Trustees handling the bankruptcy cases of US mega-fraudsters Bernard Madoff and Scott Rothstein (left) have not "thought outside the box" as much as they have simply built a new box. Their new box: A Web browser.

In recent weeks, high profile fraud conviction and asset recovery efforts have been hindered by competing international interests. But there are ways to deal with these problems and prevent cross-jurisdictional quagmires.

While members of a US Senate anti-corruption subcommittee questioned real estate agents, bankers and escrow agents this week about their role in bringing dirty foreign money into the United States, one key enforcement topic was ignored: asset recovery.

While behind-the-scenes machinations of modern day Ponzi schemes are detailed in court documents and tabloids, asset recovery specialists can glean some insight into what compels targets to defraud investors -- and what causes investors to open their wallets.

Link analysis creates graphic, pictoral maps of subjects activities -- see left -- and are increasingly important to intelligence analysts working in complex asset recovery investigations. The days of managing cases via file folders and notebooks are long over.

For years, Guatemalan ex-president Alfonso Portillo exploited his immunity as a head of state to elude justice while stealing millions of dollars and allowing drug-dealers safe haven in his country. Now, Portillo finds himself on a short list that once held Manuel Noriega and Pavel Lazarenko: Corrupt foreign heads of state under U.S. federal indictment.

Enforcement of the US Foreign Corrupt Practices Act has changed with the political climate since it was enacted in 1977, and its latest, more vigorous incarnation under President Barack Obama's administration promises opportunities for outside investigators as well as payback for the public.

With recent revelations that admitted-fraudster Bernie Madoff's investment scam yielded cash and property in Canada, the receiver charged with recovering assets in the largest Ponzi scheme in history has found help from north of the U.S. border. The court trying the case approved a request by the court-appointed trustee to retain the Montreal-based firm Kugler Kandestin to work on recovery efforts in Canada.

Social networks give investigators a window into the lives of their subjects that was once unavailable. Researcher, investigator and all-around information guru Cynthia Hetherington is one sleuth who makes the most of this wealth of online information.

Associated Press legal affairs writer Curt Anderson spent six weeks piecing together the details of his year-end investment fraud story. His investigation dealt with dozens of offices and three different levels of regulation, eventually tabbing 2009 as the Year of the Ponzi scheme. He spoke to Asset Recovery Watch about the work that went into the story.

Many of the forensic accountants and intelligence analysts who pore over the vast amounts of data generated in asset recovery cases are likely, at some point in their careers, to have the opportunity to serve as an expert witness in court proceedings. Those who are able to do it well can find providing expert testimony to be a major career-enhancer.

When receiver Marion Hecht began the process of unravelling the $50 million Ponzi scheme masterminded by Pennsylvania investment manager Joseph Forte early last year, all avenues to recovery of victims' losses seemed open. The scheme had taken in some 80 investors, many of whom withdrew principal and false "profits" well before the scheme collapsed in late 2008.

As 2009 drew to a close, professionals in the asset recovery field were able to look back on a year of events that would have a long-running impact on their work and careers. In the grand old tradition of the year-end countdown, Asset Recovery Watch has assembled the "Top 10 Asset Recovery Stories of 2009." There are no prizes for guessing this year's top story, but as always, reader comments and suggestions are encouraged...

It's no surprise to AssetRecoveryWatch.com readers that criminal bankruptcy cases are prosecuted at an extremely low rate in the U.S., as we reported on the issue in October. But now the story appears to be gathering steam in the mainstream media, which has picked up a thread first reported on this Web site, and begun to pull...

A federal judge has opened the door to litigation over the question of whether "winning" investors in a Ponzi scheme should be required to disgorge not just profits, but principal, in the interests of a fair and equitable settlement. The ruling challenges the position of US regulatory authorities, and invites major changes in how receivers approach asset recovery in the aftermath of Ponzi schemes...

Powerful lawmakers told U.S. law enforcement officials this week that they want to see more effort focused on investigating financial fraud -- particularly mortgage fraud -- and on recovering the ill-gotten assets of the perpetrators. They cited the Department of Justice's own finding that every dollar spent in criminal fraud litigation returns $20 in asset recovery...

 Asset recovery is a key element of the United Nations Convention against Corruption, which was mentioned at length during the observance of the sixth annual International Anti-Corruption Day on Wednesday. But critics claim that a newly-minted review mechanism will do nothing to further the cause of asset recovery.

