Ben Hills
The Gnomes of Zurich are punctual and precise. That is why we can now be certain that it was at exactly 9.54 on the morning of Tuesday, December 5, 1989, that the world’s greatest bank robbery began, in a back office of the mighty Swiss Bank Corporation’s imposing building at No 6 Paradeplatz, the city’s central square.
There were no secret tunnels required, no explosives or thermal lances penetrating the vaults, no men in hockey masks carrying M16s. At 9.54 precisely a man by the name of Basant Singh, a Malay of Indian ethnic background who had for three years been a trusted employee in the bank’s investigation group – its troubleshooting team – simply slipped a small piece of paper into the system.
That piece of paper, known in the international banking trade as a”Geldmarkt Passiv” voucher, triggered a computerised currency transfer across the world that led a few days later to a massive man-hunt for Singh and his fellow fraudsters. They had by then robbed Switzerland’s second biggest bank of no less than $70 million … and a large slice of this had mysteriously found its way to Australia.
For the past three weeks the Herald has sifted through thousands of pages of court evidence, checked company and title documents, and interviewed investigators, police, lawyers and prosecutors in Australia, Switzerland, Germany, Britain and Hong Kong, to put together the story of this remarkable robbery and the gang who fooled the “foolproof” global electronic banking network.
As a high-finance thriller, it has everything: a bogus West African bank, a Malay con man flitting around the world on half a dozen different passports, desperate bankers propping up a tottering Australian property developer, a suitcase full of Swiss francs dumped on the counter of an Australian bank in London, a $600 million loan signed during a flying visit to Frankfurt airport, a rendezvous in a Thai holiday resort to divvy up the spoils.
But the “Gnomegate” story begins in Australia with a meeting in a nondescript office in the Sydney suburb of Crows Nest.
TROUBLE AT T’BANK
To say that Malcolm Edwards was desperate for money would be an understatement. It was the early autumn of 1989 and the Australian property market was crumbling, along with the dreams of Edwards and his co-directors of the development conglomerate Essington Ltd.
Essington, an unlisted public company, had been one of the most spectacular boom stories of the 1980s. Its projects included the Cape York space-port, the construction of the world’s tallest office building in Brisbane, the $650 million Kindersley Place development in central Sydney, a massive office block in Melbourne’s Collins Street. It diversified into winemaking, movies, horse auctions. At one stage, Edwards, the company’s co-founder and managing director, claimed to have $2 billion worth of plans on his books.
The company was also, as they say, highly geared – it had borrowed to the hilt. Its mid-1989 balance sheet shows $700 million of assets, and almost that much debt. It had been hit hard by the collapse of its two main financiers -Victoria’s Tricontinental Bank, and the Estate Mortgage group.
In July the previous year the State Bank of NSW had come to the rescue with a loan package of $46 million, which also involved the bank taking out $20 million equity, 10 per cent of Essington’s stock. The bank gave Edwards five years to pay, but after only a few months his account had slipped into the red- by October 1989 he was to be $5 million in arrears, with the bank threatening to issue a notice to wind up the whole group.
Edwards (or so he swore in a statement to the Supreme Court in Sydney) had been looking everywhere for money to restructure his group. Having exhausted the patience of Australian banks he had made inquiries in Wyoming in the US, in Bahrain, even in Portugal.
And then, on March 17, the phone rang at Edwards’s headquarters alongside the Pacific Highway, a couple of kilometres north of the Harbour Bridge. It was his tax adviser, a man named John Ison, and he had some good news for Edwards. Good news in the shape of a stranger who was offering to raise a loan for Essington.
Later that day Ison ushered into his office a tall, thickset Indian-looking man with a bushy moustache who said his name was Vannyasingham Sothirasan -it was quickly abbreviated to “Sothi”. His first words to Edwards were to complain that he had never before been kept waiting by a prospective borrower Edwards apologised and they began discussing money. He needed $US500 million ($A641million), Edwards told the swarthy stranger. Could that be arranged? Yes, said Sothirasan – no problems, provided, of course, there was a little something up front. Not long afterwards, on the strength of that one meeting, Edwards sent the Malay $100,000 … just the first instalment of a total of $850,000 Sothirasan was to extract from Essington over the next nine months as negotiations for the loan dragged on and on.
