Evidence presentation: Unconventional methods of acquiring information:

PLEASE USE COURSE NOTES ATTACHED Homework Assignment 3: Case Study In this assignment, you will have the role of an investigator in a case study. Note: The case study is provided at the end of this document. The purpose of this assignment is to provide you with an opportunity to apply all of your learning throughout this course to a real-world scenario. You will need to apply concepts providing in the course readings; therefore, please include and apply concepts and references from each lesson in this assignment. Don’t forget to appropriately reference the source of any information (from readings or self-directed research). The case provided is fictitious, but mimics real world events and scenarios. Do not get overwhelmed with the details of the case; focus on the assignment requirements listed below. As a criminal investigator in this fraud case, you are required to prepare a case study report that describes the following: • Determine the appropriate interviewing and interrogation techniques and approach you would take in this case • Identify which individuals will be interviewed compared to those who would require a follow up interrogation • Determine the location and setting of the interview/interrogation (e.g. informal at the person’s home, office etc.) and explain your reasoning for selecting the setting • Describe the pre-interview preparation and list the main questions that you would include and why • Explain how you would establish rapport with the interviewees and include an overview of the conversation you would generate to establish rapport • Include any references to the Canada Charter of Rights and Freedoms, Canada Evidence Act, Rules of Evidence and Case Law that explain your approach to this case study. Evaluation This assignment is graded out of 40 possible points. The assignment is worth 20% of your total course grade. Example: Mark of 20/40 = 50% = 10/20 Evaluation Rubric The evaluation of your assignment is based on the following marking rubric. Content—30 marks • 10 marks for a clear and complete interview plan • 10 marks for explaining the details of the interview including location, rapport building • 10 marks for outlining the relevant legal and procedural considerations with specific references as noted in the assignment description Concisely and accurately presents the material—10 marks • Assignment is presented using a logical structure • Writing is clear, concise, accurate, thorough and professional • Marks are deducted for any instance in which the material is poorly presented or for grammar/spelling errors • Maximum of 5 pages in length Case Study Prosperity International Inc. Scenario (Fictitious characters and details) On March 30, 2009, Mr. Dickinson Vice President of HSBC Securities Canada contacted you to discuss HSBC as the victim of a $2.6 million fraud scheme and outstanding debt of $2,600,000, which was caused by purchases of Prosperity International Inc. shares in the accounts held at HSBC Securities Canada that had not been settled. You are informed that the investigation involves Michael Moffatt and two co-conspirators, Anthony Callucci and John Lawrence who are officers of a shell company called Prosperity International Inc. The background is that Michael Moffatt used sophisticated trading techniques that were indicative of a “pump and dump” stock manipulation scheme. The methods used included ‘up-ticking’, which manipulated the pricing of the shares at a bid higher than the price of the previous trade. This enables the final trade of the day to be at a higher price than the price of previous trades thereby creating an artificially high closing price. He also used: • ramping up which moves the price up through regular buying at increasingly higher prices • matching trading which places pre-arranged buy and sell orders at nearly the same time, price and volume • wash trading that does not involve a change in actual ownership • recycling funds that involves moving funds from one account to another to cover the settlement of trades. Michael Moffatt also settled trades by cheque rather than fund transfer. This allowed a delayed in settlement and facilitated the recycling of funds used to finance the manipulative trading. Background Between December 2, 2007 and February 12, 2009, Michael Moffatt was involved in a sophisticated fraud that, through share price manipulation, artificially inflated the price of shares of Prosperity International Inc. Prosperity International Inc. was a mining exploration company incorporated in Delaware on June 5, 2005. Prosperity International Inc. traded on the United States National Association of Securities Dealers Over the Counter Bulletin Board. Prosperity International Inc. was a dormant “shell” company, which did not carry on any business activity and did not own any assets. On May 6, 2008 Prosperity