THE SECRETS OF 40 WALL ST
In a country where image sells everything; certainly commerce and pop culture, and arguably…a war, why not a multi million dollar currency trading firm? A movie-like Wall Street funhouse where the mirrors, set between mahogany wood paneled desks that housed a staff comprised of young, wealthy, and arrogant traders who beat investors in the United States, Australia, Britain, Canada, New Zealand, and Norway out of upwards of one hundred million dollars, would only reflect the ignorance of it’s investors and the impotence of the S.E.C., while artfully concealing the steady flow of their clients funds being poured into accounts in Austria and Budapest.
The scam, much like Enron’s mark to market accounting with Arthur Andersen: “Our profits are what we say they are,” was stunningly simple. In Evergreen International’s language, it was “Your money is where we say it is.” To the world Evergreen was a well packaged currency trading establishment with three New York offices. The office at 40 Wall St. was constantly packed wall to wall with traders pounding thousands out of the phone with every call, and then Gary Farberov, former president of First Equity (the clearing house used to launder the money) and Andre Kodouchev, the owner of both companies, would make large deposits in foreign banks. Clients would be allowed a portion of their money on occasion. As a former employee said “You give the guy a hundred grand to get the Ferrari-why f—k up a good thing.” If clients wanted to cash out their whole account, the Evergreen traders were instructed not to take no for an answer. At all costs, keep them in.
The goal of the aggressive traders that Evergreen International Spot trading and First Equity Enterprises employed was to build relationships with clients, gain their trust, and then convince them to invest their money in currency markets that were, in actuality –the private bank accounts of the Russian mob. The traders would call wealthy individuals, owners of companies etc, and pitch them 25% returns with the tenacity and bravado that comes with a $50,000 monthly check (not an uncommon payout for 8 to 10% commission, which Evergreen traders commonly received.) These guys, many from Long Island, like their sales managers Justin Fauci (who legend has it, in a moment straight out of the movie Wall St. burned $10,000) were skilled at sales and motivated by money. They didn’t ask too many questions. Those who did, didn’t last. The cash flowed like Stoli in a Moscow whorehouse, and for a while, everyone was happy.
Since Forex trading fell under the realm of unregulated foreign currency markets, Evergreen International Spot trading enjoyed the benefits of a powerless and disinterested Securities and Exchange Commission throughout the tech boom of the late 90’s, enabling them to pillage $110 million U.S. (In all, prosecutors said, more than 1,400 Evergreen clients in more than a dozen countries — many from Australia and New Zealand — were cheated of $110 million from 1998 to September 2001.)
The firm’s clients, over 1400 worldwide, but mostly from Australia and New Zealand, lost millions they thought were secure in accounts. “Reputable” banks like the First Bank of Australia and Chase Manhattan were in on the action for a while. (Curiously, much like when they invested 50 million into a partnership with Enron called LJM that Enron C.F.O. Andy Fastow made up; you can count on Chase Manhattan to do no homework ever.) Evergreen International and First Equity Enterprises (the supposed clearing house) were indeed the worlds’ most successful “boiler room.” The characters are begging for a major motion picture: politically connected Russians (owner Andre Koudachev was a consultant to the governor of Moscow), a team of ruthless traders, and the beautiful but venomous female executive- who, herself, tried to make off with 90 million.( And They say women aren’t equal in the workplace!)
Polina Sirotina, who was an financial officer at the now infamous Evergreen International spot trading and it’s metaphorical clearing house “First Equity Enterprises” (that actually served as the chop shop for the wildly successful forex trading/money laundering operation): glanced in the mirrors more than once to admire a $100,000 necklace or fur coat purchased unwittingly for her by the Australian investor class.
In January of Evergreen’s final year, a New York private investigator, Gus Papay, made a formal complaint to the SEC about the regulator's failure to look into allegations he made in 1999 about the activities of Evergreen and First Equity. .Mr Papay was hired in 1999 by a Canadian client to look into the two companies. His client was already an investor and was being pressed to add more funds to his Evergreen account. Mr Papay visited the Evergreen premises, became suspicious and advised his client to withdraw his money. Mr Papay also contacted the SEC at the time to raise concerns about the two companies. He says he was told by an SEC lawyer there was nothing it could do because the forex industry was unlicensed. So after a long successful run, the cracks in evergreen’s foundation began to show. The two Canadian investigators were sure something wasn’t quite right. The tactics employed by brokers at the instance a client wanted to clear an account were a tip off.
