Whipping Boy (20 page)

When the response he received proved unsatisfactory, Glass presented a four-point ultimatum. To continue to retain the services of Clifford Chance, Badische would have to deliver: a verified list of all loan transactions; two years of financials; indemnification of the attorneys doing work for Badische; and a list of the Trust’s banking relationships.

Two days later, the name of Clifford Chance disappeared from the contact page of the Badische website. All ties between the law firm and the Trust were severed.

David Glass and his colleagues weren’t the only attorneys bamboozled by Badische. Documents in the milk crates indicate that the Trust also misled law firms in Zurich, Hong Kong, Vienna, London, Panama City, and Monte Carlo. The volume of the paperwork the various attorneys generated suggests it takes almost as many lawyers to start a fake bank as it does a real one. For the fraud to succeed, dummy companies had to be incorporated. Bogus prospectuses had to be generated.
Phantom partnerships had to be formed and dissolved. Websites had to be purged of actionable language. (There’s a fine line between
eliciting
loans, which is legal, and
soliciting
loans, which is not.) Funding agreements for nonexistent mutual funds had to be written and revised. Default memos had to be composed and delivered when—not
if
—potential borrowers failed to meet their time-bound obligations.

David Glass later testified that he had no sense of the scale or scope of the fraud he had helped Badische pull off. He acknowledged he had been “snookered,” but could not differentiate all the chiselers from those who were chiseled.

I wasn’t entirely clear about that myself.

The bankers were obviously ne’er-do-wells. But what about the duke who claimed to be married to the archduchess of Austria? Or the retired UN ambassador who drafted the asset tally on behalf of the Trust’s finance committee? Or the Merrill Lynch financial consultant who witnessed the signing of the special deed from the Kingdom of Mombessa? Were they dupes or deceivers? Fools or felons?

And what about
my
guy? Would the managing director of an august London bank knowingly broker deals with small-time con men? To quote my Belvedere housemaster: Not bloody likely!

Cesar never testified during the trial, and his lawyer called no witnesses on his behalf. Yet his voice did surface, if only briefly, after the jury reached its verdict. This is what Cesar told Federal Judge Shira Scheindlin moments before she pronounced sentence:

THE DEFENDANT: Your Honor, respected members of the government, thank you for allowing me to share my thoughts and feelings about the situation with the Badische group.

I very much regret all the inconvenience and suffering that has occurred due to my actions and inactions. I hope and trust that all the people, whether I knew them or not, that were harmed and did lose time and money can be compensated for their losses and are able to recover from any misunderstandings.

I feel naïve and incompetent about not being able to discern the real aspects from the illegitimate parts of the transaction. I did not do my duties as a broker and assist clients with overseas company formation work intending to harm or hurt anyone. I still believe that the transaction was a viable one, that some of the key people I was introduced to—the VPs of the banks, different advisers to the lenders, the Knights of Malta, the clients and their own attorneys—were all impressive, real, professional, and credible.

I must say that I myself have been suffering mentally, emotionally, and financially since this all started two and a half years ago. However, I have been trying to find meaning in all of this, to learn more about myself and how to be less trusting and more discerning. My various volunteer work, therapies, and spiritual study has been helping me to find a deeper meaning in life, to use this as a positive learning experience, while allowing me to have the strength to continue helping my mother and my sister with their challenges.

I hope and pray that everyone that has suffered can forgive me and find peace. I only beg for your understanding with what I knew at the time and for your forgiveness.

Thank you very much for your time.

It was strange to “hear” Cesar’s voice, as set down in pages of the sentencing record. I found it more than a little irritating.
Situation,
inconvenience,
misunderstandings
—those aren’t words I would have used to describe a multiyear, multinational, multiplayer, multimillion-dollar, and, while we’re at it, multifarious fraud. His tone reminded me of the dismay Colonel Sherry expressed when Barbara Laurence confronted him: “Haven’t we had a wonderful relationship? I’m
really
hurt!” Except Cesar wasn’t trying to shoo away a pesky mark. He was standing before a federal judge.

I later learned that Cesar’s presentencing testimony was excerpted from a much longer six-page letter submitted into evidence. The unredacted statement, though too long to reproduce in toto, warrants generous quotation. Here’s a hefty portion of that written declaration:

It is my hope that you can realize my deeds were [done] with good intentions. I am truly sorry that the effects have not turned out that way.

I do not make empty promises. I am a person of my word and follow through on what I do promise. If I am guilty of anything, it is primarily of not checking things out better. If my naiveté prompted me to participate in something less than legitimate and caused other people harm, I am truly sorry.

I am a trusting person. This is my nature and I will die being this way . . . I relied wholeheartedly on people’s word. In this particular situation, I relied mostly on Prince Robert of Badische & George Moncrieffe (the impressive chairmen), as well as Brian Sherry with whom I worked in order to properly prepare clients for their meetings. I was so impressed and honored by their supremacy that this impaired my judgment and ability to assess them.

Prince Robert, Dr. Moncrieffe and other advisers . . . like Duke d’Antin . . . were part of [the Knights of Malta] order and I felt I was in the presence of credible, experienced people held in high regard. Even the largest law firm in the world, Clifford Chance, was involved, where we would have meetings with the clients and attorneys. Who am I to question their credibility?

I still to this day believe that they were all real and that their contacts and interests were bona fide.