International Inc as part of the scheme, moved its operations to 2358 Earl Street in Markham, Ontario. In July 2008, Prosperity International Inc. shares were traded at $0.08 US per share. Between July 14, 2008 and October 13, 2008 there was no trading in the stock. Michael Moffatt had two co-conspirators, Anthony Callucci and John Lawrence. Their scheme entailed the acquisition of almost all of the free trading shares in Prosperity International Inc. This enabled these three individuals to trade the shares amongst themselves at a rapid pace with a high volume to show demand and price increases with every transaction. An investigation revealed that the acquisition of Prosperity International Inc. shares was accomplished through a series of transactions whereby $2.9 M (CDN) was obtained from several private investors, many of whom were unsuspecting and unsophisticated. Of the $2.9 M collected, $890,000 (CDN) was used to purchase the outstanding shares of Prosperity International Inc. The remaining $2 million was used to purchase a 14.4% interest in Excursion Resources Limited, an exploratory, non-producing gold mining project in Northern Ontario. The 14.4% interest in Excursion Resources Limited was subsequently assigned through another transaction to Prosperity International Inc., in exchange for Prosperity International Inc. shares. The overall effect of these transactions was that: 1) Michael Moffatt, Anthony Callucci and John Lawrence acquired control over almost all of the free trading shares of Prosperity International Inc. 2) Prosperity International Inc. acquired a 14.4% interest in Excursion Resources Limited and, 3) the private investors acquired Prosperity International Inc. shares in exchange for their investments. In the months that followed Michael Moffatt engaged in manipulative trading of Prosperity International Inc. shares and issued false and misleading information pertaining to Prosperity International Inc. These actions affected the public market price of Prosperity International Inc. shares and created a risk of deprivation for the private investors who had acquired Prosperity International Inc. shares in exchange for their investments. As a result of the manipulation, the price of Prosperity International Inc. shares ultimately dropped, resulting in losses for some of the private investors. With the uncertainty of the Prosperity International Inc. shares, the private investors sold off their shares, which were acquired by Michael Moffatt and the co-conspirators. Other private investors were repaid by a third party after the price of Prosperity International Inc. shares dropped. A minority of private investors continued to hold onto Prosperity International Inc. and suffered losses through the fall of Prosperity International Inc. share prices. By the fall of 2008, Michael Moffatt, Anthony Callucci and John Lawrence had succeeded in acquiring almost all off the free-trading shares of Prosperity International Inc. In the middle of October 2008 the manipulation of the share prices was commenced. On October 14, 2008 the shares opened at $0.30 (USD) and closed at the same price on a volume of 12,000 shares. Over the next thirty four trading days the shares traded a cumulative volume of over 2 million shares with the price peaking at $11.35 (USD) on November 28, 2008. Prosperity International Inc. shares rose by a factor of more than 3,000%. Between October 24, 2008 and December 21, 2008 eighteen press release and Securities Exchange Commission documents were issued that contained false or misleading information favorable to Prosperity International Inc. Many of the publicly available documents were written by Michael Moffatt and were designed to artificially inflate the public market price of Prosperity International Inc. shares and distort normal market forces. While conducting Prosperity International Inc. business, Michael Moffatt used various aliases including Michael Marshall, Michael Douglas and Michael Mead. This was necessary because his past criminal dealings were known within the securities industry. As a result of Michael Moffatt’s orchestration of this scheme, he received payments and benefits of various kinds, including payments and transfers of monies to him and his wife. Michael Moffatt received $1,218,000 from the proceeds of sales of Prosperity International Inc. shares in the United States accounts. Credit cards use, automobile lease payments for a 2008 450 SL Mercedes, residential lease payments for a condominium at 15 Queens Quay suite 1304 in Toronto were all funded from these payments. Airline travel and hotel accommodation for several trips to New York, British Columbia and Florida were also paid for through these dealings. Banking and brokerage documents were seized both within Canada and the United States. The result of expert analysis determined that much of the trading in Prosperity International Inc. in October and