A GIFT FROM GOD
Looking back on the whole extraordinary affair, Edwards is prepared to concede with hindsight he may appear to have been a bit naive. Naive to trust a man like Sothirasan, naive to be dragged into a scheme that would eventually land him in the Supreme Court on the wrong end of a writ for $27 million, naive to risk the survival of his business empire on the word of an international scoundrel, known to the police on three continents.
Sothirasan was only one of six different names which he used – even Edwards was aware of one of his aliases. When he tried to phone him at the Hilton Hotel in Singapore one night he was told there was no Sothirasan in the house. Sothirasan later explained that he always stayed there under the name Baldi Kaur because he could get a discount. “Just ask for ‘Baldi’,” he laughed at the disconcerted Edwards.
At the time he introduced himself to Edwards, Sothirasan was running a business in Hong Kong known as Tele-Arts Securities. It was an unregistered security dealer, and a simple inquiry later by the State Bank would reveal that the company “does not enjoy a good name”, and that “caution” should be used in any dealings with it. Nevertheless, Edwards (who says he was assured by various bankers and lawyers that the company was legitimate) sent Tele-Arts$400,000 … $400,000 which, needless to say, he never saw again.
At the time he was offering to raise $US500 million for Edwards, Sothirasan was actually on the run – he was wanted by the Malaysian police on charges involving corporate fraud, and was being eagerly sought in Hong Kong over an attempt to defraud the Hongkong and Shanghai Bank of $100 million with a false letter of credit.
Interpol had alerted the FBI and a number of European police forces of his suspected activities. But what they didn’t know was that Sothirasan was planning the biggest scam of all – he was putting together a network that would achieve what the banking community had hoped was impossible – infiltrate and loot the supposedly inviolable SWIFT and CHIPS* telecommunications systems which are the lifeblood of global banking, the systems which transfer around $1,000 billion around the world every day.
One key man in this network was to be Basant Singh, like Sothirasan a Malay of Indian Tamil ethnic background, and a cousin of Sothirasan’s wife. Singh had worked his way up to a senior and trusted backroom position in the Zurich branch of the Swiss Bank Corporation, a position which gave him access to the electronic banking network.
For several years, Sothirasan had been buttering up Singh on his visits to Europe – wining and dining him, impressing him with grand hotels – with the hope of eventually persuading him to take part in the fraud. Round about October 1989, he was ready to play.
The second player is an equally improbable person to be involved in raising a $600 million international loan to save an Australian company from liquidation. Santiago Laureano is his name, a Filipino of Spanish extraction who carries a Canadian passport, and who was also known to Interpol following an attempted fraud against a Manila bank.
Laureano’s role was as the “gofer” who was supposed to collect large sums of money from banks and courier them around the world in cash. He raised eyebrows when he waltzed into the State Bank of NSW London office just a day before the robbery carrying 499,000 Swiss francs (about $A450,000 ) in notes in a bag which he demanded to be deposited and transferred to Edwards in Sydney. This was apparently a dummy run designed to test the system.
The third player was the “banker” who was supposed to give the whole thing a veneer of respectability. He was a West African travelling under the splendid name of Dieudonne 1 Boniface Beyina Mvogo – Dieudonne means “God’s gift” and Boniface was the name taken by an 11th-century antipope.
It took nine months for these four people to get together the game plan for their fraud, nine months in which Singh was quietly testing the system, trying to find out whether Sothirasan’s scheme would work. In October they were nearly sprung – Singh created two false interbank invoices for $US3 million each which were supposed to go to an account at the Chase Manhattan Bank in Hong Kong. Chase smelt a rat and queried the transfer, and Singh immediately cancelled the transaction.
On November 8, 22.5 million Deutschemarks (about $A17.3 million ) was lifted electronically from a Swiss Bank account in Zurich on the authority of a forged telex message, to be transferred to an account held in the name of the Beyina Merchant Bank, about which we will hear more later. In the nick of time the fraud was uncovered and the money was returned to the Swiss Bank.
Then, jackpot. On November 21, Sothirasan and his gang transferred 30 million Swiss francs ($A27.3 million) from the Swiss Bank to an account at the BFG Bank in Switzerland; SF4.8 million was withdrawn – mainly in cash – before the alarm went off. Swiss Bank has recovered SF25 million and is suing to try to recover the rest.
So, by early November, Sothirasan and his gang knew that they could crack the system. They were ready to do business. And they had a desperate customer.
