Whipping Boy

by Allen Kurzweil

  “The DA’s office thought I was nuts. They looked at me like I had three heads. The whole story sounded so crazy. Then I showed them my files.”

  Laurence substantiated her complaint with faxes, emails, personal correspondence, financial statements, wire transfer records, canceled checks, loan contracts, legal memos, airline tickets, hotel bills, gold-embossed visiting cards, rejected bank letters, drafts of handwritten mea culpas, and website bios of the Barclay and Badische executives.

  “They kept asking me, ‘How could a savvy businesswoman like yourself get duped by guys playing dress-up?’”

  I tell Laurence it’s a fair question.

  “I know,” she acknowledges. “I’ve asked myself the same thing a thousand times since that first phone call with Cesar.”

  “And what’s your answer?”

  “The best I can come up with is that I was ripped off by a bunch of low-class bullies who figured out how to prey on ambition and dreams.”

  After reviewing her evidence, the DA’s office declined to take the case. “They said, sorry, you may have been a victim of international fraud, but that’s outside our jurisdiction. We don’t have the authority or the resources to pursue the matter. Try the US Attorney. So I gathered up all my stuff and schlepped it a few blocks south.”

  Specifically, Laurence presented her dossier to a criminal investigator at the Southern District of New York headquarters of the US Attorney’s Office.

  “That’s where my luck began to turn.”

  “What made you do it?” I ask. “Cesar fleeced I don’t know how many victims, but you’re the one who stepped up.”

  “You want to know the thing that really pushed me over the edge?”

  “I do.”

  “It wasn’t the money.”

  “No?”

  “No. It was missing my grandmother’s funeral. I’ll never forgive those creeps for that. I’ll never forgive myself. I wasn’t there for my mother when she needed me most. And why? Because I was in Zurich getting ripped off by a bunch of pretend businessmen. So, sure, I can play nice, and I can jump through hoops. But in the end, here’s a piece of free advice. Don’t ever fuck with me.”

  PART V

  WINDOW DRESSING

  But what is truth?

  Is truth a changing law?

  We both have truths.

  Are mine the same as yours?

  Jesus Christ Superstar, “Trial Before Pilate”

  When one lies, one should lie big, and stick to it . . . even at the risk of looking ridiculous.

  Joseph Goebbels, “Churchill’s Lie Factory”

  COMING UP FOR AIR

  Before talking with Barbara Laurence, I had viewed the swindle in comic terms, taking my cue from the jokey headlines cooked up by the New York tabloids. But that lighthearted reading was insensitive. It overlooked the malevolence that infused the crime. I could tell that for all her good-natured self-mockery, Laurence still suffered the consequences of the abuse dispensed by the Badische boys.

  We weren’t the only two Cesar put through the wringer. As an exclusive liaison to the Badische Trust Consortium, he tried to broker at least a dozen dead-end deals. Besides Laurence’s ill-fated loan, there was the $200 million agreement for a hundred-bed charity hospital in Belize. The $400 million for an oceanfront development in North Carolina. The “irrevocable $100 million funding commitment” intended to transform a derelict Long Island scrapyard into a tire-recycling facility.

  Cesar helped the prince sign agreements with an Arizona real estate developer, a German plastics manufacturer, and a Japanese inventor of an underwater bonding agent similar to Krazy Glue.

  The more I studied the dossiers, the more I came to realize that the spanking Barbara Laurence received was neither the cruelest nor the most enduring dispensed by the Trust. The file on another would-be borrower, a telemarketing executive named John Kearns, was far more sinister.

  Kearns, a sixty-seven-year-old entrepreneur seeking $30 million for a web-based technology that promised to improve the performance of hotel switchboards, contacted the Trust around the same time Laurence did. (In fact, the two were ensnared at the Dolder Grand the same weekend, and with the same ceremonial flourish: wooden laptop; green-ink, supersized fountain pen; champagne; etc.)

