In 1998, I was only two years into my post-FBI career when I was part of a team dispatched to BankBoston’s private banking office headquartered in New York. It was not immediately apparent that a crime had been committed. An audit had revealed some irregularities in connection with some private banking accounts. We were sitting in their Madison Avenue offices waiting for the private banking general manager Ricardo Carrasco to arrive.
Mr. Carrasco was a 20-year employee of the bank who was well-regarded by his superiors and beloved by his 27 employees. He was the head of the bank’s private banking unit and was supposed to take part in a meeting to help sort out some irregularities and locate missing collateral. He was running late and his supervisor who had traveled down from Boston that morning for the meeting was clearly on edge. The plan was for the initial meeting to be between Carrasco and his supervisor, and then Carrasco would join us in the conference room later and walk us through the account records. After about 45 minutes, Carrasco called in claiming he had a flat tire and that he’d be arriving late. Minutes turned to hours, and there was no further contact with Carrasco. Not surprisingly, the anxiety level shot through the roof. By the end of the day, the bank was no longer looking at this as a record-keeping irregularity.
Background investigations were commenced, surveillance teams were deployed to several locations, and a team of forensic accountants drilled down deep into the customer accounts from which the funds were missing. After some painstaking review, a picture started to emerge.
Oldemar Carlos Barriero Laborda was a prominent Argentine businessman – the owner of the Boca Juniors professional soccer club and the Argentine licensee of LoJack, a stolen vehicle recovery system that enabled the tracking of stolen vehicles. When Argentine soccer legend Diego Maradona passed away recently, memories of this long-forgotten case came rushing back. In 1998, Maradona was the star of the Boca Juniors, a soccer legend, and perhaps less known as the payee in many checks drawn on the private banking accounts controlled by Barreiro. Not many bank crimes are also missing person cases, but this was not the typical bank fraud case.
The Carrasco case is a cross-border financial crime worth revisiting, and its lessons remain as relevant today as they were in 1998 when the fraud first erupted. On a recent episode of Fraud Eats Strategy, I was joined by retired FBI Supervisory Special Agent Steven Garfinkel who in 1998 was the squad supervisor of C2, the New York FBI internal bank fraud squad to discuss the case.
Steve’s first involvement with the case was when the bank’s head of corporate security showed up at the FBI offices in New York. The security director wanted to discuss Ricardo Carrasco, a banker that had gone missing and he wanted to know if the FBI could provide any assistance. Steve asked: “Did he do something, some sort of crime that you want to report?” And he said, no, he’s just missing. Steve told him the FBI doesn’t do missing persons cases and that he should report it to the local NYPD precinct, where Carrasco lived in the East Village. At the time, the security director either didn’t know anything else or wasn’t permitted to share anything further and he left. It seemed odd and Garfinkel never had a contact like that before.
At the same time, there was a team of forensic accountants and investigators at the bank’s offices every day, scouring through bank statements, canceled checks and wire transfers. Ultimately, the team was able to determine that 17 private banking accounts evidenced an illicit relationship between Barriero and Carrasco. Carrasco was an Uruguayan private banking manager with a lavish lifestyle living in New York and Barriero was the flashy, high-profile, mercurial owner of the Boca Juniors and a notorious guy then and now in Argentina. The accounts themselves were each depository accounts and unusual in that they were attached to separate, collateralized lines of credit or, more accurately, the appearance of being collateralized. As it turned out, Barriero was the beneficial owner of all 17, but his control over those accounts had been concealed from the bank. It was only through a combination of background investigations and the ongoing analysis of the money flows between the accounts that demonstrated that Barriero controlled each one. And while Carrasco is the name that’s most prominently mentioned in media accounts associated with this case, it’s all about Barriero.
Even the way the fraud was first discovered was unusual. Carrasco had been out on mandatory leave. Mandatory two-week leave is something the financial regulators mandate in financial institutions for all employees handling funds. During a mandatory absence bank officers cannot have contact with the bank, customers or do any business. It’s a control to make sure somebody is not committing a long-term fraud. Before his leave, Carrasco had been managing a series of accounts for a wealthy South American family made up of three brothers. Carrasco created a fictitious brother and that fictitious brother had loans secured by CDs owned by the real brothers. While Carrasco was on his mandatory leave, one of the CDs was maturing and his executive assistant took the initiative of calling one of the real brothers and asked “what do you want us to do with this CD that’s about to mature” and she gave the name of the fake brother as the account holder. Carrasco’s fraud had been exposed and the regulatory requirement for mandatory leave was validated along with it.
Between the time the bank first contacted the FBI and was able to dig into the fake brother scenario, it was a few weeks. At that point, the bank had more questions than they did answers, and they needed Carrasco to fill in the blanks. But then he stopped coming to work and the bank audit turned into a manhunt. At the same time, the internal investigation had already concluded that very little of the collateral that had been attributed to the 17 Barriero-controlled accounts was legitimate. It was either collateral of unrelated and unwitting bank customers, which had been misrepresented as security for the Barriero accounts or it was just completely fictitious. Worse still, in the months preceding when the case first came to light, Barriero had drawn down all of the lines of credit to their maximum leaving the bank with potential exposure of $73 million.
