United States. Congress. House. Committee on Inter.

Nigerian white collar crime : hearing before the Subcommittee on Africa of the Committee on International Relations, House of Representatives, One Hundred Fourth Congress, second session, September 11, 1996 online

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'^ NIGERIAN WHITE COLLAR CRIME

Y 4. IN 8/ 16: N 56

Higerian White Collir Crine* Hearin. ..

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BEFORE THE

SUBCOMMITTEE ON AFRICA

OF THE

COMMITTEE ON

INTERNATIONAL RELATIONS

HOUSE OP REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS

SECOND SESSION



SEPTEMBER 11, 1996



Printed for the use of the Committee on International Relations



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U.S. GOVERNMENT PRINTING OFFICE
3&-318CC WASHINGTON : 1997

For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-053978-1



,iy\ NIGERIAN WHITE COLLAR CRIME

Y4.IN8/16:N56

Nigerian Uhite Collar Crine^ Hearin...

hlhJAKlNG

BEFORE THE

SUBCOMMITTEE ON AFRICA

OF THE

COMMITTEE ON

INTERNATIONAL RELATIONS

HOUSE OP REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS
SECOND SESSION



SEPTEMBER 11, 1996



Printed for the use of the Committee on International Relations






*^W*/A/ /,».."'/;







■^ > I.:



U.S. GOVERNMENT PRINTING OFFICE
3&-318CC WASHINGTON : 1997

For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-053978-1



COMMITTEE ON INTERNATIONAL RELATIONS



BENJAMIN A. GILMAN, New York, Chairman



WILLIAM F. GOODLING, Pennsylvania

JAMES A. LEACH. Iowa

TOBY ROTH, Wisconsin

HENRY J. HYDE, Illinois

DOUG BEREUTER, NAraska

CHRISTOPHER H. SMITH, New Jersey

DAN BURTON, Indiana

JAN MEYERS, Kansas

ELTON GALLEGLY, California

ILEANA ROS-LEHTINEN, Florida

CASS BALLENGER, North Carolina

DANA ROHRABACHER, California

DONALD A. MANZULLO, Illinois

EDWARD R. ROYCE, California

PETER T. KING, New York

JAY KIM, California

SAM BROWNBACK, Kansas

DAVID FUNDERBURK, North Carolina

STEVEN J. CHABOT, Ohio

MARSHALL "MARK" SANFORD, South

Carolina
MATT SALMON, Arizona
AMO HOUGHTON, New York
TOM CAMBBELL, California
JON FOX, Pennsylvania

Richard J. Garon, Chief of Staff
Michael H. Van Dusen, Minority Chief of Staff



LEE H. HAMILTON, Indiana

SAM GEJDENSON, Connecticut

TOM LANTOS, California

ROBERT G. TORRICELLI, New Jersey

HOWARD L. BERMAN, California

GARY L. ACKERMAN, New York

HARRY JOHNSTON, Florida

ENI F.H. FALEOMAVAEGA, American

Samoa
MATTHEW G. MARTINEZ, California
DONALD M. PAYNE, New Jersey
ROBERT E. ANDREWS, New Jersey
ROBERT MENENDEZ, New Jersey
SHERROD BROWN, Ohio
CYNTHIA A. McKINNEY, Georgia
ALCEE L. HASTINGS, Florida
ALBERT RUSSELL WYNN, Maryland
JAMES P. MORAN, Virginia
VICTOR O. FRAZER, Virgin Islands (Ind.)
CHARLIE ROSE, North Carolina
PAT DANNER, Missouri
EARL HILLIARD, Alabama



Subcommittee on Africa

ILEANA ROS-LEHTINEN, Florida, Chairperson



TOBY ROTH, Wisconsin
SAM BROWNBACK, Kansas
STEVEN J. CHABOT. Ohio
MARSHALL "MARK" SANFORD, South