The thousands of Suspicious Activity Reports filed by banks and other financial firms every month can provide a roadmap to asset recovery, writes Steve Gurdak, a detective with the Alexandria, Va. Police Department and the supervisor of Operation Financial Compliance (OFC),  Northern Virginia's SAR Review Team. Knowing what you are looking at, and knowing when to bring in an asset tracing expert are key to success...

The recent guilty plea of a Maryland mortgage broker involved in a multi-million dollar fraud highlights the fact that taking back assets lost to mortgage fraud will be a major focus of asset recovery professionals in the coming years. Mortgage fraud is expected to continue to climb through 2011, according to one industry report, and those working to take back the proceeds of that fraud can't afford to stop after simply investigating the fraudster himself.

The second wave of litigation from the credit crisis is beginning, says Andrew Sandler, as investors victimized by failed banks and other institutions begin looking to third parties to recover lost assets. Sandler, a Washington, D.C. attorney with long experience dealing with financial institutions, says that the new target of investors' fury appears to be so-called "gatekeepers" -- the underwriters, credit rating agencies, and auditors whose professional judgments led investors to have confidence in shaky institutions.

Rather than moving on parallel tracks or even competing with each other, private parties working to recover assets in the aftermath of fraud and prosecutorial authorities often better serve victims by entering into a agreement to coordinate their efforts. This article, by international asset recovery expert Martin Kenney, outlines in detail the elements that ought to be a part of any coordination agreement, and includes strategies for avoiding common pitfalls that cost time and money.

Mutual legal assistance treaties, though not without their frustrating elements, are a tremendous tool for asset recovery -- and one that too many private sector professionals ignore. In this article, Linda Candler, a former federal prosecutor and asset recovery expert, notes several methods by which those working in the private sector can obtain information through MLATS. She also offers warnings about the perils of failing to use foresight in planning MLAT requests.

When one understands three principles about the role and regulatory oversight of banks, writes asset recovery expert Wayne Klein, one can quickly recognize how records maintained by banks and other financial institutions can be a valuable compass pointing to hidden assets. In this article, Klein outlines the numerous kinds of records that banks are required to retain and points out how they can assist in asset recovery investigations.

Asset recovery experts were heartened by statements made by U.S. Attorney General Eric Holder last week at a conference bringing together representatives of countries that have signed the United National Convention against Corruption. Holder noted significant problems surrounding international cooperation in asset recovery cases and pledged that the U.S. will work to fix them. In the asset recovery community, those who frequently work across borders say that they hope some major obstacles to recovering the proceeds of corruption will be taken down.

In the final article of a four-part series, internationally-recognized asset recovery specialist Martin Kenney (left), who has recovered hundreds of millions of dollars for his clients worldwide, pulls back the curtain on intensive international investigations. This article explains how to best structure an investigation so that the risk of failure is mitigated. It also explains how to assure operational security -- so that the target never has the opportunity to take additional steps to hide assets.

The Tax Justice Network, an internationally-known group that advocates financial transparency and the restriction of bank secrecy jurisdictions, this week named the United States as the world's top bank secrecy haven, citing the opacity of financial transactions in certain states, such as Delaware. Given U.S. lawmakers' vocal criticism of tax havens, the designation may seem strange. But asset recovery experts interviewed for this story say the Tax Justice Network's criticisms are on target.

Asset recovery specialists that work across multiple jurisdictions know that winning a judgment is one thing, and collecting on it is another. Properly positioning your case to maximize the chance of successful recovery may require changing your legal strategy or doing significant research on how foreign judgments are treated in the jurisdiction holding the target assets.

The U.S. Supreme Court on Monday declined to hear former Ukrainian Prime Minister Pavel Lazarenko's appeal of his conviction on conspiracy and money laundering charges. Asset recovery experts like Martha Boersch (left) say that the Lazarenko case, in which the U.S. seeks to recover hundreds of millions of dollars, signifies a major shift in how prosecutors view foreign corruption cases. 

In the third article of a four-part series, internationally-recognized asset recovery specialist Martin Kenney (left), who has recovered hundreds of millions of dollars for his clients worldwide, pulls back the curtain on intensive international investigations. This article explains how to identify the legal and ethical restraints that investigators may face in various jurisdictions, and shows how careful planning can both keep investigators on the straight-and-narrow and help increase the likelihood of success. Kenney will be a featured speaker at the 2009 International Association for Asset Recovery Conference.

