I sat at the secretary’s desk, and after about two minutes Mike opened the conference-room door.
“Come in and have a seat, John,” he said.
“I passed?” Mike rolled his eyes.
“It’s your winning personality. Come on in.” I came.
“John, this is Rick Pierro. Rick, this is John March.” Mike walked around the table and sat down. Pierro rose, and we shook hands. He was about my height-just over six feet. I tossed my jacket on the table and sat.
“Sorry for making you jump through hoops, but this thing has got me wound up pretty tight.” Pierro’s palms were on the edge of the table, and he leaned forward slightly as he spoke. “What you said about trusting Mike was dead on. I trust him absolutely, and he tells me only good things about you. And you seem like a no-bullshit guy to me-so let’s go.” The accent was Long Island.
“Not a problem,” I replied. “What are we here to talk about?” Pierro glanced at Mike, then took a deep breath and dove in.
“You know much about Wall Street?” he asked.
“Some,” I replied. A smile flickered across Mike’s face.
“I’m at French Samuelson. You hear of it?” he asked.
“The investment bank,” I said. Pierro nodded.
“That’s what we are now-for better or for worse. When I started there, twenty years ago, we were a meat- and-potatoes commercial bank-deposits, loans, checking accounts, all the basics. Now we do it all-everything from traditional banking to mergers and acquisitions, IPOs, even venture capital. And we’re market makers in cash, fixed income, and derivatives, in every major trading center.” He said it with an odd mix of pride and irony.
“I’ve seen the change firsthand. I joined French straight out of college, went into the training program and then into corporate lending. I did well there. For three years I was the top loan producer, and in the meantime I’d gotten through b-school at night. Then I made the switch over to investment banking, and I did even better. I started as a junior associate in mergers and acquisitions. In two years I was running a team. Then I did a stint in London and another in Singapore. And in both places I brought in big deals, and big fees. I got management responsibility, too. From Sing I came back to the States, and ran a couple of different industry groups in M amp;A. And for the last three years-until six months ago-I ran all of M amp;A in North America. Six months ago I took over our venture capital unit.” He paused.
“Nice career,” I observed. I didn’t know what else to say. Pierro slipped his pen out of his pocket again. He twirled it in his thick fingers and nodded.
“I’ve done alright-despite what’s happened in the markets,” he said. “And, you know, I’m not an old guy. I got some miles in me yet. Two months ago, I find out I’m up for a spot on the executive committee. That’s the group of about a dozen senior managers that actually runs the whole place; you can’t go much farther at French.” Pierro paused again and looked at Mike, who moved his head minutely. Pierro continued. “A week ago, I get this.” He reached over to his suit jacket and took a thick envelope from a pocket. He slid it across the table.
Inside was a fax. The cover sheet bore only Pierro’s name in bold type, along with the message, “We’ll talk soon.” Vague, but ominous. The fax itself was comprised of five different documents: two letters and a memo, each dated eighteen years ago, and each concerning a company called Textiles Pan-Europa; a two-page list of what appeared to be funds transfers; and a copy of a year-old magazine article. One of the letters was on French Samuelson stationery; the other one, and the memo, were on the letterhead of a firm called Merchant’s Worldwide Bank. I leafed through the fax a couple of times, but I didn’t get it. Mike and Pierro watched me.
“This needs some explaining,” Mike said. “Have you read about Merchant’s, John? It got a lot of press a few years ago, and there’s a story on it every so often because the case is still going on.” The name was familiar, but I couldn’t place it and I told him so. “Maybe you know it by another name,” he said. “ ‘Money Washing Bank.’ ”
“The money-laundering thing.” I said. Mike nodded.
“I’ll give you the Reader’s Digest version; the details are in the file.” He pushed the filing box over to me and began.
“Merchant’s Worldwide Bank was the largest of several dozen institutions owned by a Luxembourg holding company called the Merchants Group. And, according to federal prosecutors, it was the largest criminally controlled financial services firm that anyone’s ever heard of. It had a lot of legitimate customers and did a lot of legitimate business, but that was basically window dressing. MWB’s real business was servicing a clientele that ran the gamut from bad to worse: drug dealers, arms merchants, dictators, terrorists-bad, bad guys.