Carolina
MATT SALMON, Arizona
AMO HOUGHTON, New York
TOM CAMPBELL, California

Mauricio J. TamakGO, Subcommittee Staff Director

Phi UP Christenson, Deputy Staff Director
David Adams. Democratic Professional Staff Member



GARY L. ACKERMAN, New York
HARRY JOHNSTON, Florida
ELIOT L. ENGEL, New York
DONALD M. PAYNE, New Jersey
ALCEE L. HASTINGS, Florida
VICTOR O. FRAZER, Virgin Islands



(II)



CONTENTS



WITNESSES

Page

The Honorable Mark Richard, Deputy Assistant Attorney General, Depart-
ment of Justice 4

S.A. Michael Stenger, Special Agent in Charge, Financial Crimes Division,
U.S. Secret Service 6

The Honorable Jonathan Winer, Deputy Assistant Secretary, Bureau of Inter-
national Narcotics and Law Enforcement Affairs, Department of State 8

Ms. Sally Miller, Office of Africa, International Trade Administration, Depart-
ment of Commerce 10

APPENDIX

Prepared statements:

Hon. Tom Campbell 21

Hon. Mark Richard 22

SA. Michael Stenger 29

Hon. Jonathan Winer 43

Ms. SaUy Miller 49

Other material:

Letters to U.S. victims from Nigerian nationals involved in 4-1-9 fraud ... 70



(III)



NIGERIAN WHITE COLLAR CRIME



WEDNESDAY, SEPTEMBER 11, 1996

House of Representatives,

Subcommittee on Africa,
Committee on International Relations,

Washington, DC.

The subcommittee met, pursuant to notice, at 2 p.m. in room
2172, Raybum House Office Building, Hon. Ileana Ros-Lehtinen
(chairwoman of the subcommittee) presiding.

Ms. Ros-Lehtinen. The subcommittee will come to order. Thank
you for joining us today. There are several meetings going on
today, including the Congressional Black Caucus, which several of
our members belong to. As soon as they are done with that, they
will join us.

We apologize for the sparse attendance, but many of the mem-
bers' staff are with us, taking notes and following the meeting. We
thank the witnesses for joining us today and we especially thank
the audience for joining us as we discuss this very important issue.
When formulating or implementing U.S. foreign policy, we always
try to strike a delicate balance between the overall objectives of
promoting democracy and respect for human rights with specific
U.S. security concerns.

We must always be conscious of our role in the international po-
litical arena and within the international community of nations,
but most importantly we must always be focused on safeguarding
U.S. interests and protecting the rights of our citizens. That is why
we are here today.

This subcommittee has had and will continue to have numerous
hearings on the issues affecting the people of Nigeria and the
daunting challenges that they confront as they struggle toward an-
other attempt at democracy. We have also held forums to establish
the correlation between Nigeria's internal situation and its effect
on U.S. security interests — both domestic and foreign.

Nonetheless, it can be argued that corruption in this West Afri-
can nation is certainly one of the more serious problems threaten-
ing, not only the future of Nigerian democracy, but also U.S. do-
mestic and international interests.

We are, therefore, here today in our role as public servants, as
guardians of the people of the United States, to delve into how this
system of corruption has gone beyond the boundaries of Nigeria
and is directly victimizing U.S. citizens. We are here to delve into
how U.S. entrepreneurs have fallen prey to Nigerian advance fee
fraud losing millions of dollars, as well as endangering their lives

(1)



in the interim, when they are convinced by these criminals to trav-
el to Nigeria to complete the transactions.

Nigerian advanced fee fraud is known internationally as "4-1-9"
fraud after the section of the Nigerian penal code which addresses
fraud schemes. It manifests itself in seven distinct fraudulent busi-
ness proposals. These are: disbursement of money from wills; con-
tract fraud (C.O.D. of goods and services); purchase of real estate;
conversion of hard currency; transfer of funds from over invoiced
contracts; and sale of crude oil at below market prices.

