The Big Sting

The collapse of New York’s twin towers two years ago tomorrow also marked the collapse of an international swindle that stole millions from some very prominent Australians. Not that many of them are keen to talk about it. Nor is the National Australia Bank, where the funds were deposited. Peter Martin reports. (Includes footage from The Profiteers, by Studio Hamburg Documentaries)

REPORTER: Peter Martin

The opulent foyer gushed wealth and financial probity. But upstairs things were different. Crammed into spartan cubicles, more than 100 very persuasive and persistent salesmen would work well into each night, making thousands of phone calls to Australia.

ACTUAL PHONE CALL, COURTESY US ATTORNEY’S OFFICE: I'm one of the top 10 money managers here on Wall Street, OK, I've been written up in the 'Wall Street Journal' twice. I want you to open with me on a very small level of US $12,000.

In Northbridge, on Sydney's Middle Harbour, Bert Needham was taking yet another telephone call from someone called Bob Ellenbogen.

BERT NEEDHAM: Some of the calls lasted, without exaggeration, up to three hours. Now that's a long time on the phone but this bloke was so convincing, this fellow Ellenbogen, um, it's hard to say no to these people.

It seemed too good to be true, Bert was being offered an investment return of up to 25%.

BERT NEEDHAM: I agreed to have a look at what he had to offer and then I received these rather beautifully done brochures from New York, Fifth Avenue stamps on them. It's pretty impressive.

Bert made his money in the automotive business. Now retired, he loves restoring this rare Mercedes. Bob Ellenbogen happened to have the same interest in luxury cars.

BERT NEEDHAM: He bought his wife a brand-new Mercedes. It's funny after you talk to a guy for such lengthy periods on the telephone, that you sort of, it became Bert and Bob and...

Ellenbogen had an incredibly reassuring sales proposition for Bert.

BERT NEEDHAM: Well, the hook was that the funds are presented through the NAB.

REPORTER: You felt good about that, the National Australia Bank?

BERT NEEDHAM: Oh, absolutely, I felt good about that part and there was a branch near my office, which I went to, and there was an account number for Equity First trading, which was Evergreen, and I was under the impression... In fact, I phoned the NAB in Melbourne and they said, "Yes, everything's above board here, that we're TT'ing these funds across to Chase Manhattan."

Evergreen told its clients that most of their funds would stay in these bank accounts, acting merely as security while Evergreen traded in currency markets.

It was a guarantee that won over Terry Ward. For most of the 1990s, he was the chief executive and then chairman of Heinz in Australia. He now lives in the south of France. Many of the 250 Australians lured into Evergreen were unusually wealthy, several of them at the very top of corporate Australia. 20 put in more than $1 million each, 5 more than $4 million. They were seduced by attention.

TERRY WARD: We received things like beautiful leather-bound diaries at Christmas with Evergreen on them. I have a very nice desk clock, I have a travel alarm clock, and all these things came through regularly as Christmas gifts. I mean it seemed like a well set-up corporation, not like a backyard scam.

BERT NEEDHAM: See, I could paper a room with these type of statements I've got. They just kept on coming all the time.

Bert won't say exactly how much he invested, but as the monthly statements arrived, he had no reason to doubt that he was making money. The statements were prepared by First Equity, Evergreen's sister company. But First Equity wasn't what it seemed.

Even its address in New York's World Trade Centre was a front. Inside was a one-room office and a president, Gary Faborov, who spent most of his time playing fantasy baseball on his computer. Both companies were controlled by this man, Andrei Kudashev a very charismatic Russian-American.

ALBERT GUGLIELMO, EVERGREEN INTERNATIONAL PRESIDENT: He had a way of getting people to feel like a million dollars. I saw him bring people that were depressed and 10 minutes later they felt like they'd just won the lottery.

Albert Guglielmo was the president of Evergreen, in charge of their sales team. He called them brokers and rewarded them well. If they snared a $1 million investment, their commission was 10%, or $100,000. The only catch - if a client wanted to take their money out, the broker had to give the commission back. But it seems these brokers didn't actually trade any foreign exchange.

Ex-New York cop-turned- private investigator Gus Papay became suspicious as early as 1998 when an Evergreen customer phoned to say that something about the brokers' telephone manner didn't seem quite right.

GUS PAPAY, PRIVATE INVESTIGATOR: He says he could hear in the background, as if somebody was coaching the salesperson, the account executive, as if the person was telling him what to say to the investor, what to ask, and how to talk.

Gus Papay went undercover to meet Albert Guglielmo.