Back in Australia, Edwards was close to panic. The State Bank of NSW was closing in on his loan, by now more than $5 million in the red. As well, another creditor, the Sanwa Bank of Japan, was getting anxious, as were Edwards’s partners, the Japanese EIE and Kumagai Gumi groups. Telephone calls and faxes flew between Edwards and Sothirasan, many of them quite bizarre.
Sothirasan, the self-styled international mega-million-dollar loan procurer, showed an unfortunate inability to either contain his impatience or to spell. “I sincerely feel that someone somewhere is playing silly … either perform as argeed (sic) or get off the pot, so to speak,” he said in one message to Edwards.
But finally the deal was ready to be signed.
NOTHING BUT BLUE SKY
The raw grey concrete commercial centre, linked by walkways to the hub of the European airway network at Frankfurt airport, is a place where you can rent rooms, secretaries, fax machines by the hour. It is also the place where Malcolm Edwards believed something called the Beyina Merchant Bank of Cameroon had its premises.
On November 6, Malcolm Edwards sat down in what he supposed was the bank’s boardroom for the first time with the men he was trusting to save his property empire: Sothirasan, whom he had already met in Australia, Singapore and various other places; Laureano, whom Edwards thought was a “middle European”; and Mvogo, whom Edwards believed was called “Mr Boniface”.
Edwards had a discussion with these three men – two of whom, unbeknown to him, were wanted by Interpol – and an agreement was signed for a $US500 million loan to save Essington from liquidation. The agreement, a copy of which is in the possession of the Herald, is an extraordinary document that occupies only 20 pages (shorter than some household mortgages), and which offers no real security for the enormous loan.
The money was to be borrowed from the Beyina bank with another bank called Convent Investfinanz acting as an intermediary. Some $147 million of it was to be deducted for “collaterals” and Convent Investfinanz’s fee was to be $5 million – the balance would be paid to Essington. Repayment was to be by way of 10 $50 million bills of exchange issued by Essington.
It was not only the nature of the documentation that was unusual, however, it was the nature of the two “banks” with which Edwards was dealing. Neither is mentioned in any international banking almanac, and the Beyina bank does not even give a street address on its letterhead – it operates out of a post office box in the town of Yaounde in the impoverished West African nation of Cameroon. Its “chairman and chief executive officer” is Dieudonne Boniface Beyina Mvogo, who appears to have named the “bank” after himself.
Convent Investfinanz is also an institution hardly likely to inspire awe in the international banking community. A simple check with German corporate records would have shown that it was the equivalent of a $2 company, with no assets, no liabilities, and no trading activity. Its directors were Sothirasan and a woman named Ursula Heppner.
Blissfully unaware of this, an elated Malcolm Edwards flew back to Australia with the loan agreement in his briefcase, and nine days later reported for a meeting at the State Bank’s headquarters in Martin Place with its (then) general manager of corporate lending, Chris West. Edwards told West his good news, and (according to West) this conversation followed:
West: Where’s the money coming from?
Edwards: Blue sky … it’s been arranged from a merchant bank, Convent Investfinanz, and it’s for a net $300 million, approximately.
West: It’s hard to believe that someone would advance $500 million on this basis.
Edwards: I agree.
West was so puzzled by the whole deal that he checked with banking almanacs, but could find no reference to the “banks” involved. In a sworn statement he said: “I was suspicious that the funds might ultimately be sourced from black money or some illegal activity”, and he said he shared this suspicion with the bank’s general manager, John O’Neill.
It spite of this, the bank agreed to give Edwards one last, final, ultimate deadline – Essington had until December 31 to get its loan account back in the black, or the bank would issue proceedings to wind it up.
THE STING
Basant Singh’s piece of paper was just one of around 2,000 interbank transfers processed every day in the back office of the Swiss Bank Corporation’s Zurich branch. The message carried the correct verification codes and it was routinely keyed into the computer system – from then on the fraud was on autopilot.
The bank’s computer was told it would be receiving $US20 million in New York the next day – Wednesday, December 6 – from the State Bank of NSW to park on the overnight money market. The following day, December 7, the money, plus interest, was to be transferred to the State Bank’s New York branch. Another routine transaction.