Of these, the most prevalent and successful is the fund transfer
scam, which our witnesses will explain in detail during their testi-
mony.

In all instances, however, the goal of the scam artist is to delude
the target of their scheme into believing that he is being drawn
into a very lucrative arrangement. The intended victims are reas-
sured several times as the scheme unfolds, to ensure that they will
willingly contribute a large sum of money to secure the deal when
it is threatened, and it will be. As will be discussed, the underlying
theme to all the schemes is their elaborate nature. There usually
is a con-within-the-con or two phases to the fraud, one being the
original proposal to the intended victim and the second layer being
the threat to the venture.

In all instances, doubts or questions from target victims about
the arrangement are allayed by the use of forged or false docu-
ments bearing seemingly official Nigerian Government letterhead
and seals, as well as false letters of credit, payment schedules and
bank drafts.

The dramatic increase in Nigerian advance fee fraud has been at-
tributed to numerous factors as diverse as the schemes themselves.

However, the indisputable facts are, as will be confirmed by our
witnesses, that it is an extremely profitable illicit endeavor
grossing hundreds of millions of dollars annually. This must be
stopped. The fact is that the welfare of too many communities and
the fortunes of too many families and groups are at stake.

Fortunately, the U.S. Government has recognized the threat

f)Osed by Nigerian advance fee fraud schemes and the intricate il-
icit infrastructure it has created, a network spilling over into nu-
merous other illegal activities also of grave concern to the United
States. The United States is addressing the problem from an inter-
agency perspective in the hope that a coordinated approach will re-
sult in a comprehensive assessment and solution to the problem.

Here to further educate us on the intricacies of Nigerian advance
fee fraud schemes are representatives of the Department of Com-
merce, Department of Justice, U.S. Secret Service, and the Depart-
ment of State. We thank them all for being with us today.

I would like to note that this meeting was brought to our atten-
tion by Congressman Campbell. He has contributed much to put-
ting this hearing together. He is a true asset to our subcommittee.
I would like to recognize Congressman Campbell for opening state-
ments. Tom.

Mr. Campbell. Thank you. Madam Chair, it is a very important
subject that we pursue today and it wouldn't have happened but
for you. Thank you for your kindness. I just want to take the occa-
sion to say publicly what a fine chair you have been of our sub-



committee and I look forward to serving with you in the sub-
committee on years to come.

The issue was first brought to my attention by colleagues, finends
in the business world in Silicon Valley. Some of them had been vic-
tims of this fraud. I represent Silicon Valley and I brought it to the
attention of Chair Ros-Lehtinen.

The concern of a scam this complex is not only are there victims
in the United States, but also it would be implications of our rela-
tions with Nigeria and potentially an impediment toward stepping
toward a friendlier and better relationship with Nigeria as that be-
comes possible.

Last, by way of introduction, I would like, Madam Chair, to
make my entire statement part of the record and also a couple of
examples of letters received by constituents indicating the fraud in-
volved. They permitted me to share it and thereby perhaps achieve
the object of this hearing as a warning to others who might poten-
tially be a victim of this fraud.

Thank you. Madam Chair. I desist accepting the personal note of
seeing my friend and colleague, Mark Richard. I served with Mark
in 1981 when I was working for the Deputy Attorney General and
Mark was running down criminals then. Since then he has contin-
ued to run down criminals. I have become a politician. I will leave
the implications there.

