Edward H. Davis, Jr., selected as a Who’s Who Legal Thought Leader

Who’s Who Legal: Thought Leaders 2018 brings together the insight, expertise and wisdom of some of the world’s foremost lawyers in a single book.

This year’s edition features Q&As with 67 eminent practitioners across 22 practice areas. These lawyers obtained the highest number of nominations from peers, corporate counsel and other market sources in our most recent research cycle.

Edward H. Davis, Jr.

Ed DavisQuestions and Answers:

Who’s Who Legal Thought Leaders: Asset Recovery

Edward H Davis, Jr, a founding shareholder of the international law firm Astigarraga Davis, heads the firm’s asset recovery and financial fraud group which represents victims of serious fraud and grand corruption including governments, corporations, insolvency practitioners and individuals by investigating and prosecuting civil fraud and asset recovery actions.

Who’s Who Legal: Asset Recovery has recognised Davis as the global Asset Recovery Lawyer of the Year from 2013 to 2016, and his firm as Asset Recovery Firm of the Year for 2015 and 2016.

WHY DID YOU DECIDE TO SPECIALISE IN ASSET RECOVERY AND FRAUD WORK?

I enjoy representing victims and helping them level the playing field with those that prey on them. As a result, I decided to focus my practice on the representation of individual, corporate and governmental victims of fraud throughout the world. I also enjoy learning about other legal cultures, and asset recovery and fraud work is a specialised form of international litigation. Lastly, I enjoy the “hunt” for those that have committed fraud and their ill-gotten gains.

WHAT PROMPTED YOU TO FOUND YOUR OWN FIRM?

My partners and I were seeking a better way to serve our clients in response to new factors in the industry affecting both the legal profession and our clients. Having a specialised boutique allows us to employ our “power of focus” concept and truly focus deeply on our practice groups and developments in the law to a degree that might not be attainable in a more generalised platform. Also, our boutique setting is nimbler and more cost-effective than that of many other firms, and allows us to take cases on alternative fee structures.

WHAT MAKES FOR A SUCCESSFUL ASSET RECOVERY SPECIALIST?

The actions taken in the first days following the discovery of a fraud often will determine whether the misappropriated funds or other property are ultimately recovered. Our team responds quickly to such fraud by using emergency injunctions, expedited depositions, subpoenas of bank records, our vast connections to experienced professionals and investigators around the world to seek to either locate the assets before they are dissipated or to investigate and bring claims against third parties who assisted the fraudsters.

WHAT IS THE MOST MEMORABLE MATTER THAT YOU’VE WORKED ON TO DATE?

Stanford International Bank, Ltd was an Antiguan bank that sold phony certificates of deposit to 21,000 depositors, which resulted in the second-largest Ponzi scheme in history by causing losses to over 27,000 depositor-victims from around the world. Estimated losses by depositor-victims exceeded $5 billion.

WHAT CHALLENGES ARE FACING PRACTITIONERS AT THE MOMENT AND HOW IS YOUR FIRM LOOKING TO MEET THESE OBSTACLES?

The pressure from clients to keep legal fees and costs as low as possible continues to be one of the challenges affecting practitioners. This can be a problem because of the crisis-like atmosphere in which successful asset recovery practitioners function. We combat these challenges by working closely with investigators, computer forensic experts, foreign lawyers, forensic accountants, law enforcement and other experts. These professionals are key resources in a rapid response to a discovered fraud which can lead to escalated costs (such as cost bonds) which would not be the norm in another practice area. Our firm has been meeting this particular challenge by offering alternative fee arrangements when historically the standard was solely hourly fee billing, and by working with litigation funders that assist victims of fraud who usually don’t have the resources to fight the fraudster after the fraud.

DO YOU ANTICIPATE THAT THE INTERNATIONAL COMMUNITY’S INCREASING READINESS TO TACKLE CORRUPTION WILL LEAD TO GROWING INTEREST IN ASSET RECOVERY WORK IN THE WIDER LEGAL MARKET?

