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In the Yellow Kid's biography, Conman : A Master Swindlers Own Story (Library of Larceny)
The essence of the scheme was this. Kid and his associates bought the American State Bank for $75,000. They retained all the staff, but three key positions were held by Kid and his group.
The Bank's ordinary business was conducted legitimately, but using the bank's engraved stationary, Kid constructed six letters of credit for $100,000. These were circular letters of credit, upon which each merchant who honors the letter of credit wrote a fixed amount on the back.
Kid and his merry gang then took the letters of credit to Europe and went on both a spending spree and an advance fee scam. They would purchase, say $2500 worth of goods, and then asked the merchant for the same in an advance, all against the bank's circular line of credit.
"If any bank had cabled to Chicago to see if the letters of credit were good, their cashier at the Bank, was ready to cable back that they were good."
Newman was a disbarred attorney picked for the part.
The letters of credit would take over a month to clear, so all Kid and his gang had to was get out of Europe in under a month.
When the letters of credit were presented to the Bank, the President, part of Kid's gang, protested the letter and refused to pay.
"This letter of credit was issued without my knowledge. Obviously it was a fraud perpetrated by the cashier, who signed it. The cashier has absconded and we have been unable to find him."
Kid and his gang cleared around $300,000, at a time when the pay for an average worker was $500/week.
(Read the entire book to find out what happened in the aftermath to the President.)
Now, low at this recent FBI Press Release on the Nemazee fraud.
Representatives of Citibank told NEMAZEE that he needed to produce written verification of his collateral for the Citibank loans, which collateral was purportedly being held in an account at Pershing LLC.
The Citibank represntatives specified that the verification would have to be "an original letter on Pershing stationary [sic] signed by an authorized representative of Pershing." On August 13, NEMAZEE and KASCHANCHI exchanged e-mails arranging to talk the next day.
On August 14, KASCHANCHI sent NEMAZEE an e-mail in which KASHANCHI stated in part: "Here is a try. Looks good from my end. . . . Compare it to an original if you have it."
Attached to that email was a piece of fake Pershing letterhead stationery, listing as Pershing's address and telephone number an address and telephone number associated with a Manhattan-based "virtual office" that NEMAZEE himself had established and bearing the name of an actual Pershing LLC employee.
As a result, in the event anyone made an effort to contact that Pershing representative, they would in fact be contacting a telephone number assigned to NEMAZEE himself, and not any financial institution.
Later that same day, KASCHANCHI sent NEMAZEE two different versions of the same phony stationery.
On August 19, 2009, a representative of Citibank received a letter, on the phony letterhead stationery, purportedly signed by the Pershing LLC employee and verifying that NEMAZEE's collateral account had "U.S. Treasury Securities totaling $85,853,751.00 as of 8/17/09 that are held in custody by Pershing LLC as collateral for the benefit of Citibank."
In reality, there was no such account, there was no such collateral, and the signature was a forgery.
I have yet to see a scam or fraud that Yellow Kid didn't employ first, but don't take my word read the book yourself, Conman : A Master Swindlers Own Story (Library of Larceny)
Thanks for posting the tite of the book. I was having trouble finding it on my own.
Looks like a great read.