Counterparties

Kestrel Commercial is a small bank with a large lobby, and it took Halina Zambrano nine weeks and a formal notice to get past the second of those things.

Banks do not hand their collateral registers to loss adjusters. What they hand you, in the first instance, is a relationship director called Aurelio Fenn-Baptiste who is extremely pleasant, gives you an hour, agrees with everything you say, and gives you nothing whatsoever — a performance Halina rates, professionally, as one of the finest she has seen.

What broke it open was not clever. It was that Dov Ferreiro's report went to the police in the February with the word deliberate in it, and a bank that has been told its collateral was destroyed in a deliberate fire has obligations of a kind that a bank being asked polite questions by an adjuster does not.

Kestrel's own internal review took four weeks and its findings ran to nine pages and Halina got them in the April, and the findings are, in her opinion, the single most damning document in the whole matter, and not one word of it is about Verrow & Kinsella.

Because Kestrel had done everything right. It had taken a receipt. It had commissioned an independent surveyor. It had made a physical inspection in the January, of a shed with two thousand four hundred tonnes of cocoa in jute in it, and there is a photograph in the file, and the cocoa is there.

"It was there in January," Halina told Dov, in the same café, with the same sugar bowl. "It was really there. That is what nobody expects. The first loan is honest. It is almost always honest. You cannot run this fraud unless the first one is real, because the first one is what teaches everybody involved that the paper works."

Kestrel's review found no failing in Kestrel. It is nine pages of a bank establishing, correctly and at length, that it had followed its own procedure to the letter, and the fact that it was nevertheless the first lender in a three-deep collateral fraud is set out in the appendix as an unfortunate outcome. Halina has said that she does not blame the author, who was doing the job, and that this is precisely the problem: every institution in this case did its job.

Dov asked the question he had been building towards for a month, which was: where does two thousand four hundred tonnes of cocoa go? And Halina said that it goes where it was always going to go, which is out of the shed and onto a ship and into the world, sold perfectly legitimately to somebody who paid for it and got it — and that this is the part people find hardest, because the goods are not stolen and the buyer is not a victim and there is no cocoa anywhere in this case that anybody can point at. There is only paper that outlived it.

The second lender was a different animal and the difference is the case.

Merrick Ostrander is a trade finance house of nineteen people that lends fast against commodity paper at rates that make sense only if you are lending fast, and its whole business is the six weeks between a cargo leaving a shed and a buyer paying for it. It is not a bad institution. It is a fast one, and speed is what it sells.

It lent against the May receipt in eleven days on the strength of a certificate, a receipt, and a call to the warehouseman, and it did not send a surveyor, and its own file says why: Kestrel facility repaid in full and on time — counterparty conduct satisfactory.

Halina put that line on the wall on its own sheet, and it stayed there for the rest of the investigation, and she has described it in a lecture as the most expensive sentence in Port Alder.

Because the January loan was repaid. Of course it was; it was repaid out of the proceeds of the cocoa, which was really sold, to a real buyer, at a real price. And a facility repaid in full and on time is the strongest possible evidence of a sound counterparty, and it is exactly what the second lender relies on, and it is exactly what the first loan was for.

"That is what I mean when I say the first one is honest," Halina said. "It is not a fraud that begins as a fraud. It is a legitimate transaction that somebody discovers can be run twice, and then three times, and every repetition is underwritten by the reputation the honest one built. Nobody sits down in a room and decides to do this. They discover it, and then they do not stop."

Dov, who by then had eliminated nine of the eleven container purchasers and was living with the remaining two, said that this was a very generous account of a man who had burned down a shed. And Halina said that she had not said anything about who burned down the shed, and that in her opinion they still had no idea, and that Dov had stopped considering it eleven weeks ago and had not noticed.

The September syndicate is the one that has never been fully unpicked, and it is where the case stops being a Port Alder case and becomes something that four regulators are still, at the time of writing, declining to describe as a pattern.

It was arranged out of a jurisdiction that does not answer letters, by an agent bank that Halina has never been able to identify beyond a service address, on the strength of the eleventh certificate — the one with a verified proportion of zero, and a letter attached saying it should not be relied on.

Somebody removed the letter. That is not an inference; the syndicate's own information memorandum reproduces the certificate as an appendix and the reproduction is complete and the letter is not there, and the certificate's own footer says 1 of 2 and there is no page two.

"That is the crime," Halina told a select committee two years later, and it is the only time she has ever raised her voice in a hearing. "Everything before it is greed and drift and eleven people not asking a question. Removing a page is a decision. Somebody sat down with a two-page document and made it a one-page document and sent it to nine institutions, and that person is not a warehouseman in Port Alder."

The September facility drew forty million and it has not been repaid and it will not be, and the syndicate members wrote it off across two quarters and did not sue, which Dov found incomprehensible and which Halina explained to him in a sentence: they did not sue because suing means disclosure, and disclosure means every one of them explaining in public why they took an unverified certificate at face value in a market where two other lenders had already been in and out.

Ruaidhrí Kinsella was charged in the June with fraud by false representation on the strength of the stock records, and he did not contest the stock records, and his defence — which is still his defence — is that he inflated them under instruction, that he was told the goods were on the water and would be back in the shed within the month, and that he has a name and will give it when he is asked properly.

His solicitor has made the same application at three successive hearings, which is for measures the court has twice described as disproportionate to the charges, and Halina — who has no standing whatsoever in the criminal proceedings and has attended every one of them — wrote after the third: A man facing four years does not ask for that. A man facing four years and something else does.

He has been asked properly four times. He has not given it. Halina has met him twice in the presence of his solicitor and has come away both times with the same impression, which she wrote down after the second meeting and underlined: He is not protecting anybody. He is frightened of one specific person and he does not believe we can do anything about them.

While Halina was doing all of that, Dov Ferreiro closed his own list, item by item, in the order he had written it in November, and it took him until the following August.

The container was a twenty-litre agricultural drum from a batch of forty. Nine of the eleven purchasers were eliminated on documentation. The tenth was a farm co-operative eleven miles upriver that had bought four and could account for four. The eleventh was a plant hire company on the wharf road that had bought six and could account for five, and had reported nothing, because nobody reports a missing drum.

The plant hire company's yard has a camera. It keeps forty days. The fire was on a Thursday in November and Dov Ferreiro asked for the footage on the following Tuesday, which was day five, and got it, and that is the whole of the luck in this case and he says so at every opportunity.

What the camera shows, at eleven minutes past seven on the evening before the fire, is a man of about thirty in a hooded coat taking one drum off a pallet at the back of the yard and walking out with it, unhurried, not looking up, in a manner which suggests either great professionalism or a total ignorance that the camera exists.

It was the second one. His name is Casimir Bellwood-Okpara, he was twenty-nine, he had four convictions for dishonesty and none for anything else, he was arrested at his mother's house in the March, and he made no comment in nine interviews and then pleaded guilty in the November following, twelve months to the week after the fire.

He was paid two thousand in cash by a man he met twice in a car park and cannot describe beyond a height and a coat, and he has never varied that account, and both Dov and Halina believe it, and it is the single most frustrating true statement in the file.

"He is the man in the corner with the container," Halina said, when the guilty plea came in, and she did not say it in triumph, and Dov did not take it that way. What he said was, "He is. And I have got him, and it took me a year, and you were right that it changes nothing." Then, after a moment: "Do not do that again, though. I was right that somebody had to."