Welcome to Watch This Space, a new way for me to deliver K2 Integrity’s high-level expertise and share meaningful perspectives in the marketplace with you. Twice a month, I will highlight a few recent assignments which, I believe, will help reveal emerging risks, trends, technologies and anything our team thinks is important for you to know.
I don’t think Lord Byron had global financial crime in mind when he coined the phrase “Truth is stranger than fiction.”
But, in what sounds like the plot of the next Mission Impossible, the Department of Justice announced last month that it had recovered over $2 million in bitcoin on behalf of Colonial Pipeline. The country’s largest oil distribution system had paid more than twice that as ransom to the Russian criminal hacker network DarkSide.
Asset tracing and recovery efforts are employed in nearly all global criminal investigations. Each case is fingerprint-level different, but they should all be approached with the same sound data analysis, dogged pursuit, and “boots on the ground” knowledge of global legal and political issues. And, even though the goal may be a literal pot of gold, this work is about much more than dollars or bitcoins. Cutting off capital cripples the efforts of dangerous criminals—ring leaders in terrorism, drug trafficking, cyber attacks, and more. When we do our job, and do it well, we contribute directly to the safety of the world at large.
In the case of Colonial Pipeline, the bitcoin recovery was welcome news to a shaky public. But similar ordeals lie ahead. K2 Integrity Chairman—and the world’s leading asset tracer—Jules Kroll says:
“I’ve learned that people will always find new places to hide their money. There is a desire to keep assets away from a home country, to shield it from a legal dispute, or to conceal profits from criminal behavior. Even the release of the Panama Papers didn’t put an end to it; the bad actors just scattered and found new homes for their assets. Regulators have scrambled to stay up to date, particularly with cryptocurrency, but too often the bad guys are way out ahead of the good guys. This field will continue to be active and challenging.”
Case Study: Leidos and the Athens Olympic Games
Everything about the Olympics is expensive—just ask Tokyo right now. And in 2004, host country Greece was already headed for a major financial meltdown. Following the wildly over budget Athens Games, U.S. and Greek courts sided with Leidos, an Olympics vendor and K2 Integrity client, which was owed tens of millions by the Greek government. The K2 Integrity team crafted an intricate recovery strategy.
Jerry Howe, Leidos General Counsel, explains:
“Jules and I had worked together after the fall of Libya, preliminarily trying to recover billions thought to have been stolen by the Qaddafi family. He was utterly fearless. And I saw K2 Integrity's capabilities, global reach, and business acumen firsthand.
“When I started at Leidos in 2017, the company had been waiting for payment since the Athens Olympics—13 years! With the courts on our side, everyone thought Greece would finally pay up. But with what? There had been no identification of assets. You can’t put $60 million on a credit card. With Jules’s counsel, I was willing to take the bet and chase the assets. Others were more skeptical. I remember a board member kidding, ‘I’m not sure the mother of the GC who is going to collect this debt has even been born yet.’ It was a politically unpredictable time in Greece and I knew it would be hard to get the money. We deliberately steered clear of anything political and successfully recovered almost the entire sum.
“It’s a happy ending, but this work is not for the faint of heart. It presents a steady stream of unknowns, which can eat up time and money. The most important thing to me was that we had partners who worked hand in glove. It was a true collaborative effort.”
The asset tracing and recovery process isn’t easy. And with its emphasis on anonymity and ambiguity, crypto has raised the degree of difficulty. But we are motivated by the ultimate goal of rooting out recurring corruption. This work has never been more challenging—or more necessary.