International Asset Recovery
"Developing countries lose between US$20 to US$40 billion each year through bribery, misappropriation of funds, and other corrupt practices. Much of the proceeds of corruption find "SAFE HAVEN" in the world's financial centers."
YuryFedotov, Executive Director of UNODC &
Ngozi N. Okonjo-Iweala, Managing Director World bank,
Preface to Asset Recovery Handbook
The serious problem of corruption is only increasing & the need for improved mechanisms to combat its devastating impact & facilitate the recovery of corruption proceeds has been an increasingly prominent topic of discussion world-wide.
Key Terms Defined
- ASSETS: Any item of value, whether corporeal or incorporeal, movable or immovable, tangible or intangible, and legal documents or instruments evidencing title to or an interest in such assets.
- EXAMPLES: Homes, commercial property, trademarks, patents, cars etc.
- RECOVERY: Recovering misappropriated assets for victims of investment fraud so that they may be made “whole” again. Recovering monies that victims have lost.
Asset Recovery
I. Tracing Stolen Assets
The below steps are required to identify and secure assets
This step includes:
- Collecting data/intelligence
- Reviewing all data/intelligence
- Speaking with known associates involved from the inception of the case (victims, known associates)
II. Freezing Stolen Assets
This step occurs after the assets have been traced/identified.
This step includes:
- Notifying the financial institution of the assets in their care
- Producing the requisite documents connected to the assets within the various institutions
(Ex: bank account numbers, corporate/private registration information, financial data, identifying documents related to the asset.)
III. Confiscating Stolen Assets
This step occurs after the asset is frozen.
This step includes:
- Conducting an initial evaluation of the asset
(Ex: stocks, bonds associated with the business/corporation, actual building, tangibles associated with the business, technology, etc.) - Consulting all appropriate parties
(Ex: financial institutions, victims, law enforcement)
IV. Returning Stolen Assets
This step occurs after the asset has been confiscated and evaluated.
This step includes:
- Holding the asset until it can be released/ repatriated to the appropriate party
- Liquidating the asset (if necessary)
This step takes the most amount of time. The goal is to maximize the return and endure victims are made "whole" or as close as possible to "whole."
Dottore Companies Recovery Rate
Dadante Case: 110% Recovery
The Scheme
- $50 million ponzi scheme
- David Dadante promised over 100 investors annual returns ranging from 10%-20% through exclusive access to initial public offering’s (IPOs)
- Dadante never had access to exclusive IPOs – the promised above-average returns were possibly only by paying existing investors through incoming investor funds (classic ponzi scheme)
The Receivership
- The cornerstone of this case was litigation filed against brokerage house Ferris Baker Watts, where Dadante was a prominent client
- A broker with Ferris Baker Watts assisted Dadante in purchasing and illegally manipulating the shares of Innotrac Corporation, a lightly traded technology corporation.
- The brokerage ultimately extended him roughly $19 million to finance the trading
- Dadante eventually accumulated several million shares of Innotrac, making Dadante 34% owner of the company
Outcome
It was Dottore's decision to initiate litigation against Ferris Baker Botts, Dadante's former employer, that reaped handsome dividends. In a settlement with the brokerage (which later went bankrupt), Dottore received $7.2 million in cash, as well as forgiveness of a $9 million debt that Dadante had accrued through his trading. Additionally, Dottore Companies secured ownership of nearly 3 million shares of Innotrac Corp., a company that Dadante had accumulated a 34% ownership interest.
After holding the stock for several years, Dottore secured the sale of the shares to a private buyer for a total of $35 million - a feat that the presiding judge hinted was " an extraordinary recovery...[that] would be unheard of in matters of this type and, in this court’s experience, may be one of the largest of its kind involving a fund that was the victim of a Ponzi scheme."
In total, Dottore has recovered more than $47 million in cash and secured the forgiveness of more than $12 million in debts, while investor losses have been pegged at $28 million.
In comparison to the leader in international asset recovery. The Financial Action Task Force (FATF); Their website states that;
“At the moment, countries intercept and recover less than one percent (1%) of global illicit financial flows...”