November 2008 was conducted by Michael Moffatt, Anthony Callucci and John Lawrence not only trading amongst themselves or companies they controlled, but also through accounts held by nominee account holders whom they directed or controlled. None of the accounts were held in Michael Moffatt’s personal name but rather in his alias names. During the period of manipulation, two accounts were predominantly used. These were the HSBC Securities Corporate account in the name of Wild Star Capital Management Corp. and the RBC Dominion Securities Corporate account in the name Krampton Financial Corporate. Wild Star Capital Management Corp was the main buyer and Krampton Financial Corporate was the main seller of Prosperity International Inc. stock. Some of the profits earned by Krampton Financial Corp at RBC Dominion Securities, as result of trading in Prosperity International Inc., were channeled through the use of intermediary bank accounts to the Wild Star Capital Management account. These funds were then used to finance some of its purchases of Prosperity International Inc. Some of the profits earned by Krampton Financial Corp at RBC Dominion Securities Corporate account as the result of trading in Prosperity International Inc. were channeled through the use of intermediary bank accounts to the Wild Star account to finance some of its purchase of Prosperity International Inc. The HSBC Opening of Accounts Robert Lee has been employed since 1997 at the Toronto Branch Office of HSBC Securities Canada Inc. located at 15 York Street. Robert Lee has been qualified as a Chartered Financial Analyst since 1999. His present position at HSBC is that of a Registered Representative Options (Retail) and he receives business referrals from HSBC and in particular Edmund Chung, who is the branch manager at the HSBC Toronto Branch Office located at 210 Dundas Street. Further to a referral from Edmund Chung, on October 18, 2008 Robert Lee attended the office of Trent Financial Group, a financial service company located at 147 Comber Court Suit 301 in Richmond Hill. Robert Lee met with Trent Financial Group branch manager Kevin Long. At the meeting, Kevin Long introduced Robert Lee to Anthony Callucci, who requested that Robert Lee open an investment account in Anthony Callucci’s name. The account was to be an investment account in the name of Wild Star Capital Management Corporate. The only person authorized to trade in the Wild Star Capital Management Corporate was Anthony Callucci. Robert Lee inquired whether Anthony Callucci was an employee, director, partner or officer of a member of any stock exchange, IIROC member, or public company whose shares are traded or are in the over-the-counter market. Anthony Callucci denied any such connection and stated that when he placed a buy order, he wanted his bid to show in the market. Wild Star Capital Management Corporate, Trent Financial Group and Anthony Callucci were all customers of HSBC. Edmund Chung, on behalf of HSBC, provided Robert Lee with a letter in support of the Wild Star Capital Management Corporate account application. During this initial meeting, Anthony Callucci informed Robert Lee that additional persons at the Trent Financial Group office wished to open accounts at HSBC Securities. At Kevin Long’s request, Robert Lee returned to the Trent Financial Group office on October 19, 2008 and met with another five individuals who also wished to create accounts. These persons were Yvonne Lawrence, John Lawrence (husband and wife), Frank Linton, Joan Henderson and Mary Lyons. The customary questions were asked by Robert Lee relating to employment, membership in any stock exchange or IIROC membership. At the request of Kevin Long, Robert Lee left several blank accounts opening documents for other prospective clients. Over the next few days, Robert Lee received three additional new account opening documents for clients Mary Helen Lawrence (sister of John Lawrence), James Stewart and Jessica Yardley. Robert Lee processed their account applications without meeting or speaking directly to them. Robert Lee did subsequently speak to James Stewart and Jessica Yardley by telephone prior to trading in their accounts. Mary Helen Lawrence could not be reached by phone and thus no personal interaction occurred. During the early days of the vigorous trading active of Prosperity International Inc., Robert Lee had received a total of 20 new account investors The Scheme in Motion – Trading of Prosperity International Inc. During October 20, 2008 to November 22, 2008, Robert Lee’s clients purchased Prosperity International Inc. stock in their respective HSBC accounts. The HSBC accounts collectively made up a significant portion of the buying activity during this period. The Wild Star Capital Management Corporate account was the largest buyer of Prosperity International Inc. during the period of trading manipulation. From October 27, 2008 to