During the early days of the internal investigation, there were daily phone calls with the bank’s executive team, legal counsel and several members of the investigative team including me. In one conversation, the subject of getting the bank’s corporate security department involved in the investigation was raised. I remember being surprised and thinking “why wouldn’t corporate security be involved from the outset?” Something even more surprising came next. In response to the suggestion of getting corporate security involved, someone said: “don’t call security because those guys will tell the FBI.” I already thought it was strange that corporate security wasn’t involved but this threw me.
At the risk of seeming like an apologist, you need to take into consideration that it was 1998. When I first transitioned from the FBI to the private sector in 1996, I very quickly concluded that whatever dollar amount attributed to white-collar crime, in general, was probably 5% of actual. Disclosing the existence of a financial crime in a commercial setting was seldom anyone’s first instinct back then. At the time, many white-collar crimes went unreported or under-reported. This wasn’t anything that unusual in terms of organizational mindset at the time. Importantly, when that corporate security director first came to visit Steve in his FBI offices, chances are he didn’t know the full scope of what was going on.
Some red flags had been missed. Carrasco was beloved, autonomously running a satellite office and with little to no oversight. No one at the bank other than him had ever met Barreiro which is highly unusual. Another red flag is people who don’t ever take a vacation. Many frauds require daily activities to keep them concealed. Mandatory leave policies can end up exposing frauds as a result. Many investigations happen as a result of the main fraudster going on vacation, a sudden illness, or even a death making it impossible to continue to conceal the fraud. Indeed, the fraud was found by accident while Carrasco was on leave. Another somewhat unusual thing was that although the private banking operation was headquartered in New York City, its private banking clients were exclusively high net worth Argentinians, Uruguayans and Brazilians. Perhaps the most glaring red flag was Barriero himself. He was a high-risk customer no matter how you looked at him. He was a close associate of the then Argentine President Carlos Menem which is within the meaning of the term: Politically Exposed Person. On the surface, Barriero seemed like an entrepreneur and successful Argentine businessman. He was also the Argentinian licensee of LoJack, a stolen vehicle recovery system. Beneath that surface though were some glaring red flags had anyone taken the time to look. He was reputed to be the head of a major car theft ring operating out of the lawless tri-border area where Argentina, Paraguay and Brazil meet. He had also been barred by the Argentine banking sector between 1992 and 1996 for his frequent use of bad checks. But “Know Your Customer” wasn’t a thing back then and anti-money laundering compliance was in its infancy.
The FBI case on Carrasco continued for months. The Bureau had information that he had been seen traveling from his apartment in New York out to the Hamptons. Surveillance did not locate him though. A search of his apartment was also unproductive. The FBI subsequently learned that Carrasco was believed to have boarded a flight out of Newark using someone else’s identification (that was possible back then) which was bound for California. And the very last thing anyone heard about Carrasco was that he was seen in Tijuana, Mexico boarding a private jet owned by Barriero. When that same jet landed in Argentina, Carrasco was not on board and has never been seen again.
The bank investigation moved forward leading to the bank successfully submitting an insurance claim and recovering over $50 million what had been a $66 million loss. The bank moved the headquarters of its private banking operation out of the U.S., was eventually sold to Fleet Bank which itself was acquired by Bank of America. Without a person to charge with a crime and put on trial, the FBI case was eventually closed.
Meanwhile, Barriero was unscathed and unrepentant. One of my favorite instructors at the FBI Academy was famed Behavioral Science Unit profiler Roger DePue. He was fond of saying that the best predictor of future behavior is past behavior. It’s a truism that has played out countless times throughtout my career. In doing some research in preparation for this podcast episode, I learned that Barriero has continued to command the attention of law enforcement. As recently as 2017, he was under house arrest, wearing a monitoring device, which back then we used to refer to them as LoJack. His latest brush with the law was an organized crime case – a large scale, Customs duty fraud matter referred to in the Argentine papers as the Container Mafia case. 22 years after having defrauded BankBoston, Barriero is still running afoul of the law.
In 1998, witnesses painted a picture of Barriero larger than life, charismatic, intimidating, and sometimes terrifying. Indeed, he shot a subordinate in his office while we were investigating him. Those who knew both men speculated that Barriero romanced, intimidated, extorted and ultimately corrupted Carrasco to establish an enormous, unsecured line of credit with no risk to his assets if he were to default. Which he did. There’s no indication that Carrasco derived nearly the financial benefit from the scheme that Barriero did – it appeared he was just manipulated and ultimately discarded when Barriero had no further use for him.
There are a lot of unanswered questions in this case. Most notably, if Carrasco was still alive – wouldn’t he have come forward to put the blame squarely on Barriero’s shoulders? And did he board Barreiro’s private jet in Tijuana and mysteriously disappear somewhere between Tijuana and Buenos Aires? Some mysteries remain unsolved.
To hear the full Fraud Eats Strategy podcast episode with Steve Garfinkel, click here.
Note: The postings on this site are my own and do not necessarily represent FTI Consulting’s positions, strategies, or opinions