You can imagine my frustration over the past 2 years. Emotionally & psychologically, I almost lost it but have been continually trying to take care of myself with Biofeedback/cognitive
therapy and regular prayers. Physically I was in pain, and financially, I already have lost it. I’ve spent a lot of time over the last 2 years in spiritual study. This was further speeded up due to my Achilles tendon tear injury immediately after this whole investigation started.

I’ve been trying to use this as a positive learning and growing experience. It hasn’t been easy with all the frustrations and let down feelings I have had.

As a spiritual teacher also taught me, there are no Justified Resentments. Since there are no justified resentments, I accept being here in this position, due to the choices I have made and have no blame towards anyone. The fault may not be entirely mine, however, I have no ill will towards anyone. Why? Because if I think that someone else cause[d] this, then I may have to wait forever for it to be resolve[d] by that someone else!

I humbly beg for your understanding of me, an appreciation for my actions taken at the time with what I knew and thought to be credible, and insight into my circumstances that brought me here, pleading not guilty, with all my heart and soul.

I’m no lawyer, but it seems pretty dopey to plead
not guilty after
you’ve been convicted—unless the appearance of dopiness is a ruse. Cesar’s testimony raised a few questions. Actually, more than a few. Were the feelings expressed in his wishy-washy mea culpa heartfelt or fake? Did he truly consider himself guilty of being an innocent? Did he really imagine himself to be on the receiving end of abuse? Did he perceive his “deeds” to be undertaken with “good intentions”? How could anyone in his right mind serve up a plea so clotted with self-pity, wounded pride, insubstantial introspection, self-justification, and dubious assertion? And equally preposterous, how could so many entrepreneurs put their faith in a self-declared patsy claiming to be the managing director of the Barclay Consulting Group?

There is a saying that we learn most about ourselves from our enemies. This I have truly been trying to do. I have learned how I was manipulated, and in a way, how to manipulate others as well.

Cesar Viana
, Memorandum in Aid of Sentencing

Many of the clues to the tectonic puzzle lie high up in the face of almost inaccessible precipices.

Leon W. Collet
,
The Structure of the Alps

Before I started digging into the mechanics of the fraud, I doubted that a San Francisco branch of Barclays could be large enough to handle the kind of casino financing that Cesar had mentioned when he first spoke to Barbara Laurence. I was mistaken.

Barclays’ West Coast outpost could have easily underwritten a $6 billion hotel deal. While the Badische loan program was in full swing, Barclays Global Investors, a San Francisco–based subsidiary of the famous London bank, administered assets of $1.4
trillion
. It had twenty-five hundred employees and during good years its profits exceeded $1 billion. In 1999, it was one of the largest corporate money managers in the world.

Now for the
but
.

But
Barclays Global Investors did not employ Cesar. Cesar was the managing director of Barclay Global Invest
ments,
a division of the Barclay Consulting Group. The Barclay that spelled its name without an
s
employed a staff of one, Cesar, and maintained a checking
account with Bank of America that had an average cash balance in the high three figures. And whereas Bar
clays
leased three hundred thousand square feet of prime real estate in San Francisco’s financial district, Bar
clay,
mindful of overhead, made do with a sixty-dollar-a-month “business address service” located a few blocks west of its more profitable eponym. Not to put too fine a point on it, Barclay had as much to do with Barclays as it did with Charles Barkley, basketball’s legendary round mound of rebound.

Half a mile (and $1.4 trillion) separated Barclay from Barclays.

Even after prosecutors won their case, Cesar insisted he was innocent. “I would never intentionally harm anyone nor would I seek personal gain,” he told the sentencing judge. The Honorable Shira A. Scheindlin wasn’t convinced. Rejecting his plea for reduced jail time, she sentenced Cesar to thirty-seven months, followed by five years of “supervised release.” For good measure, she saddled Cesar with a restitution penalty of $1,222,494—nearly half the advance fees the government lawyers proved at trial had been misappropriated from some of the American victims of the fraud. (Worldwide loss figures will never be known, but the milk crates suggest the Trust pocketed some $4 million in performance guaranties.)

Still, things could have gone a whole lot worse for Cesar. He landed in a cushy prison camp attached to the US Penitentiary in Lompoc, California. Setting aside the well-publicized criticism of one famous former resident, convicted insider trader Ivan Boesky, who once groused that overcrowding at Lompoc forced him to play doubles on the prison’s sole tennis court, most detainees praise the minimum-security outpost. One Lompoc inmate posted this helpful review on thepamperedprisoner.com:

It’s a camp, so pretty much anything you imagine as a prison, throw it out. This place is literally green grass, eucalyptus trees, and a split-rail fence surrounding it. We had sport fields, weight piles, we watched movies on the weekends, we had TV rooms; it’s a summer camp. It’s the federal version of community service. You work during the day, you have jobs, stay busy, then work’s over, do what you want. You have over 340 guys watched by one or two unarmed guards. The whole thing operates on the honor system.

While I’d have preferred that Cesar serve time in a more austere, Shawshanky setting, I found myself marveling—more than marveling, deriving a deep sense of pleasure—in the situational irony of my former roommate’s cosseted incarceration. Lompoc provides its residents with mountain vistas, well-tended fields, split-rail fences, window boxes, and cow pastures (the prison maintains an award-winning dairy farm). In short, Cesar had gone from an alpine boarding school regulated like a prison camp to a prison camp run like an alpine boarding school.