November 22, 2008 Wild Star Capital Management Corporate purchased 392,000 shares of which it sold 17,500 shares. In early November 2008 at the request of Robert Lee’s clients, HSBC Securities credit department approved payment for trades in the Wild Star Capital Management Corporate account to be made on settlement date rather than on trade date. While some of the trading in Prosperity International Inc. was funded by Krampton Financial Corp., Robert Lee was not aware of the existence of the Krampton Financial Corp. account at RBC Dominion Securities. All of the trading in the HSBC accounts was unsolicited. Prior to any of the clients purchasing Prosperity International Inc. stock, Robert Lee had no knowledge of Prosperity International Inc. or Krampton Financial Corp. Robert Lee had never recommended the purchasing of over-the-counter bulletin board stock for any of his clients. Prosperity International Inc. was not a stock being recommended by the HSBC Securities. As an investment advisor, Robert Lee, had access to trading data including price and volume information of over-the-counter bulletin board stocks including Prosperity International Inc. through various reporting agencies such as Bloomberg and the over-the-counter Bulletin Board website. Later, when interviewed by investigators, Robert Lee told the investigators that he was not aware that such information was available to him. For seven of the twenty clients that Robert Lee signed, Prosperity International Inc. was the only stock purchased in their accounts. Five clients held a maximum of two other stocks. Specifically, three clients held stock in Petrel Resources Ltd., which traded on the TSX Venture Exchange and two of the three clients held stock in Circle Software Corp, which traded on both the TSX and NASDAQ exchanges. The remaining eight clients had a diversified portfolio. Robert Lee did not question his clients’ trading in Prosperity International Inc. until he was directed to do so by HSBC Securities Compliance Department. Compliance Queries On October 26, 2008 during the period of early trading in some of the HSBC accounts, Michelle Veltri, the branch administrator at HSBC Securities, asked Robert Lee about the buying activity (purchases of) Prosperity International Inc. and relationship between his clients and Prosperity International Inc. Robert Lee responded by advising that all of the clients mentioned were newly open accounts (opened less than 2 weeks) from HSBC bank referral. Robert Lee advised that purchasing of Prosperity International Inc. was unsolicited and that the new clients were related in some manner as some worked at the Trent Financial Group. In respect to their relationship with Prosperity International Inc. he was not aware of any relationship. On November 2, 2008 Michelle Veltri conducted an internet search on Prosperity International Inc. and discovered that Anthony Callucci and John Lawrence were officers of Prosperity International Inc. On July 9, 2008 Anthony Callucci had been appointed president and chief executive officer of Prosperity International Inc. On October 25, 2008 John Lawrence had been appointed public relations officer for Prosperity International Inc. Although the appointment of Anthony Callucci was officially announced in a Press Release on October 25, 2008, all Prosperity International Inc. press releases and SEC filings beginning in July 2008 identified Anthony Callucci as president and CEO of Prosperity International Inc. On September 21, 2008 Anthony Callucci was also appointed to Prosperity International Inc. Board of Directors. Anthony Callucci had not advised Robert Lee of his appointment and John Lawrence had not advised of his appointment when they initially opened their accounts with Robert Lee on October 18 and 19, 2008 On November 2, 2008 Michelle Veltri sent an email to Robert Lee requesting that he ask all clients who recently purchased Prosperity International Inc. shares: • whether they had any relationship or any affiliation to Prosperity International Inc. • why these clients had decided to purchase Prosperity International Inc. • what information they had received to influence their decision When interviewed by Robert Lee, five of the clients admitted to knowing Michael Moffatt, Anthony Callucci and John Lawrence. Several clients claimed to know at least one of the three individuals on a business level and had been persuaded that Prosperity International Inc. had great investment potential. The remaining clients had learned of Prosperity International Inc as a potential good investment by word of mouth. All twenty clients advised that they were purchasing Prosperity International Inc. stock based on their view of the stock’s potential to appreciate in value and not based on undisclosed material insider information. On November 5, 2008 Robert Lee questioned Anthony Callucci and John Lawrence who admitted their positions with