| Activity | According to a survey written by the Bank's Exchange Control Department the Lewis Altman case was 'the most sophisticated swindle that we have come across' (Quote: J.P. Carlisle, 'Fraud (Exchange Control) and how to do it', 26 February 1980, 3A148/1. In addition to this document, 'The history of Exchange Control enforcement' by William Clowser of HM Treasury, 3A152/12 has also been used). It was thought to be the longest lasting investigation on exchange control fraud, starting in August 1975 and running into 1977, and it was said to be the longest trial heard by the City Magistrates. The conviction for breaching exchange control regulations was the largest prosecution of its kind.
The fraud took advantage of the Exchange Control requirement that UK residents purchasing foreign shares had to do so in investment currency (denominated in $US and obtained in the investment currency market at a premium above the official exchange rate). On sale of the securities, 75% of the investment premium was repaid (i.e. 25% was surrendered). During the 1970s the dollar premium was high and 'premium stripping', i.e. obtaining the reimbursement of inflated or even unpaid premiums, was a tempting scam.
The Lewis Altman case was an example of premiums being reclaimed that had never been paid: Lewis Altman & Co handled the currency deals and the money went into bank accounts in Switzerland and Liechtenstein. A revolving funds scheme (see Appendix) was used on 28 occasions over a five month period netting illegal profits of more than £2.0 million on a realised premium of £6.1 million from investment currency sales of $9.6 million.
In February 1977 the following were charged in relation to the fraud: Lewis Altman & Co and two directors of the company, Lewis Altman and Robert Carnes; EIC Euro Securities Ltd; and Tricommerce Ltd. The chief operator of EIC was Eric Kohn but he disappeared while the investigation was in progress. During the investigation it also became clear that Judah Binstock (a solicitor living abroad) controlled EIC, Tricommerce and the foreign companies involved and it was he who was the prime architect of the conspiracy. A warrant for his arrest was issued, but he remained abroad. The trial culminated in April 1978 when Altman was fined £55,500 and Carnes, £3,500. Lewis Altman and Co were fined £155,500, while EIC and Tricommerce were fined £522,000 and £528,000 respectively. Lewis Altman & Co appealed but withdrew in July 1979.
In addition to this, Lewis Altman was also involved in another case which was the subject of a lengthy investigation, though which was not prosecuted. This involved foreign currency transactions put through the Hong Kong and Shanghai Banking Corporation (see Appendix). Over 9 months the loss of foreign currency was about $2.795 million and Altmans netted more than £400,000 in premium.
Lewis Altman died on 28 June 2008, aged 90.
How the fraud was perpetrated:
A 'brass plate' branch of EIC Euro Securities Ltd and a 'brass plate' company, Tricommerce Ltd, were set up in the Isle of Man (to confuse there was also a Liechtenstein company Etablissement Tricommerce). A current account in the name of 'Tricommerce Ltd' was opened with a French bank in London. Altman received US dollars from EIC's IOM 'branch' and sold them as to 75% investment currency and 25% at the official rate. The proceeds were remitted to EIC in London and were credited to an account in their books of Tricommerce. On the instructions of a non-resident director of Tricommerce (Lawrence Green) the proceeds were remitted back to Altman. Later the process changes and the funds went to Tricommerce's account at the London office of a French bank, and then to Altman in the form of drafts marked as on account of several foreign companies to whose accounts in his books Altman posted the funds. These funds were then used to buy local authority bonds on behalf of the foreign companies and to sell them within a few days and remit them to Switzerland ready to start the round again.
The fund to operate the system was set up by Altman by claiming to have effected 'put-throughs' - i.e. under the Stock Exchange rules the jobber does not know the identity of the buyer or the seller and does not see the transfer deeds of the certificates of title. The conspirators probably changed to the more complicated system because they realised that it would be easy for the authorities to check the genuineness of the 'put-through' by reference to the company registers (as was in fact done with negative results).
In the other case Altman used long-standing connections with the Far East and was active in arbitrage dealings with brokers in Hong Kong, Malaysia and Singapore when these countries were part of the scheduled territories. After 1972 (when these were no longer scheduled territories) they continued to maintain, with permission, bank accounts in those countries in the local currency (which was now by definition now foreign currency). The accounts were with branches of Hong Kong and Shanghai Banking Corp (HKSB). Altman reported to HKSB in London the receipt of money at these branches abroad and claimed that it was eligible for sale as investment currency. HKSB bought at the official rate the equivalent in US$ of the amount reported and then sold them as investment currency for the premium which was passed to Altmans. This was done through Guinness Mahon (who were needless to say relying 100% on the integrity of the HKSB) who were instructed to wash in the premium and credit HKSB with the profit which, less charges, was credited to Lewis Altman & Co. However the foreign currency in the accounts abroad should have been transferred to London to replace the dollars - this essential step was not taken and Altman retained the foreign currency to be used again in a similar manner. HKSB were badly at fault in allowing these transactions, although it was one of their junior employees who alerted the Bank. HKSB offered to compensate for the loss but since the case was not pursued and no loss was established. |