Yes, as technology continues to get more sophisticated, the speed of the movement of money throughout the world will likewise increase. This, combined with a growing awareness that national borders are no more an impediment to recovery than they are to the fraudster who moves across those same borders, will likely result in the interest in asset recovery work growing into a larger distinct legal market. We already see firms forming asset recovery departments and groups which is a signal that that the market is recognising this distinct practice area as an exciting new offering to their clients.

HOW IMPORTANT ARE ORGANISATIONS SUCH THE ICC COMMERCIAL CRIMES SERVICES’ FRAUDNET NETWORK IN INTERNATIONAL ASSET RECOVERY WORK?

Organizations like the ICC’s FraudNet are very important and necessary in the international asset recovery work. Fraudsters work using their own networks of cronies and those that provide them assistance – legal and otherwise. So it is essential that counter-networks operate at a high level of coordination to defeat them. They also are powerful change agents that raise awareness and educate fraud victims worldwide about the methods that can be deployed to assist them in their fight to recover their assets and damages.

AS HEAD OF THE FIRM’S ASSET RECOVERY AND FINANCIAL FRAUD PRACTICE, IN WHAT WAYS ARE YOU ATTEMPTING TO DISTINGUISH YOUR GROUP FROM OTHER COMPETITORS IN THE MARKET?

I work on creating innovative solutions. I’ve helped develop and expand various creative discovery and asset seizure methodologies to obtain recoveries for our clients. Additionally, I’ve both led and worked collaboratively on various civil asset recovery teams – another concept I helped pioneer – on cross-border asset recovery engagements. Having a strong commercial litigation and insolvency background, my team and I have championed and coordinated asset recovery efforts between civil and criminal systems as a means to penetrate and defeat complex opaque asset hiding structures used by fraudsters. I was recently mentioned by Latin Lawyer (2016) for my efforts in the area of asset recovery. Lastly, as a result of our efforts, I was also recognised as the global Asset Recovery Lawyer of the Year by Who’s Who Legal: Asset Recovery, in 2013 (and again in 2014, 2015 and 2016); my firm was recognised as the Asset Recovery Firm of the Year in 2015 and 2016 by the same publication.

Panama Papers update: progress and impediments

Scandalous revelations of suspicious financial activity exposed by the Panama Papers have toppled political leaders, induced regulatory reforms and prompted greater cooperation from Panama itself towards international efforts to combat tax evasion. But Edward H Davis Jr and Andres H Sandoval would like to see more headway in the area of asset recovery.

In April 2016 the Suddeutsche Zeitung released the ground-breaking publication covering the ‘Panama Papers’ – a massive leak of 11.5 million documents from the Panamanian Mossack Fonseca firm and its affiliates, formerly the world’s fourth-largest provider of offshore incorporation services. Shortly thereafter, due largely to the efforts of the International Consortium of Investigative Journalists (ICIJ), limited information extracted from the Panama Papers was digitised and disseminated to the public in the searchable Offshore Leaks Database maintained on the ICIJ’s website. [1] The impact of the Panama Papers leak in the political, journalistic, investigative and financial arenas is plain to see. However, well over a year later, the Panama Papers fervour is only now creeping into the asset recovery arena. That it has taken this long to arrive is frustrating, but perhaps predictable in light of evidentiary concerns and the inherent difficulty in commencing litigation. Regardless, this signals the next step in combating tax evasion, corruption, fraud and money laundering in the wake of the historic leak.

Facts and figures
The global effect and pervasiveness of the Panama Papers leak is unrivalled. The 11.5 million leaked documents, dating back nearly 40 years, contain information on more than 214,000 offshore entities, in more than 200 jurisdictions, created by Mossack Fonseca. Major financial institutions alone drove the creation of nearly 15,600 offshore entities. Of these financial institutions, HSBC and its affiliates were responsible for the creation of more than 2,300 offshore corporate vehicles. Others, such as Banque J Safra, UBS AG and Societe Generale, were not far behind.