Prosperity International Inc. Robert Lee then updated the Wild Star Capital Management Corporate and Anthony Callucci accounts to reflect insider status. By November 19, 2008 Michelle Veltri and HSBC Compliance became concerned about the Wild Star Capital Management Corporate rapid and significant accumulation of Prosperity International Inc. shares. During the previous four days, Wild Star Capital Management Corporate had accumulated over $1 million US of Prosperity International Inc. stock. On the same day Robert Lee contacted Anthony Callucci in regards to the high stock purchases. Anthony Callucci advised that his trading was based only on publicly available information. Later the same day, Robert Lee emailed Michelle Veltri of his conversation with Anthony Callucci who in turn escalated the matter to her senior management at HSBC Securities. By mid November 2008 senior management at RBC Dominion Securities Inc. began questioning the active Prosperity International Inc. trading in the Krampton Financial Corp. account. On November 16, 2008, their concerns intensified when new share certificate for 3.4 million of Prosperity International Inc. shares was deposited in the account. On November 19, 2008 due to the suspicious trading of Prosperity International Inc., RBC Dominion Securities decided to prohibit the deposit of new shares and to shut down the Krampton Financial Corp. account. The Victims Meanwhile, concerns were developing at RBC Dominion Securities. On November 18, 2008 HSBC Securities developed credit concerns regarding the increasing size of the Prosperity International Inc. trades given that settlement date privileges had been granted in the Wild Star Capital Management Corporate account. HSBC Securities Canada had an outstanding debit of $2,600,000, which was caused by purchases of Prosperity International Inc. shares in the accounts held at HSBC Securities Canada that had not been settled. Michael Moffatt, Anthony Callucci and John Lawrence traded in and exercised control over these accounts. In an effort to obtain payment to cover this debit, Robert Lee met with Michael Moffatt. During the meeting Michael Moffatt advised Robert Lee that he would wire transfer $2,600,000 (USD) of his own money from Barclays Bank in the Cayman Islands to cover the debit, but on the condition that he would be able to get the money out at a later date. RBC Dominion Securities Inc contacted HSBC Securities expressing their concerns, which resulted on November 23, 2008 of HSBC Securities action to freeze all Prosperity International Inc. trading activity and related accounts. Ultimately HSBC Securities Canada did not receive funds to cover the debit. In normal business practice, HSBC Securities Canada would liquidate the securities held in the accounts in order to cover the debit. By end of November 2008, HSBC Securities Canada had concluded that the price of Prosperity International Inc. shares had been manipulated and that the accounts controlled by Michael Moffatt, Anthony Callucci and John Lawrence were involved in the share manipulation. HSBC Securities Canada opted against selling the shares and instead incurred a loss in these accounts in the amount of $2,625,000 (USD) As brokerage firms started to freeze accounts operated by parties trading in Prosperity International Inc., Anthony Callucci emptied accounts that were not yet frozen and was subsequently was able to obtain $250,000 (USD), which was the proceeds of the fraud. Anthony Callucci transferred the funds to the trust account of the law firm of C.H.Young and Associates. The funds were later transferred from the trust account to Michael Moffatt and subsequently from Michael Moffatt to his wife Carol Anne Moffatt. From Carol Moffatt the funds were transferred to Barclays Bank in the Cayman Islands. As a result of the actions taken by RBC Dominion Securities and HSBC Securities, the trading volume and share price in Prosperity International Inc. dropped dramatically. The share price of Prosperity International Inc. dropped to $6.00 (USD) by the end of December 2008, to $1.86 (USD) by the end of January 2009 and to $0.34 (USD) by the end of February 2009. Ontario Securities Commission Issued Cease Trading On December 10, 2008 the Ontario Securities Commission issued a cease trade order in Prosperity International Inc. stock against various holders of the Accounts, as well as against Michael Moffatt, Anthony Callucci and John Lawrence. On December 17, 2008 because of Michael Moffatt’s extensive history of securities fraud convictions in Canada, he was prohibited from trading in any securities. Notwithstanding these orders, in January 2009 Michael Moffatt had recommenced trading in securities, including Prosperity International Inc. He set up accounts in British Columbia and in the United States held by nominee account holders. Michael Moffatt directed trading in those accounts from Ontario, in