponzi scheme?”
“As I said earlier, I suspected from the moment I read his first fund memorandum. But he has never confirmed it to me, and I have never asked him. I have accepted his money, complicit with my silence.” He hung his head a moment, then looked up again. “How do we proceed from here?”
Katie said, “I suggest I draft a sworn affidavit laying out the facts of our discussion today, incorporating the information from the list you will send me. I’ll send my draft to you for your review and ultimate signature. Please add any additional facts that you believe will be helpful. All of that will be incorporated into our complaint to be used against the Ducasses. Once we have our documents in final form, we can make our move. Agreed?”
Bemelman nodded.
Rudiger showed Bemelman to the door.
Before Bemelman stepped out, he turned and said, “There is one other thing you should be aware of.”
Rudiger and Katie both waited.
“A young man and woman who worked for the Ducasses were killed in an attempted robbery earlier this year. The young woman’s aunt was a client of mine who fit the Ducasses’ profile that I referred to them as a prospective investor. The young man worked in the Ducasses’ accounting department, and after he began a relationship with the niece, the aunt backed out of the deal. I have always believed the young man uncovered the Ponzi scheme and advised the young woman to warn off her aunt. I have also always considered those murders suspicious, although the police never uncovered any connection to the Ducasses.”
Bemelman opened the door and left, leaving Rudiger and Katie staring at each other in silence. Finally, Rudiger said, “I think I’ll keep that PI, Krause, I hired to research Bemelman on retainer to watch our backs, just in case.”
Later, Katie said, “Bemelman’s as much a victim of Ducasse as he is his shill. In strict legal terms, I guess the worst thing he’s done is take money under the table. If he was to tell the Swiss police everything he knows, he might get immunity.”
“Maybe that’s why he’s kept such detailed records.” Rudiger had a sour taste in his mouth. He thought a moment, then said, “I’m not sure how this ends, but it would be nice if we could avoid wrecking Bemelman.”
That night after they made love, Rudiger turned to Katie in bed and said, “When I first went to your house and got to know your father, we were walking on the beach the last afternoon before you returned. He told me that after he died he hoped you could figure out a way to go back home to the States.” He paused, then said, “I wouldn’t mind being legitimate again, either. A second chance.” He looked into her eyes in the faint light. He felt a swell in his chest, his emotions rising. “You and me going home to New York, playing house together. Seeing if we could make it work. I could go for that.”
Katie kissed him. “Me, too.” She stroked his hair. “It’s a nice dream, but I don’t see how I could make that happen. Unless I had something major to deal to Holden, he’s got me and I can’t go home.”
“Your father said you were a crackerjack lawyer, and now that I’ve seen you in action, I agree. What does Charlie Holden really have on you?”
“I thought about that a week or so ago. I remember your story about that investor of yours, Myron, the bread-bag-closure mogul, who gav
e you the $50 million in bearer bonds that were never part of your hedge fund. So I guess technically Holden couldn’t prove one way or the other that we took them, since nobody but you and Myron knew they existed. I could make the case that all I did was up and leave the U.S. one day with Daddy for Cape Verde without telling anybody.”
Rudiger said, “That’s encouraging.”
“And then I remembered that I used Angela’s phony passport to leave the country and go to Cape Verde. That’s passport fraud, a felony.”
She pulled herself close against Rudiger’s body, rested her head on his chest. He closed his eyes and felt the calmness of being with her, focused on them together as if they were one. She said, “I thought about what Holden’s got on you, too. You told Daddy you took $40 million of Myron’s money, but the other $400 million or so that disappeared from your hedge fund was pure market losses, right?”
“Yeah, most of it after I left town when the Feds froze my fund’s assets in losing positions and the markets continued to melt down.”
Katie lifted her head and looked Rudiger in the eye. She said, “No harm, no foul on your part.”
“But remember my CFO falsified our results, and I told him to keep cooking the books until I could manage my way out of it, and ultimately couldn’t.”
“Well that’s securities fraud, a felony, and a big one. I recall Holden also had counts against you of obstruction of justice and flight from prosecution, also felonies. But for you, too, Holden wouldn’t know about the $50 million in bearer bonds. Then there’s the $40 million of Myron’s money you took from your hedge fund.”
“Actually, I had investment discretion for him, and he was dead by then, so I had his estate redeem the money from my hedge fund first before I swiped it, so technically I didn’t steal it from the fund but from the estate’s bank account after the redemption. And like I told your father, the guy had no will, no heirs, and I haven’t the faintest idea what happens in that case. But I don’t know how anybody would figure out what happened to the $40 million, certainly not Holden. I wired it to a bunch of different accounts in the Netherlands Antilles, Brazil, all over the place and finally to an account in the Cayman Islands.”
Katie said, “Still, Holden’s got you on a big securities fraud and some other felonies.”
Rudiger said, “So we’re both cooked.”
“Yes. It was nice of Daddy to think of going back home to the States,” Katie said. She eased herself up and kissed him again. “But it isn’t going to happen, for either of us.”
The next morning Katie was finished with the affidavit of Bemelman’s statement, having received his detailed list of investors, amounts and dates of investment the previous afternoon. She spent another hour incorporating that information into the complaint, then emailed the draft affidavit and complaint to Bemelman. When she finished she stood up and walked into the bedroom, where Rudiger was sitting at the desk working on his iPad.
“I’m done.”
Rudiger turned and smiled at her. “We’re ready?”
“Once Bemelman sends his comments on his affidavit, we should be good to go.”
“Now we show it and the complaint to Ducasse and sweat him.”
Katie felt a surge of excitement, said, “What about this instead? Go to Holden with an airtight case. Barter the bust on Ducasse for letting us walk.”