Ms. Ros-Lehtinen. Thank you so much, Tom. Without further
delay, I would like to introduce our panelists for today's hearing.
First, we will hear from Mr. Mark Richard, who currently serves
as Deputy Assistant Attorney General overseeing the Justice De-
partment's Office of International Affairs, International Security,
Terrorism and Violent Crime Sections, as well as the Office of Spe-
cial Investigations. At Justice's Criminal Division since graduating
from law school in 1967, Mr. Richard's extensive experience in the
field includes, although is not limited to, having served as: Deputy
Assistant Attorney General for International Law Enforcement; As-
sistant to the Attorney General (or AG) for Criminal Law Enforce-
ment; Deputy Assistant AG for Internal Security and International
Law Enforcement; Deputy Assistant AG for General Litigation and
International Law Enforcement; as Chief of the Department of Jus-
tice's Fraud Section; and as Executive Director of the Attorney
General's White Collar Crime Committee. He has received numer-
ous accolades in recognition of his service, dedication, and out-
standing performance.

He will be followed by Special Agent Michael Stenger. Agent
Stenger is the Special Agent in Charge of the Financial Crimes Di-
vision of the U.S. Secret Service, which is responsible for the over-
sight, direction and coordination of domestic and international
criminal investigations involving, among others: financial institu-
tion fraud; West African, Asian, Russian and other organized
crime; electronic funds transfer fraud and other electronic crimes;
and money laundering.

Agent Stenger serves as the U.S. Secret Service representative
on the U.S. Treasury Department's Undercover Advisory Board and
the Technical Security Division Investigations Working Group. He
is a 20-year veteran of the Secret Service having served in Newark,



New York City and Washington, DC in protective, investigative
and staff assignments.

We will then hear from Jonathan Winer, who is Deputy Assist-
ant Secretary of State for Law Enforcement and Crime in the Bu-
reau of International Narcotics and Law Enforcement. In this ca-
pacity, he has represented the United States as head of delegation
to the P-8 Group on Crime; the Crime Commission; as chief State
Department representative to the Financial Action Task Force and
at difficult meetings of the European Union on 'Third Pillar" and
law enforcement issues. From 1985 through 1993, Mr. Winer
served as counsel to U.S. Senator John Kerry. Prior to his tenure
in the Senate, he served as counsel to the Lieutenant Governor of
Massachusetts, staffing the Governor's Anti-Crime Council. We
welcome you today.

The final witness for today's hearing is Sally Miller, director of
the Office of Africa at the U.S. Department of Commerce. Ms. Mil-
ler's service to the Commerce Department extends over 26 years
where she has served in various capacities including as: director for
the Central and Southern Africa Division; as policy coordinator for
the Asia-Africa Division, Office of Country Marketing; regional
marketing manager for Sub-Saharan Africa, Office of International
Marketing; Eastern/Southern Africa Desk Officer also in the Office
of International Marketing; and as forward planner in the Develop-
ing Countries Promotion Staff. As our other witnesses, Ms. Miller
has an impressive and extensive list of accomplishments.

We thank all of our witnesses for being here today. We look for-
ward to your testimony. Before we proceed, I would like to first rec-
ognize Congressman Hastings, who has just joined us.

Mr. Hastings. Thank you, Madam Chairlady. I welcome the wit-
nesses and thank you for holding this hearing. In the interest of
time, I will forego any opening statement. Madam Chair.

Ms. Ros-LEHTiNfEN. Thank you so much. Congressman Payne, I
know you have the caucus going on and we thank you for taking
time to come. If you would like to make some statements...

Mr. Payne. I, too, will, first of all, thank you for calling this very
important hearing today and commend you for the interest that
you have shown in the continent and the number of hearings you
had. I, too, will just yield back my time to hear from our distin-
guished guests and panelists and look forward to interacting with
them.

Ms. Ros-Lehtinen. Thank you so much. Congressman. Mr. Rich-
ard.