The Panama Papers also exposed 140 politicians from over 50 countries to charges of bribery and corruption for allegedly improper ties to offshore corporate vehicles in no fewer than 21 financial havens. As a result, 14 current and former heads of state as well as over 30 current and former politicians or public figures have come under scrutiny by governmental bodies. Several top government and corporate officials have cracked under the pressure, including, notably, the former Prime Minister of Iceland, Sigmundur Davia Gunnlaugsson, who resigned just days after the initial media coverage of the Panama Papers leak. Other political figures have been faced with high- profile investigations, including Argentina’s Mauricio Macri, Ukraine’s Petro Poroshenko and Pakistan’s former Prime Minister, Nawaz Sharif.

These investigations are bearing fruit. In late July 2017, Pakistan’s Supreme Court deemed Sharif unfit to be a member of parliament for reasons of dishonesty and corruption. The Supreme Court’s decision is the culmination of months of proceedings sparked by the Panama Papers leak, which linked Sharif’s family members to purchases of luxury real estate in London through offshore corporate vehicles. Further, on 31 July 2017, the National Accountability Bureau, Pakistan’s top anti-corruption unit, announced it would file formal corruption charges against Sharif, his children, son-in-law and the former Pakistani Finance Minister, Ishaq Dar.

Beneficial effects
Among the seemingly more positive effects, the Panama Papers leak has fuelled a global push towards transparency and accessibility of information regarding the ultimate beneficial owners (UBOs) of opaque offshore entities and accounts. Just weeks after the leak, the United States executive administration under former President Barack Obama announced it would implement regulatory reform to increase financial transparency and combat tax evasion, corruption and money laundering. Among the various measures, in May 2016, the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) promulgated new rules on customer due diligence requirements, which require financial institutions to identify any natural person beneficially owning more than 25% of, or otherwise controlling, the institution’s legal entity customers. Similar initiatives are being pushed in the United Kingdom, Germany and others in the G20 group. Only time will tell if these initiatives prove to be effective or are just window dressing.

Cleaning the backyard
The Panama Papers leak has also exerted pressure on countries previously resistant to increased financial transparency – namely, Panama. In 2016, Panama’s Vice President Isabel de Saint Malo pledged Panama’s willingness to sign the Convention on Mutual Administrative Assistance in Tax Matters – an agreement developed jointly by the Organisation for Economic Co-Operation and Development (OECD) and the Council of Europe to combat tax evasion through the automatic sharing of residents’ financial information. Holding fast to that pledge, on 3 March 2017, Panama deposited with the OECD its instrument of ratification of the Convention, which came into force in Panama on 1 July 2017. Panama has also signed an information-sharing treaty with Mexico and continues its negotiation of similar agreements with Spain, Italy, Germany, the UK and Switzerland. As of 12 June 2017, the OECD reports 112 jurisdictions currently participating in the Convention.

Delayed recovery
Where the Panama Papers have had much less impact than was originally hoped for is in the asset recovery arena. Following the leak, early commentators predicated litigation in the financial havens themselves, such as the British Virgin Islands, Jersey, Hong Kong and Panama, as well as financial centres that may house assets or UBOs, such as Switzerland, the UK and the US. However, now over one year later, this litigation has largely yet to be seen. This is disappointing in light of estimates that as much as 8% of the world’s financial wealth (approximately US$7.6 trillion) is held in financial havens. Further, according to Gabriel Zucman, economist, professor and author of The Hidden Wealth of Nations, as much as 80% of that hidden wealth is not reported to the tax authorities of any country. Equally astounding, the Stolen Asset Recovery (StAR) Initiative – a partnership between the World Bank Group and the United Nations Office on Drugs and Crime (UNODC) to promote international efforts to end financial havens for corrupt funds and prevent the laundering of the proceedings of corruption – estimates that up to US$40 billion per year is stolen by corrupt public officials around the world.