GUS PAPAY: And I said, you know, I'm really enthusiastic about this. How would I get into this business of foreign currency exchange? And he says "Forget about it." He says, "Nobody makes money trading foreign currency." He says, "You'll probably go bankrupt in a week."

Evergreen's entire trading division consisted of one 28-year-old, Mamed Mekhtiev. He reported impressive paper profits, but they were false.

Enjoying success on paper, very few of Evergreen's 1,400 investors bothered to take their money out. In 1999, Gerry Cahill travelled to New York to make sure that he could. He needed $250,000 urgently in order to secure a mortgage.

GERRY CAHILL: The money was there. It was there on demand. And then any, any sort of reservations I had, in many ways, sort of disappeared because it was comforting to know that you ask for your money, you get your money.

Two months later, Gerry Cahill put his money back in.

GUS PAPAY: It was like a pyramid scheme. What they did was, they solicited money from new investors. And if an older investor wanted to take his money out, they would use the new investment money to pay him off.

Bert Needham was part of the pyramid. His broker Bob Ellenbogen got him to hand over to Evergreen the names of friends.

BERT NEEDHAM: Yes, I had, because I had no reason not to at this stage. And I gave them some names and I guess they were just possibly using me the same way they used the first fellow that I called.

But then in 2001, something happened to make Bert Needham suspicion. A top official from Evergreen was visiting Australia and wanted to meet him at Sydney's Park Hyatt hotel. Bert went to the hotel and waited, and waited. 90 minutes later, another Evergreen official appeared and apologised.

BERT NEEDHAM: We went into the dining room there and sat down, having coffee. The fellow I was with was extremely agitated. He kept looking over his shoulder, at the back of him, looking everywhere as if somebody's going to fall through the roof on top of him. And I said, "Are you OK?" And I must admit I started to get a bit worried too. I thought, God, who's going to come in next?

And there were other bizarre attempts at public relations. From the south of France, Terry Ward was invited to Long Island, New York, and the home of his broker, Justin Faucci.

TERRY WARD: We went out there. His wife was there, his baby, I think an aunt, an old aunt of the family, a Catholic priest called Father Joe. And we had a great time, sitting around the pool, drinking lots of nice champagne and then, at the end of the day, we were chauffeured back to New York.

By the middle of 2001, the pressure to put in more money quickly became intense.

BERT NEEDHAM: About a month before the tragedy in New York, they offered me two-for-one, but I'd have to get some dough in, in a hurry.

REPORTER: Two-for-one?

BERT NEEDHAM: Yeah, two-for-one, one share, and then double it. It was some special deal that they had going. And so I sent them some more dough, and I don't think I even got the statement, because that's when the towers collapsed.

Hello? Oh, thank you, Bob, I was getting a bit worried. I tried to call you... I was at home here, I was down the front of the house, my mobile went and it was Ellenbogen on the phone, saying, "Bert, there's no need to worry about anything. I'm in the other office, on Fifth Avenue, not in the tower, everything's under control, don't worry about it." And I said I was a little bit itchy about what was happening, ad he said, "There's no need to fear anything at all." And that was the last call I had.

In the days following September 11, the head of Evergreen, Albert Guglielmo, suddenly finds he can't contact the firm's owner, Andrei Kudashev. He's in Moscow. On Sunday September 22, Albert is called to an urgent meeting on a Brooklyn golf course. As he told a US court, present were the head of First Equities, Gary Faberov, and Evergreen's chief salesman, Justin Faucci.

ALBERT GUGLIELMO: Justin's like, he's a little upset. I could see it. So he tells Gary Farberov, "OK, tell him, OK, tell him." I said, "Tell me what?' So Gary Farberov comes up to me and goes, "Andrei Koudachev is gone." Exact words OK? "Andrei Koudachev is gone and the money's gone and you'll never see Andrei or the money again."

As the scheme unravels, the three turn on each other in a pizza bar. As much as US$104 million is missing. Farberov suggests a cover-up.

ALBERT GUGLIELMO: So he says, "Why don't we keep it going? Keep raising the money like nothing happened. We'll raise money, we'll pay off the old investors and then one day I'll go in the market and I'll say I lost $100 million trade and we'll do it slowly," he says. "I'll say I lost $20 million on this trade, #20 million on this trade and eventually we'll say we lost the whole thing, trade, I'll write up tickets and everything." So what, are you out of your mind? So what are you, nuts? He goes, "If not, we're all going to jail." I said, "I ain't going to jail." I said, "You're going to jail. I guarantee you that."

