CANADA

A tale of dollars and derring-do

DAVID THOMAS December 28 1981
CANADA

A tale of dollars and derring-do

DAVID THOMAS December 28 1981

A tale of dollars and derring-do

NATIONAL

When 70 victims of the biggest— and least noted—fraud in Canadian history gathered in a Montreal hotel room last week, their mood was grim. It was not lightened by their dawning realization of just how vulnerable Canada is to financial scams. Some of them were Swiss bankers bilked out of millions. Others were owners of small importing businesses, and some were simply travellers who had traded marks or lire for worthless cheques. They were all creditors of a familiar national corporation—Mercury International Travlsurance Agencies Ltd. The firm operates 21 currency exchange kiosks at five of the country’s major airports—and it has been collapsed by a daring con.

The creditors agreed at their meeting to permit Bank of America Canada Ltd. to take over Mercury—with the promise that they would get about 92 cents for every $1 they are owed. Inexplicably, the $2.4-million fraud that bankrupted Mercury was largely ignored when it occurred at the end of October.

Early that month a man using the name Richard Pellegrin and identifying himself as having Mexican diplomatic connections entered Mercury’s downtown Toronto offices and cashed $25,000 in Royal Bank of Canada world money orders. Then on Friday, Oct. 23, the paunchy, mustachioed man with a light Latin American accent returned with more Royal Bank money orders—$1 million worth. Prudently, Mercury’s local manager said he would have to verify their validity, and would the man please return on Monday?

For its part, the Royal’s main Ottawa branch reported that money orders bearing those serial numbers indeed had been issued, although, as with all such “instruments,” no record was kept of their purchaser and they did not have to be signed when cashed. Then, the culprit returned for his money and at the same time presented another $1.4 million worth of Royal Bank money orders. He returned again a day later to pick up the second fistful of cash and, in all, walked away with a staggering $1,977,350 (U.S.) in cash.

Thursday, Oct. 29—three days after they were cashed by Mercury International—the first of the 240 $1,000 money orders made their way through the clearing system to the Royal Bank. There they were found to be counterfeit-printed on special paper that had been stolen in Montreal last spring and imprinted with serial numbers identical

to those of legitimate money orders issued in Ottawa.

The perpetrator of the fraud not only managed to use correct serial numbers, he knew just how often he could return to the scene of the crime before the counterfeit paper would be discovered. Says Mercury President Harry Gruber, almost admiringly: “This guy knew his way around the banking system.”

As the ripple of dubious money orders started returning through the system, Canadian banks froze Mercury International’s accounts so that they would be caught with the least amount of worthless paper when the music stopped. Denied access to its cash, and with $2.4 million in bad money orders bouncing between the banks, Mercury’s Montreal headquarters filed for bankruptcy on Nov. 3 in Quebec’s Superior Court. Bankruptcy trustee Richard Messier of Clarkson Gordon chartered accountants immediately cabled a freeze on

Mercury’s 70 bank accounts around the world. That action, in turn, prevented a still unknown number of people and firms from cashing an estimated $7 million worth of Mercury International money orders and cheques. Stuck with the most Mercury paper was Swiss Bank Corporation. It is holding $2,545,300.

Surprisingly, for a firm dealing daily with strangers in large amounts of money, Mercury International was not insured against the loss. That oversight is even more surprising because Mercury is in the insurance business itself and is a subsidiary of Eastminster Assurance Agency Ltd., controlled by Newfoundland’s financially troubled Andrew Crosbie interests. Crosbie had been negotiating a possible sale to the Bank of America before the fraud occurred.

Under the agreement accepted unanimously by the creditors, Bank of Amer-

ica will take over Mercury as soon as the proposal is ratified by the court, probably next month. Meanwhile, Mercury will continue to operate as before with the same 150 employees and senior management. As part of the deal, trustee Messier will have$1,250,000,in addition to Mercury International’s cash assets of $5,155,000, for disbursement to creditors. Had the company been liquidated instead, creditors would have received about 71 cents on the dollar rather than 92.

But first, Messier must attempt to identify all creditors, a difficult task since money draft purchasers, Mercury’s included, are not required to register payees’ addresses. At the same time, police have a similar detective job in chasing down the con artist responsible for what Toronto fraud squad’s Sgt. Herb Lowe calls the biggest case of forged documents in Canadian history. A warrant has been issued for the arrest on fraud charges of one Lakerman Hardat, alias Richard Pellegrin, last known ad-

dress Montreal and last heard of (minus his moustache) in early November in the Bahamas. Lowe is hoping his man will prove as vulnerable to error as was Mercury International. Declares the officer: “He’s got to move the money around and, with that amount, he’s going to make a MISTAKE.”-DAVID THOMAS

DAVID THOMAS

Thomas Hopkins

Randolph Joyce