Those most affected by this hidden wealth are the citizens of the governments susceptible to tax evasion, corruption and the illicit diversion of funds, as well as the victims of fraud where the opaque corporate structures are used to hide the proceeds of these crimes. As a result, these jurisdictions often suffer from undeveloped infrastructure, failing health facilities and inadequate educational institutions. While it may be no less important to investigate and expose the corrupt actors that prey on these governments, there must also be a focus on and concerted effort to recover the value that has been secreted in financial havens and often elsewhere.

A start
There may be signs of change, however. On 14 July 2017, the US Department of Justice commenced a civil forfeiture proceeding against approximately US$144 million in assets – primarily, a luxury yacht and Manhattan real estate-allegedly representing the proceeds of corruption, bribery and money laundering. The allegations concern prominent businessmen Kolawole Akanni Aluko and Olajide Omokore, and Nigeria’s former Minister for Petroleum Resources, Diezani Alison-Madueke. The US alleges in part that Aluko and Omokore purchased, luxury real estate in London and high-end furniture for Alison-Madueke’s benefit and, in return, Alison-Madueke used her influence to steer lucrative state oil contracts to companies ultimately owned or controlled by Aluko and Omokore. The ICIJ’s Will Fitzgibbon first reported in July 2016 on the links between Aluko, Omokore and Alison-Madueke as detailed in the Panama Papers. This led to investigations in Nigeria, the UK and elsewhere.

Evidence and privilege concerns
So, what is the reason for the tardy arrival of the Panama Papers’ impact in the asset recovery arena? Firstly, a lack of competent evidence. The ICIJ’s Offshore Leaks Qatabase largely, if not entirely, lacks source documentation. The same is true of the ICIJ’s database for the ‘Swiss Leaks’ and the ‘Luxembourg Leaks’ in previous years (other than documents expressly approved by Luxembourg authorities). Similarly, it is unclear to what extent, if at all, the Panamanian authorities have disseminated to the public or shared with authorities of other countries the documents seized from Mossack Fonseca’s offices following the initial leak. While there may be legitimate reasons for restricting the disclosure of source documentation, the availability of only extracted and secondary information poses hearsay, trustworthiness and other evidentiary problems for authorities, asset recovery professionals and victims in constructing asset recovery cases. More must be done to allow access to this critical information.

Secondly, it is an open issue as to whether information taken from the Panama Papers is privileged or protected. Additionally, the issue is complicated by the possible application of foreign law, making it difficult to know which privilege rules apply. Though exceptions to privilege may exist, such as the crime-fraud exception under US law or the iniquity exception under English law, this issue must be weighed carefully.

Rather, a best practice would be to treat the Offshore Leaks Database as an important tool in the investigative toolbox and a springboard to pursue additional disclosure in the appropriate jurisdiction. In this respect, emerging asset tracing techniques in recent years can assist greatly in closing the fence around intricate offshore structures. With respect to the US, these techniques include pursuing disclosure proceedings in aid of foreign litigation under 28 USC § 1782, the subpoenaing of information from banks in order to trace the flow of monies through different jurisdictions, and seeking recognition of foreign bankruptcy proceedings under the UNCITRAL Model Law on Cross-Border Insolvency. By using the Model Law, foreign bankruptcy trustees can gain access to US-style discovery and broad turnover powers of assets within the territorial jurisdiction of the United States.

Whatever the reason for the delay, the fervour to see positive change prompted by the Panama Papers must now enter the next phase: concerted efforts to pursue – on behalf of the victims of tax evasion, corruption, fraud and money laundering – the vast hidden wealth that has been secreted through the use of opaque offshore corporate vehicles. Such efforts are long overdue.

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Notes:

  1. https://panamapapers.icij.org/
    Edward H Davis Jr (+1 305 372 8282, Ext. 228, edavis@ sequorlaw.com) is a founding shareholder of Sequor Law. Davis was recognised as the Asset Recovery Lawyer of the Year by Who’s Who Legal in 2013, 2014, 2015 and 2016. With nearly
30 years of experience, he focuses his practice on asset recovery, financial fraud and the pursuit of misappropriated assets throughout the world on behalf of the victims of fraud. Davis is also a leading member of the ICC Commercial Crimes Services FraudNet Network.

