Seven Men Charged in Scheme after Bank Thwarts Computerized Embezzlement
CHICAGO (AP) _ Seven men were charged Wednesday with taking part in a sophisticated scheme to defraud First National Bank of Chicago and three of its corporate customers of $70 million by arranging bogus orders to transfer funds by computer, authrities said.
Named in criminal complaints charging illegal wire transfer of funds were two First National employees, a third Chicago man, and three men from Detroit, including 30-year-old Armand Moore, identified as the ringleader of the failed scheme, said U.S. Attorney Anton Valukas.
A seventh man was identified in the complaint only as ″the reverend,″ Valukas said. He declined to say whether the unnamed person had any ties to a religious group.
Four of the men, all of whom were arrested late Tuesday or early Wednesday, appeared for a preliminary hearing Wednesday before U.S. Magistrate Bernard Weisberg. They were Moore and Neal Jackson, 31, both of Detroit; and Herschel Bailey, 30, and First National employee Otis Wilson, 30, both of Chicago.
The four were being held at the federal Metropolitan Correctional Center pending a bond hearing Friday.
The second bank employee charged, Gabriel Taylor, 27, is cooperating with authorities, Valukas said.
Another Detroit man, Leonard Strickland, about 50, and ″the reverend″ were still being sought, he said.
The men are accused of transfering $70 million Friday from First National accounts of three customers - Chicago-based United Airlines; the New York- based brokerage of Merrill Lynch & Co.; and Louisville, Ky.-based distiller Brown-Forman Corp. - to two New York banks.
The money then was transferred to three accounts in two banks in Vienna, Austria.
Valukas said no money had been withdrawn from any of the four banks involved - Citibank and Chase Manhattan in New York, or from Creditanstalt and Focobank in Vienna.
The scheme became known to authorities shortly after Merrill Lynch officials uncovered a $24 million shortfall Monday and notified First Chicago, which in turn notified authorities, Valukas said.
He also said authorities were attempting to determine whether the accounts at the Viennese banks were fictitious. Two were in the names of companies, Lord Investment Inc. and GTL Industries, and a third was in the name of one Walter Newman.
″Our investigation into whether others are involved is continuing,″ Valukas said. Evidence will be presented to a federal grand jury to consider further charges, he said.
He said Moore recruited First National employees Wilson and Taylor, both of whom participated in the scheme by providing confidential information such as code words, which enabled the schemers to circumvent the bank’s security procedures.
Valukas said Taylor agreed late Tuesday to contact several other members of the alleged scheme and discuss the matter while wearing a recording device.
The prosecutor said $25 million in United Airlines funds had been transferred out of First National along with $24 million in Merrill Lynch Funds and $19.7 million in funds from Brown-Foreman.
First National spokesman Anthony Zehnder said neither the nation’s 10th- largest bank nor the three corporate customers whose accounts were involved would lose any money.
At First National and other large banks, money can be transferred to various accounts by computer. In transfers involving big sums of money, the bank routinely telephones the company to ask an official to verbally confirm that the transfer request is genuine.
A person with access to certain accounts and computer codes, and the ability to supply a bogus telephone confirmation, could arrange illicit wire transfers of large sums of money from Chicago to banks elsewhere.
″You could set up an endless chain of wire transfers with the right connections,″ Zehnder said.
Valukas declined to comment on reports that one of the schemers reportedly used fake tape recordings of the voices of two Merrill Lynch officials who were authorized to approve wire transfers. One of the officials was in California at the time, and the other was in the hospital.