Singh destroyed the evidence – the Geldmarkt Passiv voucher – and completed arrangements to go on leave the following Friday. In New York, the State Bank’s branch manager was told by Chris West, Essington’s banker, to expect a large deposit for the company’s account – he was not to query the transfer with the transmitting bank but was to communicate with Essington’s banker, Chris West, in Sydney when the money arrived.
At 11.11am New York time on Thursday, December 7, a message lit up on a trading screen at the State Bank’s New York office. $US20,004,583.33 had arrived in the bank’s own TOS (trade and overseas) account from Zurich. The bank immediately passed it on to Edwards, and Malcolm Edwards’s struggling Essington Corporation was suddenly $27 million better off.
It was six days before the terrible truth began to dawn on the Zurich gnomes. When they sat down to try to reconcile their accounts the following Wednesday they could see that the money had gone out on December 7, but they could find no record of the $20 million deposit arriving as promised the day before from Sydney. The transfer slips were missing from the system. State Bank denied having ever made the arrangement.
A message headed “TOP URGENT TOP URGENT” was flashed through the SWIFT system to the State Bank in Sydney. A few days later a senior executive of Swiss Bank followed this up with a letter:
“Swiss Bank Corporation has been a victim of an international group of criminals … police investigations are (being) carried on here in Zurich, in Frankfurt and Luxembourg (and) American police will be involved too. The transfer of $US20m is part of this very dangerous scheme … we therefore have to urge you once again to keep all assets with your bank stemming from the transfer blocked.”
But it was too late.
It had taken just 24 hours for most of the $A27 million to disappear. Acting on Edwards’s instructions, the State Bank shot off tranches of millions of dollars to accounts all over the world, which were then broken down into smaller and smaller bundles of bills. In all, investigators found more than 60 separate payments which had been made – only $99,000 was left in Essington’s account by the time the bankers froze it.
An investigating accountant testified later that Edwards had benefited from the entire $27 million. Edwards strongly disputed this. He said that, on top of the $850,000 which he paid out before the money arrived, another $10 million had been transferred to Sothirasan, Laureano and others connected with them.
State Bank records show that one of the biggest beneficiaries was the bank itself – Edwards used $3.8 million to pay down Essington’s loan account. Another $4 million was paid into an Essington account at the Commonwealth Bank; $5 million was transferred to another Edwards company, Austrich Ltd, in Hong Kong; $2 million was sent to yet another Edwards company, Capos Ltd, in Fiji. Two drafts totalling $6 million were sent (via the State Bank) to the obliging Mr Laureano, by now ensconced in the plush Savoy Hotel on London’s Strand.
The ultimate beneficiaries of the Swiss Bank’s largesse included scores of Edwards creditors – lawyers, real estate agents, banks, travel agents. Edwards even settled a $2,375 bill at one of his favourite restaurants, La Potiniere in McMahons Point.
But the joy was to be short-lived. The gnomes do not like losing money. They like even less being made fools of.
YES, WE HAVE NO HABEAS CORPUS
It took just three weeks for the international dragnet to snare its first victim. Right through Christmas the lights had been burning all night at No 6 Paradeplatz. Court action had been launched in Sydney, Singapore, Hong Kong, London, Kuala Lumpur, Manila, Wellington, Zurich and Frankfurt. Teams of private investigators were swarming across three continents.
The first person to be grabbed was Salvador Laureano, the courier. He was stopped at Bangkok’s domestic airport one steamy January morning with$US100,000 cash in his suitcase. With the co-operation of Thai police, the Swiss bank’s gumshoes persuaded Laureano to return to Frankfurt, where he was promptly arrested by police and extradited to Switzerland.
Laureano, Singh and Sothirasan had been planning to rendezvous in the seamy seaside resort of Pattaya, on the Gulf of Thailand, a short flight south of Bangkok. Only Sothirasan made it – and he was accompanied by two smart Malay lawyers, who pointed out that there was no extradition treaty between Thailand and Switzerland.
For six weeks, investigators working for the Melbourne-based Nationwide Investigation and Security Group Ltd trailed Sothirasan around the countryside. At one stage – at their urging – he telephoned Edwards in Sydney to ask him to give the money back. But according to Edwards, the conversation went:
Edwards: Swiss Bank say that the money you advanced us is theirs.
