Winnipeg Free Press - PRINT EDITION

Papers shed light on huge fraud case

Feds have no hope of getting money back

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OTTAWA -- The federal government has quietly abandoned any hope of getting back millions of dollars misappropriated by a former public servant, newly released documents show.

A Public Works employee stationed in the German city of Koblenz transferred $3.3 million of government money into three personal bank accounts. The employee made 18 transfers to banks in the Netherlands, Luxembourg and Belgium between April and June 2004.

Details of the multimillion-dollar fraud from nearly a decade ago are only now coming to light after The Canadian Press obtained briefing notes, memos and other documents under the Access to Information Act.

Public Works identifies its former employee as Sean Banks, who was the senior accounts payable clerk in Koblenz. He turned himself in to German police in June 2004 and spent part of a six-year prison sentence there before being deported to the United States in 2007.

"It was discovered that payments were processed without authorization and that the mandatory financial procedures had been bypassed," Public Works spokesman Pierre-Alain Bujold stated in an email.

'Taking costly collection measures in the U.S. against such low-value assets is not justified'

An accomplice, Manfred Josef Hendriks, spent two years in a German jail, the documents say. Claus Burg, a suspected third accomplice, was never found.

Public Works opened an office in Koblenz, which serves as its European headquarters, in 1957. The office mostly deals with military procurement for National Defence. Each year, it issues some 900 contract documents and does about $170 million in business.

Since Banks was caught, Public Works has made changes to the Koblenz office.

"To prevent such frauds, the department has since implemented administrative changes such as moving payroll functions from the Koblenz office to Canada," Bujold wrote.

The documents do not describe how Banks managed to transfer millions of dollars into European bank accounts over a three-month span, nor do they explain the role of any accomplices.

Public Works says Banks used a false identity to open bank accounts.

"The judgment in Mr. Banks' criminal trial indicated the identification used to open accounts in the name of Claus Burg was fictitious," Bujold said in an email.

Banks was deported to the U.S. and flown to New York in November 2007, the chief public prosecutor in Koblenz said.

The Canadian government launched civil suits against Banks in 2004 and Hendriks in 2007. So far, the government has managed to recover only $358,000 -- or around 10 per cent -- of the misappropriated money.

Public Works hired a debt-collection agency in January 2011 to track down Banks in the United States. After more than a year, the collection agency found him but determined Banks had few assets.

The collection agency told Public Works that Banks lived with his partner in a home valued at US$43,000.

Searches failed to turn up any money stashed in domestic and offshore bank accounts, nor did the agency find any cash in places such as Germany, Switzerland, the Cayman Islands and Saudi Arabia. Banks did not appear to have a valid driver's licence or a job, the documents say. Based on Banks' meagre assets, Public Works stopped trying to collect money from him.

"The department has also taken all necessary measures to inquire about the financial situation of Mr. Banks and about the possible collection measures that could be taken against his assets," says a memo to the deputy minister.

"The department has been informed that the total value of Mr. Banks' personal assets is very small (i.e. less than US$45,000). Taking costly collection measures in the U.S. against such low-value assets is not justified.

"For all of these reasons, we submit that due process has been followed by the department for this file. No further actions will be taken."

-- The Canadian Press

Republished from the Winnipeg Free Press print edition September 16, 2013 A12

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