  To set up the prerequisite offshore accounts, Kearns borrowed $30,000 from the friend of a friend, a pilot with Northwest Airlines. For the $120,000 performance guaranty paid to the trust he hit up his eighty-six-year-old mother-in-law; she took out a loan against her home in San Jose. And to cover travel expenses, Kearns borrowed $25,000 from his daughter’s mother-in-law and another $40,000 from a bank in Costa Rica.

  The international snipe hunt Kearns undertook was so extensive that federal prosecutors, at trial, charted his itinerary on a giant Styrofoam-backed map of the world, marking each fruitless stopover with a bright yellow star. New York received the first. Zurich the next. After that came Costa Rica and then Guam. From Guam, Kearns traveled to Hong Kong, then back to New York, where he attended a meeting with the Badische finance committee in the boardroom of Clifford Chance (“the largest law firm in the world”), followed by “a private luncheon in the Delegates Dining Room at the United Nations.” He then rushed home to Lake Tahoe, California, to care for his wife, who was battling stage III multiple myeloma, an incurable cancer of the bone marrow.

  But no sooner had he put down his bags than he was forced to pick them back up. Contractual deadlines imposed by the colonel compelled him to quit his wife’s bedside and fly to Toronto, Halifax, New York, London, and Hong Kong. The Trust rejected every one of the banks Kearns hoped to use.

  Government prosecutors never put a star on Bad Heilbrunn, Germany, but they could have. Kearns was in the tiny German village, overseeing his wife’s cancer treatments at a renowned clinic, when Colonel Sherry showed up to declare that his loan was “in limbo” and that his performance guaranty had been forfeited. To temper the grim news, Sherry offered to cover Barbara Kearns’s medical expenses and to underwrite a second loan, this one for a patented “hair augmentation product” that Kearns was keen to bring to market. The colonel assured the “nonperforming” borrower that Badische would invest $10 million in the new venture, which exploited recent breakthroughs in fetal stem cell research.

  Back in Lake Tahoe, Kearns tried to follow up on the commitments Sherry had made at the Bavarian cancer clinic. His efforts were stymied by the colonel’s abrupt and unexplained disappearance.

  Desperation made Kearns tenacious. “Our lives are on the line,” he wrote in one of the many emails the colonel failed to answer. “The delays and unknowns have cost us to the point we have had to discontinue all of [my wife’s cancer] treatments. It adds to our stress that we hear nothing from anyone and can only conclude the worst.”

  He was right to do so.

  Badische wiped Kearns out financially. At trial, he estimated he lost “close to six hundred and fifty thousand dollars.” But his testimony indicates that the Trust stole a great deal more than money. Like Laurence, Kearns was regularly chastised during the loan proceedings, both for what he said (“There was [to be] no ‘John’ or ‘Brian.’ It was all ‘Mr.’ and ‘Mrs.’ and ‘Doctor.’”) and what he wore (“They told me suit and tie. California Casual was not acceptable.”). Like Laurence, he was punished for his contractual derelictions, forced to submit handwritten pensums apologizing for failing to present his bank letters in what Sherry called a “timeous” manner. And like Laurence, he might have overcome his bitterness more quickly if the bankers hadn’t deprived him of something more valuable than dignity or dollars.

  {Courtesy of John Kearns}

  John and Barbara Kearns shortly before they were introduced to the Badische Trust Consortium.

  He told me tearfully: “Here’s what I can’t forgive. They stole the last months of my wife’s life.”

  Reconstituting the plight of Barbara Laurence and John Kearns sidelined Cesar. That was to be expected. The job
of the shill requires that he withdraw from the scene once his confederates take the stage. I didn’t mind. On the contrary. The fraud was so alien to my own experiences I wanted to learn as much as I could about it. But there were other reasons, beyond curiosity, for my tenacity—reasons of temperament that had nothing to do with the crime.

  Obsessives tend to have obsessions. Cesar wasn’t my first fixation, and I’m sure he won’t be the last. Baseball cards, Matchbox cars, Pez dispensers—I’ve always been a collector. From the age of seven until I left for Aiglon, I had an unquenchable interest in coins. I made regular trips to the local bank to exchange my allowance for rolls of pennies that I’d scrutinize, triage, and reroll while watching TV. I still have a blue Whitman coin holder with a single vacant slot—I never managed to harvest a 1909-S VDB—and a forty-pound box of duplicate wheaties rerolled by year of minting.* My point? I tend to go overboard. I investigated Cesar and Badische the same way I collected Lincoln pennies—intent on filling every void.