Sothirasan: Well, there’s been a mix-up. It’s just a hitch. You will get(the rest of) your loan. They are always chasing me for tax matters …
Eventually Sothirasan was persuaded to fly to Switzerland and within two months the ringleaders of the world’s biggest bank robbery were all behind bars. However, prosecution has been held up because of the failure of the Australian authorities to co-operate with Swiss investigators.
According to the Zurich district attorney, Dr Helen Wormser, Sothirasan has been in the city’s Bezirksgefagnis (district prison) for more than a year waiting for his prosecution to begin. “We don’t have habeas corpus here – this is Roman law,” she said. Dr Wormser said she had asked the Australian Attorney-General for assistance four months ago, but had received no reply.
The Attorney-General, Michael Duffy, told the Herald that the Swiss Government had asked for assistance in the investigation last December. He had approved the request just last week. A spokesman for the Australian Federal Police said that the case had been assigned to a woman police constable on her first assignment after completing college. He could not say when – or whether- a report would be forwarded via Interpol to the Swiss authorities who had requested it.
Singh and Laureano were also held in prison in Switzerland for some months before being released pending charges. Singh had overlooked one small thing in planning the fraud – he had destroyed the originals, but the Swiss Bank had a back-up system under which all money transfers were microfilmed. He flew back from Malaysia to Switzerland to face charges.
As for the fourth member of the gang, the bogus Cameroon banker Mvogo, he was arrested in Frankfurt and is still in prison. Frankfurt police said that he had undergone the “accusation” process of his arraignment and had been committed to stand trial on fraud charges, probably later this year.
And the money? Since just a few days after the fraud was discovered, the Swiss Bank Corporation has been throwing all its resources into a monster case running before Justice Andrew Rogers, chief judge of the commercial division of the NSW Supreme Court. The hearing, bristling with QCs, ran for three weeks late last year and is estimated to have already cost more than $1 million.
The Swiss Bank is suing Essington, Edwards’s private investment company, Bangaroo Investments Pty Ltd, and the State Bank to get its $27 million back. All have denied liability, and so far the only money recovered in Australia has been the $99,000 left in Essington’s account.
As for Malcolm Edwards, in an interview last week with the Herald (see story above) he said he regretted having been conned – it had placed his company in a “very difficult” financial position. But there was hope in sight in the shape of another saviour, a venture capital company in California which was about to invest nearly $50 million in Essington.
This time the money would not evaporate, said Mr Edwards. It would be here in a few weeks. And it would not be stolen.
Promise.
The People Involved
THE MASTERMIND: Vannyasingham Sothirasan
International con-man travelling on six passports. Friday, August 26, 2005, Director of a $2 company, received $850,000 in commissions from Edwards to arrange a $600m “loan.”
THE OPERATOR: Bessant Singh
Trusted Swiss Bank employee, who dropped a false interbank transfer into the system triggering the fraud.
THE COURIER: Salvador Laureano
Filipino con-man, entrusted with ferrying the loot around the world.
THE BOGUS BANKER: Dieudonne Boniface Beyina Mvogo.
His “bank” operated from a post office box in a remote West African town, but he claimed he could organise a $600m loan.
THE BUSINESSMAN: Malcolm Edwards
His company received the $27m stolen from the Swiss Bank. Claims he was deceived by a gang of international fraudsters.
NEW YORK, Thursday: $27 m is electronicaly transferred into Essington Corporation’s account at the State Bank of NSW.
ZURICH, Tuesday: A forged interbank transfer is slipped into the system at Swiss Bank Corporation.
SYDNEY, Thursday-Monday: Money is dispersed into 60 accounts around the world on the instructions of Essington boss Malcolm Edwards.
THAILAND, January: Three ringleaders of the scheme give themselves up.
Publishing Info
Pub: Sydney Morning Herald
Pub date: Saturday 20 April 1991
Edition: Late
Section: Spectrum
Sub section:
Page: 39
Word count: 4392
Keywords: Biog Malcolm Edwards
Drawings: Sturt Krygsman
Illus: Malcolm Edwards
Picture by Rick Stevens
Caption: … “Our problems have been increased by the number of facilities we thought we had in place.”
Table: The People Involved Map: How the money was transferred from Zurich to Thailand
* SWIFT is the international network used for transferring money between banks – the Society for Worldwide Interbank Financial Telecommunications. CHIPS is its equivalent in New York – the New York Clearing House Inter-Bank Payments System.