STATEMENT OF MARK M. RICHARD, DEPUTY ASSISTANT AT-
TORNEY GENERAL, DEPARTMENT OF JUSTICE; SA. MICHAEL
STENGER, SPECIAL AGENT IN CHARGE, FINANCIAL CRIMES
DIVISION, U.S. SECRET SERVICE; JONATHAN WINER, DEPUTY
ASSISTANT SECRETARY, BUREAU OF INTERNATIONAL NAR-
COTICS AND LAW ENFORCEMENT AFFAIRS, DEPARTMENT
OF STATE AND SALLY MILLER, DIRECTOR, OFFICE OF AFRI-
CA, INTERNATIONAL TRADE ADMINISTRATION, DEPART-
MENT OF COMMERCE

Mr. Richard. Thank you so much, Madam Chairwoman, and
members of your committee. With your permission, I would like to



submit for the record my written prepared remarks and merely
summarize them at this point if that is agreeable with you.

Ms. Ros-Lehtenen. Of course, no problem.

Mr. Richard. I am very pleased to be here to testify about a very
significant subject dealing with the growing problem in the United
States of responding to white collar crime as well as drug traffick-
ing offenses, which are being perpetrated by Nigerians offered from
the safety of Nigeria itself.

Let me preface my remarks by acknowledging that while there
are believed to be over 90,000 Nigerians in this country, the vast
majority are law-abiding and making significant contributions to
American society. Nevertheless, crime perpetrated by a segment of
Nigerians is, in fact, becoming a growing problem to law enforce-
ment in this Nation and around the world.

We find that Nigerian nationals are, in fact, involved in per-
petrating a variety of financial and other crimes directed against
U.S. citizens and businesses. As you mentioned in your opening re-
marks, these crimes include credit card insurance and bank frauds.
And as you indicated, of particular concern is the fraud scheme
that has historically been appearing with frequency and regularity
involving the fast fee and letter frauds commonly referred to as 4-
1-9 schemes.

A common 4-1-9 scheme emanates from Nigeria and has been
seen and manifested itself in a deluge of letters sent through the
mail and by fax proposing fictitious business opportunities, most of
which are in fact just a ruse.

The letters, which are the opening solicitation in a crude but ef-
fective advance fee scheme, offer to share a percentage of a very
large sum of money with the recipient. The sender often represents
himself to be an official of the Nigerian Government and claims
that he and his associates have obtained these funds from the Ni-
gerian Government by over invoicing a contract, for example, or
even by embezzling money from government accounts or otherwise.

In return for the recipient's assistance for identifying bank ac-
counts outside of Nigeria to which the money can be deposited, the
recipient is promised a percentage of the funds.

Many recipients merely throw these letters away or provide them
to law enforcement. We have obtained tens of thousands of these
solicitation letters from victims and potential victims, although I
must admit we believe we are only seeing a small portion of the
total number of letters sent to this country.

If the recipient does, in fact, respond to the solicitation letter he
will be asked to send money to his new Nigerian confederates to
facilitate the promised transfer to his bank accounts. If the victim
provides these funds, he may be contacted by what appears to be
another organization frequently located in the United States which
claims to be a clearinghouse for the Central Bank of Nigeria, for
example, the representative of which will request the victim to pro-
vide additional funds to complete the transfer.

These clearinghouses are just another step in the fraud scheme
and they are often operated by a confederate of the original con
man.

Let me try to briefly articulate some of the problems law enforce-
ment has encountered in dealing and responding to this problem.



At this time, law enforcement has no way of actually determining
the true number of these letters that enter into the United States
nor do we have, in my judgment, a very solid data base concerning
the total losses attributed to these schemes. As difficult as it is to
determine the true number of solicitation letters entering the Unit-
ed States, it is difficult to ascertain the actual number of victims.
Often victims are reluctant or frightened to come forward.

In some instances, despite their losses victims may refuse to be-
lieve that they have in fact been defrauded. Nevertheless, based on
our experience in this area and the outlines provided by the Secret
Service, we have definite belief that losses are, in fact, very signifi-
cant and range in the area from $10,000 to well over $4.5 million
per victim.

Moreover, the cases that are brought to our attention are ex-
tremely difficult to investigate and prosecute. Even in cases where
the victims are willing to cooperate, the perpetrators are frequently
located in Nigeria and employed with fictitious identities. We may
indict defendants under certain names that they use to defraud.
Nevertheless, we discover that they have committed offenses using
aliases and they are masters at obtaining financial records and
other fictitious documents to mask their true identity and make it
extremely difficult for law enforcement to track them.