The most interesting thing about Evergreen International wasn’t the scam. Getting New Zealanders to invest in phony currencies is about as impressive as saying that Bill Clinton hit on you. Both events are rather common. What intrigues me about Evergreen is how easy it was to fly under the radar for so long, without the status or political connections of a company like Enron. Evergreen relied solely on presentation to sell itself. The mixture of well polished operation and an unregulated product set in motion what can be called the most successful boiler room in history. I’m sick and tired of debating the ethics of corporate governance every time a company is successful in defrauding its investors. The American left will say that capitalism is to blame: “we need more regulation.” (Fun Fact-Tyco, WorldCom, Global crossing: all regulated companies!). The American right will say it’s a Godless society that spawns a materialism so virulent it masks right and wrong. I say shame on everyone. Shame on the traders (those who even knew what was going on-in a company like Evergreen-you were on a need to know,) shame on the investors for being foolish, and shame on the masterminds for using our country and our laws against us. Shame on the S.E.C. for lying down. But most of all, for this ardent capitalist, shame on a public that only asks questions after the fact, and lets a well presented hoax become reality-whether in the case of a war, an election, or a currency trading firm.
The two companies and their owner, Andrei Koudachev, and the president of First Equity, Gary Farberov, were indicted by the US attorney's office after the collapse of the World Trade Center in New York. First Equity had offices in the twin towers, and when investors tried to get their money back after September 11 they found the principals and the money had disappeared.
The lucrative, and unnoticed jig-was up. Thus began the list of indictments:
Mr. Gary Farberov, the former president of First Equity, which represented itself as a clearing house for Evergreen, but was allegedly a shop front for money laundering by siphoning investors' funds to secret bank accounts in Hungary and Austria changed his previous not guilty plea to guilty.
Defendant: Forex International Ltd. charged with: 18:371, and 3551 et seq. - did knowingly and intentionally conspire to devise a scheme and artifice to defraud. Status: Unknown
Defendant Andrei Borisovich Koudachev charged with: 18:371, and 3551 et seq. - did knowingly and intentionally conspire to devise a scheme and artifice to defraud.
Defendant Gary Farberov charged with: 18:371, and 3551 et seq. - did knowingly and intentionally conspire to devise a scheme and artifice to defraud. Status: Unknown
Defendant Evergreen International Spot Trading, Inc. charged with: 18:371, and 3551 et seq. - did knowingly and intentionally conspire to devise a scheme and artifice to defraud. Status: Unknown
Defendant Sergei Habarov charged with: 18:371 and 3551 et seq- CONSPIRACY TO DEFRAUD THE UNITED STATES (Conspiracy to Commit Mail and Wire Fraud) Status: Fugitive
Defendant Polina Sirotina charged with: 18:371 and 3551 et seq- CONSPIRACY TO DEFRAUD THE UNITED STATES (Conspiracy to Commit Mail and Wire Fraud) Status: Released.
Defendant Justin Fauci charged with: 18:371 and 3551 et seq- CONSPIRACY TO DEFRAUD THE UNITED STATES (Conspiracy to Commit Mail and Wire Fraud) Status: Released.
Defendant Mamed Mekhtiev charged with: 18:371 and 3551 et seq- CONSPIRACY TO DEFRAUD THE UNITED STATES (Conspiracy to Commit Mail and Wire Fraud)
Status: Released - Fugitive
Defendant Peter Papaemmanuel charged with: 18:371 and 3551 et seq- CONSPIRACY TO DEFRAUD THE UNITED STATES (Conspiracy to Commit Mail and Wire Fraud) Status: Released.
Defendant Albert Guglielmo charged with: 18:371 and 3551 et seq- CONSPIRACY TO DEFRAUD THE UNITED STATES (Conspiracy to Commit Mail and Wire Fraud) Status: Released.
Defendant Philip Levenson charged with: 18:371 and 3551 et seq- CONSPIRACY TO DEFRAUD THE UNITED STATES (Conspiracy to Commit Mail and Wire Fraud. Status: Released.
Defendant Brian Pasqualini charged with: 18:371 and 3551 et seq- CONSPIRACY TO DEFRAUD THE UNITED STATES (Conspiracy to Commit Mail and Wire Fraud) Status: Released