A Legend Passes

The recent death of a well-known criminal left a CFE remembering how the crook committed some of the most convoluted frauds in the 20th century and how they easily could have been prevented. 

I do not normally scan the obituaries so I am not sure why I was reading that page of the local newspaper that day. The notification in the “Sun-Sentinel,” Broward County, Florida’s newspaper read simply “WILSON, Philip M., of Coral Springs, FL. Died on January 15, 2003” and supplied the name of the funeral home. No other details. No descriptions of how he committed some of the most infamous and convoluted frauds in the 20th Century. Just a name and a date.

I first thought that this was another of Wilson’s elaborate schemes designed to throw everyone off the track. He was due to voluntarily surrender to federal authorities after pleading guilty to two counts of a 15-count indictment involving wire fraud and commercial bribery. And I was scheduled that same week to pick up arrest warrants charging Phil with a variety of state charges, from RICO to money laundering and advance fee fraud. My case had been almost two years in the making and had carried me from the British Virgin Islands to New York and West to Texas and Utah. This had to be another of Phil’s tricks. But sadly, it was not.

The fraud community had become a little bit smaller. The “good guys” would have to look farther afield for their next case.

Philip Morrell Wilson was born Aug. 6, 1937, in St. Louis, and purportedly lived a comfortable, middle-class childhood. He started to run afoul of the law when he was 26 by passing some bad checks and dabbling in a little breaking and entry. His “dark star” really began to shine in 1968, when he took advantage of the new offshore business regulations on the Isle of Sark, off the British coast. Wilson’s Bank of Sark operated for four years, producing certifications and bank letters that ended up in the portfolios of some of the largest corporations in the world, including American Express. At $100 million, Wilson’s Bank of Sark was at the time the largest fraud in history. While working the Bank of Sark, which was actually a third-floor, one-room, walk-up with a fax and telephone, he met fellow fraudsters Sam Wilkinson and Clifford Noe.

Wilkinson later certified, on a beautiful balance sheet, the Bank of Sark’s assets at $72.5 million. Cliff Noe, who awarded himself doctorate degrees so he could call himself “Doctor Noe,” became a long-term associate of Wilson and often called on him for assistance in schemes. Their association allegedly included phony Coca-Cola stock certificates and some representatives of the Vatican.

Wilson was convicted of eight counts of federal mail fraud related to the Bank of Sark transactions. After spending November 1972 through May 1974 as a guest of the U.S. penal system, Wilson was debriefed by most federal agencies responsible for fraud investigation and even testified as an expert witness before the U.S. Congress. Because of the elaborate and complex nature of the frauds committed by Wilson, the federal authorities sought to obtain Wilson’s knowledge of the flaws in the financial systems and weaknesses in the investigative and prosecution processes.

Despite his apparent rehabilitation, Wilson continued his involvement in the “banking and insurance” field in Virginia and Florida. He worked to convince people that his “Insurance Designers and Underwriters Group” was not only wildly successful but was associated with Lloyd’s of London. The indictment for that scheme listed more than $2 million in victims’ checks being sent to Wilson, et al. After an additional five-year session in federal housing, Wilson’s parole was transferred to south Florida, where he went to work with stolen property and money orders. During a meeting with an undercover agent, Wilson said he could provide stolen Greyhound money orders he had obtained during the 1981 Miami riots. Shortly thereafter, he sent several blank checks drawn on Texas oil companies and some money orders across state lines to Alabama as proof of his ability to deliver the goods. He even assisted in a scheme to transport drugs.

In 1984, Wilson was convicted of a federal charge of conspiracy to distribute narcotics. While on probation for those charges, he continued to commit advance fee fraud from his Fort Lauderdale “insurance” company. He was later convicted and sentenced to 12 years in state prison on a state RICO charge spanning the years 1981 through 1988, although he only served two years.

I met Wilson after he left the bogus Emerald Pure Trust in 1999.1 He then opened several Florida investment brokerages with variations of the name “MorningStar.”2 According to his promotional literature, MorningStar would arrange for funding of clients’ projects through its association with various well-known banks and philanthropic organizations.