The United States has treaties and legal assistance relationships
with many foreign jurisdictions, but at times prosecutors can make
official requests for specific assistance. Money is often wire-trans-
ferred out of the bank that we have identified into the victim's
hands and we are left essentially attempting to chase funds from
country to country. The laundering of these funds causes extremely
difficult problems for law enforcement.

Ms. Ros-Lehtinen. If you could conclude your remarks, Mr.
Richard? Thank you.

Mr. Richard. Let me just also point out a disturbing trend
among some of these Nigerian groups that have been operating in
the white collar crime area: we do see indications of overlap with
narcotics trafficking and other forms of crime which impose their
own set of problems for law enforcement and the community in
general.

We are working, as you indicated, in an attempt to develop and
maximize our effectiveness on an interagency basis and I am sure
my colleagues here will describe that in greater detail during the
course of their testimony. Thank you, Madam Chairwoman.

[The prepared statement of Mr. Richard appears in the appen-
dix.]

Ms. Ros-Lehtinen. Thank you so much. We have enjoyed work-
ing with your son, Dan, on the Cuba issue. Send him our best.

Thank you. We would like to now hear from Mr. Stenger of the
Secret Service.

STATEMENT OF SA. MICHAEL STENGER, SPECIAL AGENT IN
CHARGE, FINANCIAL CRIMES DIVISION, U.S. SECRET SERVICE

Mr. Stenger. Thank you for the opportunity to address the com-
mittee. I would like to ask that my full statement be submitted in
the record.



Ms. Ros-Lehtenen. We will put them all in the record. That will
be fine.

Mr. Stenger. I would like to make a note that with me today
is Jim Caldwell. He is one of the agents that works for me. He has
recently just returned from an operation in Nigeria. The Secret
Service distinguishes between structured traditional organized
crime now commonly referred to as organized criminal enterprises.

Many of these groups do not follow prior patterns associated with
organized crime in relation to structure. However, these groups do
support themselves internally through national association while
externally creating cells for criminal enterprises on a domestic and
international scale. An example of this would be the Nigerian
groups which we speak to today.

In 1984, after the Secret Service received additional jurisdic-
tional responsibility for credit card and false identification, we
began to engage the Nigerian criminal element on a regular basis.
We found that Nigerian criminals are heavily involved in the man-
ufacture and use of false identification.

Through the use of false identification many are entering the
United States illegally and have proven adept at developing com-
plex schemes to systematically defraud financial institutions. In fis-
cal year 1992, the Congress of the United States appropriated
funds to the Secret Service which were earmarked for a Nigerian
task force initiative. They have taken a proactive approach to the
Nigerian organized crime problem by establishing and maintaining
task forces throughout the United States whose main focus is the
investigation of financial frauds committed by Nigerian nationals
and their accomplices.

These task forces include representatives from Customs, Postal
Inspection, Immigration, DEA, INS, bank investigators as well as
numerous local, county, and State police agencies. This diverse
membership is indicative of the number of fraudulent activities
being perpetrated by Nigerian criminals. Nigerian criminal sellers
have become expert in their many fields of endeavors. In short,
they do their homework on financial systems and identify weak-
nesses that allow them fraudulent access to enormous sums of
money. These attacks are often the result of careful planning, pre-
cise execution and ultimately take advantage of financial systems
designed to be consumer- or customer-friendly.

Since 1990, Nigerian advance fee fraud has emerged as one of


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Online LibraryUnited States. Congress. House. Committee on InterNigerian white collar crime : hearing before the Subcommittee on Africa of the Committee on International Relations, House of Representatives, One Hundred Fourth Congress, second session, September 11, 1996 → online text (page 1 of 8)