  “THE LARGEST LAW FIRM IN THE WORLD”

  During one of my conversations with Barbara Laurence I asked her: “What caused you to lower your guard?”

  “If I had to choose one thing that made me stupid, I’d say the lawyers. It never occurred to me that a distinguished Park Avenue law firm could be tied to a scam.”

  John Kearns echoed that sentiment when called to testify: “If the largest law firm in the world was working for Badische, how could it not be legit?”

  I’d been asking myself the same question ever since I first started sifting through the discovery materials. It was nearly impossible to reconcile the memorandums generated by so many legitimate lawyers with the illegal shenanigans of the ersatz royals. The Trust’s genius in this regard was most obvious in its sustained manipulations of Rogers & Wells, a Park Avenue law firm absorbed, in January 2000, by Clifford Chance, the London-based multinational behemoth.

  Casual ties between the Trust and Rogers & Wells stretched back nearly twenty years, but the relationship was only formalized in 1998, when Colonel Sherry presented the firm with a $10,000 retainer. Soon after his check cleared, Rogers & Wells tapped a recently hired bank and regulatory law specialist named David L. Glass to serve as their “lead attorney” and liaison to the Trust.

  “I was new to the firm and eager to build a client base,” Glass later recalled. “I was told the Badische bankers were existing clients so I was only too happy to oblige them.”

  And oblige them he did.

  Glass first helped the Trust, in August 1999, by drafting a regulatory memo that Colonel Sherry (unbeknownst to its author) deployed to reject Barbara Laurence’s initial bank letter.

  “After that, he latched on to me,” Glass would later remember. Early on, the lawyer produced, again at the colonel’s request, a series of “attestation letters” on Clifford Chance letterhead that served no obvious legal purpose. The first such document recorded the removal of Prince Robert as head of the Trust. As Sherry explained to Glass, the prince had begun behaving erratically in early 2000, soon after his wife, the self-styled Princess Audrey Khimchiachvili, fell ill.* The chairman’s grief—which routinely expressed itself in drunkenness, self-directed monologues, slurred speech, and alarming lapses in personal hygiene necessitating the intervention of professional upholstery cleaners—made it impossible to keep him at the helm of the Trust, so Colonel Sherry asked that Glass memorialize, in writing, the promotion of the Baron Moncrieffe as interim chairman.

  Glass considered the request unusual. None of his clients had ever asked for a so-called attestation. Then again, none of his clients controlled $60 billion in assets. Glass provided the letter. No sooner had he done so than Colonel Sherry asked him to affirm that Badische was “a client in good standing” of Rogers & Wells before it merged with Clifford Chance. The colonel supplied the following rationale: he feared potential clients might wrongly assume that Badische had “hired Clifford Chance just because it was a famous, worldwide global law firm.”

  Once again, Glass obliged.

  Sherry’s requests grew incrementally bolder. Could Badische receive its business correspondence at the firm? Doing so would allow the Trust to consolidate business plans and other confidential materials in a single location, a tremendous convenience for the globe-trotting bankers. Additionally, the impeccable reputation of Clifford Chance, Glass was informed, “would discourage people who were not serious from making idle inquiries.” The Trust wanted to keep scoundrels and swindlers at bay.

  Glass conferred with his colleagues and, receiving no objection, approved the request. It was quickly followed by another: Could Badische receive their clients at the law firm? A Waldorf Towers suite, for all its gilded extravagance, lacked the gravitas of an international law firm.

  Glass again checked with his colleagues and again gave the okay.