Wilson charged a qualifying application fee ranging from $15,000 to $30,000. After he verified that his mark actually had enough money to warrant his time, he would deliver a terms-and-conditions statement and a pre-qualification letter. The victim would receive the promise of a letter of credit through one of Wilson’s associates to be issued by a “world-class bank” for the amount of the loan, at a rate of two or three percent of the loan’s value, payable in advance. The client was to wire the funds to MorningStar’s escrow account where it would be drawn down in stages during the loan process, culminating in the final issue of a letter of credit. Of course, the escrow account was actually MorningStar’s regular business checking account and Wilson snatched the victim’s money the next day. Wilson would tell the victim that banking problems were detaining issuance of the letter of credit. After several delays, the victim finally would give up in disgust. By the time I presented the evidence to the statewide attorney, millions in fees were logged through Wilson’s accounts. I still receive calls from new victims even after two years of tracing funds and following complex chains of correspondent companies. Wilson continued to run the scams even while he was being investigated because he was convinced that his actions were too confusing to follow.

Wilson was a master at obscuring the trail. He received funds into his Florida accounts in one city while living with friends in another. His telephones were all cellular and his office was often a Denny’s restaurant. He carried the records of his transactions in a plastic storage box in the back of an old station wagon. He provided “proof” of his efforts to obtain loans from acquaintances’ companies in Florida, Alabama, and New York. These companies, whose names often aped those of internationally known, successful firms, would all refer to subsidiaries in quaint overseas locales that were “guaranteeing the funds” or “providing collateral.”

In one series of transactions, MorningStar received the advance fee and shortly thereafter produced documents that guaranteed Company A, on the West Coast of the United States, had accepted the loan application. Company A then provided documentation showing the loan would be funded under the auspices of Company B. Company B, a charitable foundation, promised the money by way of its funding unit, Company C. These guys from Company C noted that Company D – the British Virgins Islands branch of a Spanish firm – would provide the collateral. A prominent Canadian bank allegedly would provide the money as a part of a much larger funding action. Wilson and his buddies would offer proof of funds in the form of second- and third-generation facsimiles of letters of credit issued by South American banks and copies of multi-million dollar company checks with the account numbers obscured. Wilson was no piker; he would often pay his associates salaries of $70,000 to $80,000 to ensure a steady flow of professional-looking letters.

In my fraud examination, I found that Wilson and his friends bandied about such bank names as Wells Fargo, Canada Dominion, Deutsche Bank, and ABN Amro as if they were close partners. But I discovered that none of the banks had ever heard of any of these characters or their purported companies. Sometimes we would actually find a bank account in the name of a target company but seldom did it hold more than a few hundred dollars.

Wilson had no problem talking about his exploits. He told tales to our undercover agents about ripping off millions in fake stock and bond deals in South America and elsewhere. Nor was he closed-mouthed about his current operations; when I asked him what happened to the missing escrow money, he said that he had spent it. “You have to live, you know,” he said. There was talk, at least from him, of making a film about his exploits but it never happened. He did make it into publication, appearing in the books, “The Fountain Pen Conspiracy”3 and “The Vatican Connection.”4
One crystal-clear lesson that emerges from tracking Wilson’s escapades throughout the United States is that simple due diligence would have prevented most of the crimes. In each instance, the victims relied exclusively on information that Wilson provided. If they had secured Certified Fraud Examiners to perform the most basic of due diligence actions they would have found sufficient red flags to stop Wilson and his cohorts cold. The victims ignored all the warning signs and brushed aside their doubts while rushing to secure the cash. Only two of Wilson’s most recent victims thought to contact law enforcement authorities after they discovered they had been taken. Until thorough due diligence becomes a part of every significant transaction, the Phil Wilsons of the world are going to continue to cripple our economy.

We are gonna miss you, Phil. You were an entertaining, educational target and an innovative fraud artist. Too bad you were not the last of your breed.

Victor A. Johnson, CFE, CCFT, CCCI, is a special agent working economic crimes with the Florida Department of Law Enforcement in Miami, Fla.   

1. The Emerald Pure Trust was another advance fee scam run out of Orlando, Fla., whose owner is now on a semi-permanent vacation in South America to avoid further contact with the FBI.
2. Wilson sought to confound his “investors” by choosing names similar to familiar, big-name corporations. In this case, he chose “MorningStar” (Financial Group Trust). He also used the “Albert Schweitzer Charitable Foundation” and linked his information to the real Albert Schweitzer Society’s Web pages. In the Caribbean, he was to receive major funding from the “Swiss Euro Group LLC,” aping another familiar name.
3. Jonathan Kwitny, “The Fountain Pen Conspiracy,” Alfred A. Knopf Inc., New York, 1973.
4. Richard Hammer, “The Vatican Connection,” Holt, Reinhardt and Winston, New York, 1982.