 

Recuperar activos ocultos en el extranjero: Nuevo nicho para abogados

Nuevo nicho para abogados


Las estrategias combinan legislaciones de distintos países.

By Antonio Collados

El peruano Vladimiro Montecinos, el chileno Alberto Chang y el matrimo‐ nio filipino de Imelda y Ferdinando Marcos tienen algo en común: oculta‐ ron en el extranjero los bienes que obtuvieron mediante fraudes. Si bien la recuperación transnacional de activos es un área de práctica legal muy extendida en el mundo, es muy poco conocida en Chile.

Se trata de un área de derecho relativamente nueva, en donde se requiere trabajar en equipo no solamente de abogados de distintos países, sino también con investigadores y con contadores forenses, según explica Guillermo Jorge, jurista argentino que participó el viernes pasado en un almuerzo organizado por el Estudio Rivadeneira Colombara Zegers, al cual asistieron algunos profesionales chilenos y varios expertos internacionales. Esta oficina se está integrando a una red internacional de estudios que se dedica a estos temas y que están agrupadas en Fraud Net, donde hay abogados de Estados Unidos, Argentina, Suiza y Reino Unido.

La especialidad también se aplica a casos de divorcios de personas de alto patrimonio en que uno de los cónyuges tiene parte de sus bienes fuera de su país, como fue el caso del ex futbolista y actual entrenador del Atlético Madrid, Diego Simeone, cuya bien asesorada ex esposa obtuvo 20 millones de euros como producto de estas pesquisas.

En el seminario del viernes, el abogado estadounidense Edward Davis Jr. destacó el sigilo como uno de los aspectos más relevantes de estas gestiones. “Esto es como cuando un tigre sale a cazar, se mueve con mucha tranquilidad, se toma su tiempo, es silencioso, pero no es lento”, dijo.

Davis asegura que todo se hace de una manera diseñada para que no alerte a la persona que está escondiendo el activo, porque el dinero puede moverse de un día para otro.

“Hay que ser un tigre inteligente y ágil”, agrega Jorge, su colega argentino, quien destaca que algo que les da mucha agilidad a los equipos de abogados privados son los recursos. Explica que un fiscal debe ceñirse a procedimientos lentos y formalidades para pedir cooperación internacional, lo que contrasta con las redes de abogados privados conectados en grupos de whatsapp, con bases de datos a las que acceden simultáneamente.

Una “Interpol privada”

De acuerdo a la descripción que realizan, estos equipos trabajan como “una suerte de Interpol privada”, ya que pueden reaccionar rápidamente y actuar de manera simultánea en todos los países que sea necesario, según comenta Ciro Colombara, socio del estudio chileno, quien explica que la globalización hace que los conflictos jurídicos también sean globales.

“Casi todos los casos relevantes tienen una arista internacional y en el caso de los temas económicos es muy habitual que los activos económicos estén en otros países, especialmente en paraísos fiscales”, añade.

Esto hace que el conocimiento idiosincrático de las distintas jurisdicciones donde tendrán lugar las pesquisas sea una clave fundamental de su éxito. “Si le pides a un juez de un país ‘A’ que le pida algo a un juez del país ‘B’, se lo tienes que pedir en un lenguaje tal que él lo lea como algo muy parecido a lo que hace todos los días, hay que saber cómo hacer coincidir los sistemas, qué palabras claves incluir”, dice Arnie Lacayo, otro experto de Estados Unidos que participó en el seminario.

Tanto Lacayo como Davis Jr. trabajan actualmente en el caso Stanford, un fraude de más de US$5 mil millones, sólo superado en magnitud por el caso Madoff, en que la defraudación alcanzó los US$50 mil millones.

Los especialistas explicaron que la clave en estos casos es la capacidad de seguir el flujo del dinero para entender cómo se hizo el fraude, dónde están los activos y así definir la forma de recuperarlos.

Para leer el artículo completo, oprime aquí.