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Vincent Parco Consulting LLC
Private Investigations

The Pirate in The Saville Row Suit

Appearance can be deceiving: in this cautionary tale Mr. Smith learns that he should have looked before he leaped at an opportunity that was too good to pass up.

Mr. Khan was the picture of a successful business-man. Born of upper-class Pakistani parents, he was educated in the finest schools in England. He wore impeccable Saville Row suits, drove Bentleys and Rolls-Royces, and he always had a beautiful woman on his arm. He conducted his business from opulent offices in Manhattan. Mr. Khan made money for his partners and especially for him-self. He ran two companies (Sarab Trading Co. and Byssus Textiles Co.) and a number of ad-hoc shipping companies that he formed when the right situation became available. Mr. Khan bought and sold commodities such as grain through the Sarab Trading Co., and he bought and sold textiles internationally and shipped them through the Byssus Textiles Co.

 Outwardly, Mr. Khan (not his real name; all names and identifying details in this article have been changed) was a hard-boiled, efficient, sharp businessman who allowed a number of partners to make money with him, but they never knew the true story—until it was too late. At the beginning everybody made money. Mr. Khan would offer good prices, negotiate March 1998 good deals for ships, and make a healthy profit for himself and his partners. As time went on, his business associates, business dealings, and business in general increased. It was not uncommon for Mr. Khan to be negotiating a multimillion dollar deal with companies in Pakistan, Korea, England, or anywhere else in the world.

 After doing business with a group of investors, one in particular became his major part-ner. His name was Mr. Smith, who thought he saw a golden opportunity and proceeded to invest large sums of money with Mr. Khan. Mr. Smith also brought in a number of his own business contacts and associates to invest with Mr. Khan. All was fine, apparently, for approximately two years, until Mr. Smith was surprised to find himself being served with legal papers involving a shipping deal that had gone wrong. Apparently, Mr. Khan had time-chartered a ship to bring Korean steel from Canada to the United States.  Mr. Khan received a generous fee for his charter. He chartered the ship with an option to buy, not taking title to the ship but insuring it with himself as the beneficiary of the ship’s insurance policy.

 Most of the ship’s crew were from Pakistan, South America, and China: There were no American citizens among the crew. Along the Atlantic coast, the ship developed “engine trouble” and docked in Balti-more, where it off-loaded the steel at 40¢ on the dollar. Mr. Khan pocketed this money. The crew was paid off handsomely in cash and the ship was then put out to sea and scuttled. Mr. Khan filed an insurance claim on the ship and its contents. The Korean steel company did not receive the insurance money for the contents of the ship, nor did it receive a refund on the charter: They were out millions of dollars. They proceeded to sue Mr. Khan and Mr. Smith for $4 million for the contents of the ship. Mr. Smith decided it was time to hire an investigator to check out Mr. Khan’s background. During the course of the investigator’s (belated) due diligence, he learned that Mr. Khan had had a number of lawsuits filed against him and had lost a number of them, so that he owed approximately $3 million in various civil judgements. According to the telephone records the investigator obtained, Mr. Khan was conducting business with other nancia1911entities. When the investigator contacted these businesses for general background information, his inquiries revealed that Mr. Khan was in the midst of— or making preparation to— defrauding these other businesses. Mr. Smith was informed by his investigator that he was one of many victims of Mr. Khan’s schemes.

The Devil Is In The Details

Even as the investigator was gathering more information, Mr. Khan moved from a Madison Avenue office to a Fifth Avenue office in Manhattan. Most people entering his office were impressed with the plush surroundings and had little doubt that Mr. Khan was a very successful man. Although he owed millions, it was a small unpaid bill that brought about the collapse of Mr. Khan’s house of cards: He did not pay a contractor $5,000 that he was owed on the renovations for his new office. As luck would have it, the contractor hired the same attorney who was representing Mr. Smith. That resulting $5,000 judgement proved to be the key that unlocked Mr. Khan’s schemes for all to see. Now that there was a judgement against Mr. Khan, Mr. Smith’s investigator was legally allowed to obtain a credit report. The credit report listed many real estate loans, holdings, and inquiries by several real estate, mortgage, and credit card companies. When the investigator contacted these companies, he uncovered all of Mr. Khan’s schemes and intended purchases of property. The investigator had found that Mr. Khan had based his entire business on a proverbial house of cards, and he informed Mr. Smith that in order to pay for his lifestyle (which included a $1.25 million home in Texas; a $875,000 home in Connecticut, and a $1.2 million condominium in Manhattan), Mr. Khan took from Peter to pay Paul.

The picture was constantly shifting: Mr. Khan proceeded to pay off almost $3 million dollars of the judgements outstanding against him. The fact that he had the ability to come up with this amount of money indicated to the investigator that he had a tremendous amount of cash income. It also suggested that Mr. Khan was cleaning up his credit for a future scam. Mr. Smith was able to extricate himself from the scuttled-ship lawsuit by suing Mr. Khan and reducing his involvement in the judgement. Although Mr. Smith still had a partial judgement against him, he was able to secure a judgement against Mr. Khan. From Mr. Khan’s credit report Mr. Smith learned of the mortgages on the houses in Connecticut and Texas, and he attached the houses. Unfortunately for Mr. Smith, Mr. Khan was able to dispose of the Texas house without Mr. Smith receiving proceeds from the sale. Mr. Smith attached Mr. Khan’s condominium in Manhattan and got back a considerable amount of his investment.

As Time Goes By

Things were quiet for a few years when suddenly Mr. Khan resurfaced. He was importing charters of textiles from Iran and pulled one of his pirate schemes in which the ship mysteriously disappeared. He collected the insurance on the ship, the goods, and so on. The Iranian carton company obtained a $3.3 million judgement against Mr. Khan in the World Court, which was troubled and therefore set the judgement at $10 million. Mr. Khan was successful in hiding all his assets. His whereabouts were unknown. The offices that fraud he had used to conduct his operation were found to be abandoned. A few months after the World Court judgement there was a front-page headline in a European newspaper regarding Mr. Khan’s dealings with a bank. According to the newspaper story, Mr. Khan was time-chartering ships, borrowing small amounts of money from the bank, increasing the loans, and then paying them back, developing an excellent line of credit with the bank. Once he had succeeded in raising his loan amount to $50 million, Mr. Khan proceeded to default. A member of the government who had assisted Mr. Khan in securing these loans with the bank, resigned in disgrace. The bank almost went belly up. Mr. Khan was put under house arrest, but eventually slipped out of the country. He returned to Pakistan, but his whereabouts are not known now. He is a fugitive from warrants in at least two countries. Wherever he is, Mr. Khan is most likely making more deals, ensconced in a well-appointed office and wearing a nice suit.

Seeing Red

Clearly there were red flags that were ignored by people who entered into deals with Mr. Khan. First, the shipping companies that did business with Mr. Khan did not follow-up within the trade regarding his dealings with other shippers, probably because they were blinded by Mr. Khan’s cheap prices: He offered a deal that was just too good to pass up. They ended up wishing they had.

Second, investors should have been suspicious about the w3ay that Mr. Khan dealt with so many people and conducted so many different business deals. Investors should have wondered if all those deals could possibly have all been above board. Mr. Smith regretted not hiring an investigator at the beginning of his involvement with Mr. Khan rather than waiting two years. Mr. Smith learned the hard way that all that glitters is not Gold.

Vincent Parco, private investigator, is a  Certified Fraud Examiner and Certified Forensic Examiner and member of the American Academy of Forensic Examiners. His professional experience includes terms as senior investigator with the Office of Professional Discipline and as senior investigator in charge of the Office of Professional Medical Conduct.

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