The U.S. government loses billions of dollars each year to fraud. There are people out there willing to act as whistleblowers, sometimes even filing qui tam lawsuits, to help get the money back. But the U.S. government's treatment of whistleblowers may be hurting its own asset recovery efforts by making them too scared to come forward.

As receivers and trustees around the U.S. continue to unravel the numerous Ponzi schemes and other financial frauds that have been revealed over the past year, the tactic of using "clawbacks" to recover assets lost to fraud is being increasingly employed. It is also getting more support from the courts.

In the second article of a four-part series, internationally-recognized asset recovery specialist Martin Kenney (left), who has recovered hundreds of millions of dollars for his clients worldwide, pulls back the curtain on intensive international investigations. This second article explains how to identify targets in an international concealed assets investigation and how to gain access to vital evidence. Kenney will be a featured speaker at the 2009 International Association for Asset Recovery Conference.

The news that international risk consulting firm Kroll Inc. settled a lawsuit with a foundation that lost money in the R. Allen Stanford (left) Ponzi scheme suggests to some asset recovery experts that third-party lawsuits may be the next wave of court cases to arise from recent major frauds. The foundation, Electri International, had hired Kroll to do due diligence on Stanford's company, and invested in it after Kroll delivered a clean bill of health. The lawsuit, resolved last week, accused Kroll of gross negligence and sought recovery of $6.4 million.

Mutual legal assistance treaties are not specifically designed to deliver information to receivers, but that doesn't mean they can't be useful in an asset recovery investigation. By developing a relationship with prosecutors, understanding the specifics of each treaty, and suggesting that certain language be included in MLAT requests, receivers can reap a wealth of valuable information about concealed assets.

U.S. receivers working to trace assets overseas are often frustrated by the fact that their authority to gather information and evidence largely stops at the water's edge. But a little-known provision of the USA PATRIOT Act allows courts to appoint a special Patriot Act receiver with the authority to invoke mutual legal assistance treaties and other international agreements that compel authorities in other countries to assist in investigations. The benefits to receivers working multi-jurisdictional cases, experts say, could be huge.

One in ten bankruptcy filings contains elements of fraud, but an AssetRecoveryWatch.com analysis of data produced by the U.S. Trustees Program, which appoints trustees to manage bankruptcy filings, indicates that less than one percent of bankruptcy filers face fraud-related criminal or civil penalties. Part of the problem, experts say, is that lax standards allow the appointment of trustees with no experience in asset tracing and recovery.

The USA Patriot Act, passed in 2001, contains a provision that would allow a special receiver to be appointed, at the application of a federal prosecutor or federal or state regulator, to help recover assets in criminal and civil cases. The Patriot Act federal receiver has many advantages not available to the typical receiver. In this first article of a series we look at one of those advantages, access to Bank Secrecy Act data, and discuss the difference it can make to how receivers do their job.

In the first of a four-part series, internationally-recognized asset recovery specialist Martin Kenney (left), who has recovered hundreds of millions of dollars for his clients worldwide, pulls back the curtain on intensive international investigations. This first article outlines the necessary elements of an investigation, explaining in detail how to build a case-specific model that includes forward- and reverse-tracing as well as built-in decision points to aid in risk management. Kenney will be a featured speaker at the 2009 International Association for Asset Recovery Conference.

Many asset recovery professionals will tell you that mutual legal assistance treaties are one of their most vital tools, especially when it comes to recovering the proceeds of corruption. Others will tell you that the MLAT process is cumbersome, inefficient, and frequently a waste of time. Both are probably right. In this first of a series of articles on MLATs, we look at how the treaties are used to recover assets from corrupt public officials and what changes experts in the field say would improve the process.

How far can a trustee go in the effort to win back the assets of the victims of fraud? Not as far as Irving Picard has gone, claim lawyers for Stanley Chais, a California investment advisor and philanthropist who, from the 1970s, ran one of the largest "feeder funds" that channeled money to Bernard L. Madoff Investment Securities. Picard, trustee for the Madoff estate, has frozen millions of dollars in Chais' accounts at Goldman Sachs, but this week a judge will hear arguments from attorneys for Chais, who are expected to claim that Picard has no proof that the money in the account is the proceeds of fraud. The decision, which goes to the heart of a receiver's authority, could have a significant impact on other cases.