Risks to financial intermediaries and those who give advice on handling other people’s wealth
| Pages | 267-271 |
| Date | 01 July 2005 |
| Published date | 01 July 2005 |
| DOI | https://doi.org/10.1108/13590790510624846 |
| Author | Ian Comisky |
| Subject Matter | Accounting & finance |
Risks to Financial Intermediaries and Those Who
Give Advice on Handling Other People's Wealth
Ian Comisky
INTRODUCTION
Formidable obstacles confront an attorney who acts as
a ®nancial intermediary in cases arising in the USA.
Even where all parties initiate the process with the
best of intentions, strict US money laundering and
asset forfeiture laws, along with the ethics require-
ments of the individual states in which the attorney
may practise, place an attorney acting as a ®nancial
intermediary in a dangerous position once criminal
charges are brought. This paper serves to summarise,
in a relatively brief fashion, the lengthy history in
two cases involving a renowned US attorney, F. Lee
Bailey, who in one circumstance undertook to act as
a ®nancial intermediary during a criminal proceeding
and in the second circumstance simply sought to be
compensated for legal services rendered.
BACKGROUND
In the 1990s, F. Lee Bailey became involved in two
separate proceedings, each of which eventually
resulted in his being held in contempt of court, and
one of which resulted in his incarceration for 44 days
before his eventual release.
In the ®rst proceeding, in March 1994, Mr Bailey
was retained by an individual, Claude Duboc, who
was involved in a massive narcotics tracking and
money laundering operation, after his indictment in
the Northern District of Florida. Mr Bailey attended
a series of meetings with federal prosecutors and deter-
mined to pursue a strategy by which the client would
cooperate in selling and repatriating assets purchased
with the narcotics proceeds located oshore. Mr
Duboc had accounts in various countries, including
cash and securities, collections of classic automobiles,
yachts, artwork, and two mansions in France. In par-
ticular, the strategy was to maximise the value of the
assets in an attempt to obtain a reduced sentence by
showing extraordinary cooperation. Under US law,
assets involved in illegal activities such as narcotics
tracking are subject to forfeiture.
1
During the course of the meetings, participated in by
Mr Bailey and yet another well-known US attorney,
Robert Shapiro, the government acknowledged and
understood that certain of the oshore assets required
maintenance prior to being sold in order to maximise
their value. Indeed, properties in France alone required
maintenance in the amount of $15,000± $20,000 per
month. Yachts were thought to be worth $2.8m and
$900,000, respectively. Mr Bailey's oer to help main-
tain, liquidate and repatriate the proceeds of the over-
seas drug-related assets was accepted.
One of the assets owned by Mr Duboc consisted of
602,000 shares of stock of a drug company known as
Biochem Pharma (Biochem) and a concern was
expressed that if the block were sold immediately, it
would depress the price of this startup company.
The government agreed that Mr Bailey could main-
tain custody over the 602,000 shares of stock, then esti-
mated to be worth about $5.891m, in order to
maintain the properties and pay other expenses
required to liquidate the oshore assets.
Mr Bailey and Mr Shapiro also inquired about the
payment of legal fees since, under US law, an attorney
does not have the right to collect fees from assets
subject to forfeiture.
2
With respect to the legal fees,
the government's position was that the amount of
legal fees would have to be approved at a later time
by the judge presiding over the case.
Mr Duboc pleaded guilty to narcotics charges on
17th May, 1994. Prior to the plea, in a pre-plea
hearing which was not recorded, the government
expressed its position that the stock was being trans-
ferred to Mr Bailey in trust to be used to pay expenses
incurred in the management of the French properties
and that whatever was left could be used to support
a petition to pay attorney's fees in the discretion of
the court.
3
Mr Bailey's view on the receipt of the
stock was dierent. His belief, expressed later, was
that the stock was being transferred to him and that
he was running the risk that if the stock went down
in value, it would work to the detriment of his client
and reduce any funds available to pay legal fees, but
that he had the right to retain the bene®t of any appre-
ciation in the value of the stock. The stock was trans-
ferred to Mr Bailey.
The matter proceeded in this fashion with no formal
trust agreement, no documentation of record or other
Page 267
Journal of Financial Crime Ð Vol. 12 No. 3
Journalof Financial Crime
Vol.12,No. 3,2005, pp. 267± 271
#HenryStewart Publications
ISSN1359-0790
To continue reading
Request your trial