  By the end of February, the offices of Clifford Chance, located at the very top of the MetLife Building, the historic landmark straddling Grand Central Terminal, became the de facto boiler room for a band of make-believe bankers. There were some days when Cesar shepherded as many as six groups of Barclay clients in and out of the firm. For major assemblies—gatherings that could include some dozen Badische representatives and prospective borrowers—Glass had his assistant reserve a vast conference room on the fifty-third floor. More intimate meetings of the finance and executive committees were generally conducted in the firm’s mahogany-paneled boardroom, a sumptuous venue more in keeping with the Baron Moncrieffe’s Old World aesthetic. Cesar, present at most of the loan meetings, remained aloof during the negotiations. “He stuck to the sidelines,” Glass later remembered. “He ushered people in and ushered people out, but it was never very clear what role he had.”

  When it came to the prep work for the loan meetings, no detail, no matter how minor, escaped Glass’s attention, as the following email exchange suggests:

  COLONEL SHERRY: We will be eight on one side (incl. you) and eight on the other (for visiting clients) with one for the acting Chairman. Therefore, we would need 17 chairs. . . . We may also put one of our people at the foot of the table. This would decrease it to 7 on each side and one at each end, being 16 chairs total. Please advise.

  DAVID GLASS: I am pleased to inform you that we have a room that should work for our meeting. It is room K on the 53rd floor. It has a long conference table . . .

  Glass did more than oversee the seating arrangements. He made introductions. When Badische asked for help developing an anti-money-laundering policy, Glass brought in a partner experienced in “international regulatory matters.” When Badische expressed a desire to issue collateralized bonds tied to its African assets, Glass put the Trust’s in-house lawyer Richard Zeif in touch with a Clifford Chance partner specializing in “securitization transactions.”

  All these efforts did not go unrewarded. In mid-July 2000, Badische named David Glass its “Honourary Avocat Generale.” Colonel Sherry reinforced the symbolic appointment by sending the CEO of Clifford Chance an unsolicited reference letter. (“We have found David Glass of your New York office to be honest, sincere, diligent, accurate, respectful, resourceful, knowledgeable, pleasant and helpful in all matters of our business needs.”)

  Glass appreciated the framed commendation and the letter of support, but it was an altogether different expression of “confidence” (that’s the word he would later testify Colonel Sherry employed) that left the most lasting impression.

  The same week he doled out kudos, the colonel presented Glass with a sealed manila envelope and a one-page “tally” listing the investors bankrolling the House of Badische loan program. He then asked Glass to affirm the dollar values listed on the tally sheet by comparing them to confidential asset letters contained in the envelope.

  Glass considered the request unusual but not unreasonable, and whatever qualms he might have had were trumped by his interest in learning the source of the Badische billions.

  What the lawyer discovered, upon reviewi
ng the contents of the envelope, shocked him. “The floor opened up from under me,” he later recalled. The nine putative funding commitments included: an offering from a “high yield investment program” promising dividends of 50 percent a month; a generic solicitation letter from Merrill Lynch (“It was basically a sales document that in no way presented a commitment of funds”); an unsubstantiated promise of funds from Duke d’Antin’s Habsburg Foundation; and a $1 billion loan proposal from a company that, a quick web search confirmed, shared space with a “scuzzy” used-car dealer in a California strip mall.

  The tally Colonel Sherry provided attorney David Glass.

  The most preposterous of the “assets” was this special deed of trust from the Kingdom of Mombessa:

  The blatant illegitimacy of the deed devastated Glass. On the stand, he maintained a measured tone when asked to describe how he felt when he reviewed the alleged asset: “My immediate reaction was that this was not by any means a commitment of funds.” (Years later, asked the same question, his response was more vivid: “When I perused those letters, I felt all of a sudden as if I was looking down into my open grave.”)

  Glass found himself in a quandary. Refusing to validate the declared value of the assets would undermine months of negotiations between Badische and their loan applicants. Yet endorsing the bogus documents might render his clients susceptible to civil or criminal action. Glass toted up the dollar figures cited in the letters and compared them to the figures on the one-page tally. The sums matched. At least the math was sound. That persuaded him to set aside his legal concerns, if only temporarily, and provide the colonel with the requested attestation. None of which resolved the bigger problem facing David Glass: how to tell a colonel (who he would soon learn wasn’t a colonel), a baron (who wasn’t a baron), and a prince (who wasn’t a prince) that they might be the victims of an international fraud?