Albert Guglielmo acts to save his own skin. As the business day begins in Melbourne, he calls the NAB and begs them to freeze what's left of the First Equity account.

MAN ON TELEPHONE: I am recording this conversation and I will use it against your bank if that money disappears, and I'm going to the authorities. I think you should watch that account very seriously. OK?

SECOND MAN: Alright

FIRST MAN: OK. Thank you. Thank you. Bye-bye.

A few hours later the president of First Equity, Garry Farberov, phones to clean out the account. The bank tells him about Guglielmo's call.

LOUIS R AIDALA, GUGLIELMO’S ATTORNEY: My understanding is that Farberov convinced them that these were simply the complaints of former employees who were disgruntled. And apparently he was persuasive enough so that they felt that they could comply with his request and they faxed him money, which I think was in the amount of approximately $2 million.

Then Garry Farberov went to Las Vegas and gambled big.

ALBERT GUGLIELMO: He goes to Vegas. We find out now he went to Vegas and he's gambling $20,000 a hand.

Faberov had been emptying the NAB account from the beginning. Documents presented in court reveal that First Equity showed its account balances to be like this when anyway were actually like this. The court found that Faberov had been keeping some of the money himself and wiring the rest to companies controlled by Andrei Kudashev in Eastern Europe.

ALBERT GUGLIELMO: This is how smart Andrei is. I mean this guy was just unbelievable, OK? Now, you got these people's money being transferred from their own private account in NAB into First Equity's account in NAB. You've got $50,000 going there, $100,000, $50,000, $20,000, $100,000, $300,000, whatever it is. And then you've got Farberov taking the money out of the same bank and wiring it to Budapest, month after month after month for 3.5 years, 4 years. And NAB doesn't know. You explain that to me.

We asked the National Australia Bank to explain. We sent it 11 detailed questions and received back this 4-sentence response.

The bank says it checked to: “determine that an appropriate officer of First Equity was opening a bank account on behalf of that company."

But evidence given in a US court case shows those checks to have been inadequate. The man who applied to the NAB for the account has admitted that he lied. He told the bank that he was a director of First Equity when in fact he was not.

While the US court case has come up with some answers, Bert Needham has had much less success dealing with the NAB itself. His local branch asked him to phone an official at head office in Melbourne.

BERT NEEDHAM: He seemed to be under duress about even discussing the thing. They just brushed me off like... I just couldn't believe that a big bank would do that. And they just brushed me off and cast me aside and I can never get on to anybody after that.

Australia's corporate watchdog doesn't seem overly concerned about the NAB's role in the whole affair. Its response? It's working on a brochure warning people that banks have limited responsibilities in these matters. But it hasn't yet got the banks to agree to distribute the brochure.

PETER KELL, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION: We haven't come to an agreement on a warning as yet but that's because we're still looking at, from ASIC's end, what might go in a brochure and how long it would be and how it might best be distributed.

In the US, while most of the brokers involved have not faced charges, all of Evergreen's most senior staff have been found guilty of conspiracy and money laundering - among them, Albert Guglielmo, who's facing 30 years in jail. All except the owner of Evergreen, Andrei Kudashev. Since moving to Moscow, he's been economic adviser to the regional governor, head of the region's gas company and president of the Russian manufacturers union.

Back home, the NAB is being sued by at least one investor in Evergreen in a belated attempt to freeze the account and discover documents. It says it cooperated to assist the investor, and the action has been withdrawn.

Unlike Bert Needham, many of Evergreen's wealthy and prominent Australian customers are reluctant to reveal themselves. They won't be suing and they wouldn't be interviewed for this program.

BERT NEEDHAM: If you've been successful, you get lazy, because you're not as hungry as you used to be. It seems they value their reputations more than the money they've lost. One told Dateline he'd lost $2 million but was OK, because it was only about 5% of his total wealth.

BERT NEEDHAM: I guess the fox gets caught by the fox.

But others in Australia and overseas borrowed to invest in Evergreen and have seen their future destroyed.

GERRY CAHILL: I felt, well, total betrayal. But it's like any pain. I had a lot of sickness and illnesses and surgery in my life and therefore a lot of physical pain with it. But pain disappears in time and it recedes.

Bert Needham is philosophical about his loss but bitter about his treatment by the National Australia Bank.

BERT NEEDHAM: Banks are the people that give you the... When the sun's out, they give you the umbrella. When it starts to rain, they want the thing back.

Source SBS

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