“Money laundering was their leading service, and they were top-of-the-line providers. This wasn’t retail smurfing-no mom-and-pop operation passing a few million a day on the street. This was a wholesale business. They maintained hundreds of corporate shells-anyplace in the world you might need one-ready and waiting to funnel cash by the tens of millions, even the hundreds of millions, daily. These were entities with structures so twisted you’d need an army of accountants just to draw the org charts. And they controlled real companies too-legitimate businesses with offices and employees and products and everything. They’d buy into them, usually secretly, and turn them into cash conduits. Behind it all, to move the money around for them, they had a massive network of correspondent banks that included some of the biggest firms in the world.” Mike leaned back in his chair, his hands clasped behind his head.
“It was unique in terms of scale and scope, a beautiful thing, in its own way,” Mike continued, a hint of admiration in his voice. “But it started coming apart just over three years ago, when the number two guy at a regional bank called Southern States Trust tried to buy drugs from a DEA agent in San Diego. They got him dead to rights, video and all, so he did a lot of talking. One of the things he talked about was who really owned Southern States. A hungry assistant U.S. attorney in San Diego started pulling, and it all started to unravel. He documented a chain of secret ownership for Southern States through over a dozen proxies, in six different countries, leading back finally to MWB. The roof really caved in a short while after, when the head guy at MWB, a Pakistani named Zahed, was a no-show for a meeting with the U.K. authorities. Two weeks later he turned up in Kuwait, dead.
“That’s the condensed version. I didn’t even get to the investigation of the thing, which is a soap opera in itself. The number of agencies involved in this country alone is staggering. Add in the players from all the other countries MWB operated in, and you get a zoo. It’s all in the file.” I was quiet for a moment, letting the story sink in, recalling some of what I had read about MWB over the last couple of years.
“Mike, you know I always like the business, but this kind of forensic accounting thing is really not my line,” I said. “There are firms that specialize in this.” I knew he understood; this was for Pierro’s benefit. But Mike went on.
“MWB is the background, John, but this case isn’t money laundering. Take a closer look at the fax.”
I picked up the fax again, and went through the five documents in it. The first was a letter on MWB stationery, from an MWB managing director named Gerard Nassouli to Emilio Dias, who had apparently been the treasurer and CFO of Textiles Pan-Europa. It was dated February 14, eighteen years ago. Valentine’s Day. In the letter, Nassouli reports that he has been dealing with a “sympathetic” and “flexible” banker at French Samuelson, who will help to establish a credit facility for Textiles’ U.S. subsidiary, Europa Mills U.S.A. In the letter, he names the banker: Rick Pierro.
Next was an internal MWB memo, dated a week after the letter, written from Nassouli to “The Files,” and describing a meeting between him and Pierro. At this meeting, according to the memo, Nassouli and Pierro filled out the French Samuelson credit facility application for Textiles, and they prepared the Textiles corporate documentation, required to establish an account at French.
This was followed about three weeks later by a letter from Pierro to Dias, confirming that a revolving credit facility would be established for Europa Mills. The next document was the list of funds transfers. Each entry consisted of a date, an amount, an ordering party, and a beneficiary. There were well over a hundred of them, listed on two pages, and they spanned a six-year period that began eighteen years ago. Given the context, and the parties involved in the transfers, they seemed to represent drawdowns by Europa Mills U.S.A. against its credit facility at French, and subsequent repayments of the loans, with interest, by Europa Mills’ parent company, Textiles Pan- Europa. If that’s what they were, then in a six-year period, something over $120 million had flowed back and forth between French, Europa Mills, and Textiles.
The final document in the fax was an article from the Economist, an issue late the previous year. It was a piece about the aftermath of the MWB collapse, or one aspect of it. It focused on four different European companies. According to the article, they had all at one time been vital, expanding concerns, but were now just so