violation of the Ontario Securities Commission cease trade orders. Also, by directing trading in accounts in British Columbia, Michael Moffatt was in violation of another cease trade order in effect in British Columbia, from a previous conviction in that province. The net proceeds of sales of Prosperity International Inc. shares in the United States accounts totalled $1,218,000. Third-Party Trading Instructions On November 3, 2008 Anthony Callucci introduced Robert Lee to Michael Marshall (alias for Michael Moffatt) who advised he was Anthony Callucci’s partner. This was followed up with a written trading authorization form allowing Michael Marshall to trade in the Wild Star account. The following week, Anthony Callucci and Michael Moffatt (Michael Marshall) telephoned Robert Lee and provided him with trading instructions for the Wild Star Capital Management Corporate account. Michael Marshall provided Robert Lee with cheques to finance purchases made in the same account. Michael Marshall remained involved with the Wild Star account, communicating with Robert Lee with or without Anthony Callucci on a daily basis until the Wild Star account was closed down. During the month of November 2008, various third party cheques were deposited into some of the clients’ accounts, Date of Cheque Amount Source of Funds Account deposited to November 1, 2008 $2,800 Krampton Jessica Yardley November 1, 2008 $7,500 Krampton Joan Henderson November 4, 2008 $15,000 (US) Krampton Wild Star November 4, 2008 $10,000 (US) Krampton Yvonne Lawrence November 4, 2008 $7,500 (US) Wild Star Yvonne Lawrence November 4, 2008 $17,500 (US) Wild Star Mary Helen Lawrence November 12, 2008 $200,000 (US) Krampton Wild Star November 15, 2008 $55,000 (US) Krampton Wild Star November15, 2008 $250,000 (US) Krampton Wild Star Pursuant to the HSBC Securities’ compliance manual, third party cheques are not permitted to be deposited into client accounts. Also Robert Lee had not met in person with Jessica Yardley, Joan Henderson and Mary Helen Lawrence. Robert Lee took no steps to determine the source of the funds and who controlled Krampton or the relationship between Krampton, Wild Star and the clients receiving the funds. Every day from October 20, 2008 to November 23, 2008 the clients were putting in unsolicited day orders to purchasing between 2,000 and 5,000 of Prosperity International Inc. and every day the clients were purchasing the shares at a higher price than the previous day. Banking Robert Lee received Wild Star Capital Management Corporate cheques from Anthony Callucci either from Toronto Dominion Bank account 14521-031-4234 and Toronto Dominion Bank account 14521-721-4845. Robert Lee received cheques from Krampton Financial Corp. drawn on the HSBC Dundas Branch account 012-199-990-070 Additional Information A criminal record search was conducted on Michael Moffatt with a date of birth of November 15, 1945, which reveals that Michael Moffatt is not presently before courts on any criminal charges. A criminal record search indicates a long extensive history of criminal activity starting in June 1965 with a conviction for NSF cheques. To date, Michael Moffatt has been convicted on 97 charges all relating to fraud and securities fraud. Michael Moffatt has served jail time ranging from 2 to 5 years, although he had often been released early as he was a model prisoner. A criminal record search of Anthony Callucci and John Lawrence indicates neither individual has a criminal record. Properties Michael Moffatt resides with his wife at 23 The Queens Quay Suite 1207. Michael Moffatt and his wife Carol Anne Moffatt purchased the condominium on April 12, 2006 in the amount of $750,000. An initial deposit $15,000 was given with the offer to purchase on February 21, 2006 and $200,000 was paid on the closing date. An outstanding mortgage is held by Confirm Mortgage Broker in the amount of $514,000.

Interview_and_evidence__notes_2013.docx

                                                                Interview and evidence

The mind game is the newest television fascination. The “Mentalist” and “Lie to Me” are only two such television programs that intrigue the viewer with ‘consultants’ who assists law enforcement in the detection of truth and lies.

While this can be entertaining, as you will find out during this course, there is no simple formula for spotting or catching liars. Body language, voice and demeanor all provide excellent information to the investigator but there are few people who are skilled at obtaining the truth that have not reached success without solid observation and sophisticated techniques.

Think of an investigation as a fact finding mission, which requires the investigator to establish a rapport to gain the trust and cooperation of the witnesses, victims and even the suspects to ascertain what occurred.

The aspects of a criminal investigation are to:

1) Identify the crime....