“Walk?”
“Yeah,” Katie said, her scalp tingling. “What we talked about last night. Going home. Only now we have something to deal to Holden: bringing in Ducasse in exchange for dropping all charges against us. Or maybe we get a slap on the wrist, plea-bargain for some minor offenses and do community service for a few years. Holden gets a big, splashy international bust; U.S. investors defrauded, justice served. Holden files with the Swiss to extradite Ducasse to prosecute him.”
Rudiger said, “It’ll never happen.”
Katie leaned forward, insistent, said, “Holden has to look like a complete moron for letting us get away.”
“It was the Brits that let us get away.”
“I know Holden better than you do. And I’ve also never seen an operation like they used to bring us to the UK. That’s not within the U.S. Attorney’s Office’s or the Justice Department’s mandate. It was some kind of black ops, Special Forces or the CIA. Holden had to go to the top to get that authorized.”
Rudiger said, “How high?”
“At least the attorney general, and who knows where the AG had to go to get it approved and funded. It shows how hard Holden was willing to push to bring us in. Trust me, if we offer ourselves up as part of a package, Holden will deal. He looks like a fool now, and he wants us badly. That’s a good combination for us.”
Rudiger grinned. “Bringing down Ducasse and getting Holden off our backs forever. That’s a deal I’d love to do. How do we make it work?”
“We brainstorm it out, I finish my complaint, email it to Holden and then call him to cut a deal. Then Holden calls the Swiss and they bring in Ducasse. Maybe we even fly home on the same plane they use to extradite Ducasse.”
Katie couldn’t stop beaming. Maybe going home.
Holden had just walked out of his office, heading to the conference room for a meeting with his staff on an insider trading case, when he heard his phone ring. Stephanie picked up, listened and said, “One moment, please.”
Holden looked at her.
“Katie Dolan on the line for you.”
Holden felt surprise wash over him, then a rise of excitement. “Who?”
“Caitlin Dolan, an attorney who formerly worked in this office for—”
“I know who the hell she is,” Holden said, turning around and heading back into his office. Everybody’s a wise-ass.
Holden picked up and said, “Well, well, well, if it isn’t our own Katie Dolan. Is this a social call or can I do something for you?”
“Hello, Charlie, Mr. United States Attorney for the Southern District of New York. Congrats on finally getting promoted to the top job out there.”
“Like I said, can I do something for you?”
Katie said, “Don’t bother trying to trace this phone, it’s a prepaid cell and I’m throwing it away after I hang up. I called to offer you a deal.”
You’re offering me? “Yeah? What’s that?”
“A ten-year $2 billion Ponzi scheme bust, tied up in a nice neat bow with Walter Conklin and me cooperating and providing testimony in exchange for immunity.”
Holden laughed. “I must say, little lady, you never lacked for balls.”
“Come on, Charlie, cut the bravado. I know you’re interested.”
Holden paused. It couldn’t hurt to hear more. “Okay, shoot.”
“The scheme is run by a private family-owned Swiss financial advisory firm. Starting ten years ago they raised four private equity funds, a total of $1.85 billion, and are currently raising a new $2 billion fund. It’s a Ponzi scheme. Investors from the early funds are getting paid out from money investors put into the later funds.”
“Swiss? What’s our legal nexus? Who’s been damaged in the U.S.?”
“Thirty-five investors in the funds are from the U.S. We’ve got testimony from two of them. We’ve also got the sworn affidavit of a Swiss banker at ASB who’s been profiling and funneling easy marks to the fund sponsor, intentionally finding unsophisticated investors who won’t suspect the scam.”
“Could be intriguing, but you can’t be serious about full immunity for Conklin and you.”
“I am. I emailed you the draft complaint and our witnesses’ affidavits ten minutes ago. I used code names for the target suspects and witnesses. Read them and I’ll call you back tomorrow at the same time.” The line clicked off.
Holden got up and walked out of his office. As he passed Stephanie’s desk he said, “There’s an email in there someplace from Katie Dolan with att
achments. Print them out and have three copies ready for me when I get back.”
The next day at noon, Holden sat in the chair behind his desk, his computer screen pulled directly in front of him, waiting for a Skype call. Katie had called back that morning and Holden had agreed to the Skype call. Shepherds, Johnston, a computer tech and one of their goon squad guys who did enforcement work sat in chairs encircling his desk. The goon was recording the call.
At exactly noon, the screen flashed to Katie Dolan’s face.
“Good afternoon,” Holden said. He smiled, showing he was cooperating, receptive.
“Hi, Charlie,” Katie said. “Who else is there?”
“A couple of my guys listening in. They read your stuff last night, too. Shepherds and a new guy, Johnston.”
Holden moved closer to the screen. “You’re looking tanned and relaxed, Katie. Being on the lam agrees with you.”
“Let’s cut to it, Charlie. I’m sure you’re busy. I know I am.”
Holden felt a flare of anger, reined himself in. He said, “How about you tell us what you want before we tell you what we think of what you’ve got?”
“I told you yesterday. Full immunity in exchange for our cooperation and testimony in a prepackaged Ponzi scheme bust.”
“You’re too smart, too experienced to believe that full immunity will ever happen.”
Katie said, “I’m not sure we have much more to discuss then.”
Holden knew she was bluffing, that she’d accept lesser charges, some fines and probably even some jail time for Conklin. He said, “Alright, but before we cut this off as going no place, let me tell you what we think of what you’ve got. We agree with your analysis that 35 U.S. investors gives us plenty of grounds for indictments based on U.S. securities violations, and based on the amount of capital invested, plenty of juice for getting the Swiss to cooperate for extradition. But two investors’ testimony isn’t going to cut it—”
