Salvation Army nets 'profit' on pounds 5.7m sting

Click to follow
Lawyers acting for the Salvation Army have recovered almost $5m (pounds 3m) more than the $8.8m (pounds 5.7m) lost in a bogus investment racket involving conmen with Mafia links.

Thirty-two months after the embarrassing announcement that it had been hoodwinked, the army said yesterday that it had recovered $13.7m (pounds 8.7m) - which includes interest and the cost of the international hunt for the funds. Paul Rader, General of the Salvation Army, said the recovery had answered his members' prayers and would allow residential projects to go ahead in Plymouth, Belfast, Glasgow, London and Southport. "We hope this will go a long way to restoring the public's faith in the Salvation Army. We pursued the money with discipline, resolution and a great deal of tenacity."

The recovery was the result of an astonishing international paper chase by lawyers who tracked down the money, and the crooks who stole it, across 13 countries including the United States, Panama, Uruguay, Switzerland, Canada, the Netherlands and Denmark.

The man leading the operation, Richard Clark, of Slaughter & May, said the final figure represents cash banked, rather than assets identified. There are further assets in the US over which the army has a claim.

The charity lost the money after being persuaded to invest in banking instruments known as standby letters of credit. Stuart Ford, a Birmingham builder, and Gamil Naguib, a Canadian-Egyptian investment adviser, convinced Colonel Grenville Burn, the Salvation Army's fund-raiser, that vast sums of money could be earned by trading in such letters of credit.

Against the advice of lay experts, Col Burn and a number of his superiors handed over $10m (pounds 6.5m) to Ford and Naguib in May 1992. They transferred $8.8m (pounds 5.7m) of this into a bank account in Luxembourg and then on through two other banks, each time weakening the charity's control over the money.

More than $3m (pounds 1.9m) was channelled back to Britain, where it was used by Ford to repay personal debts and provide questionable loans for an airport project and a hotel in Scotland.

The rest, $4.35m (pounds 2.8m), was spent on a standby letter of credit being sold by Harold Glantz, a New York businessman who has been investigated several times in America over his links with the New York Mafia. Glantz used the money to buy a beach house in Malibu and two other properties in Santa Monica and Hollywood.

In interviews with the Independent, Ford and Naguib denied wrongdoing, insisting they were conned out of the money by Glantz and a Dutch associate, Guido Haak. The letter of credit never materialised. Mr Clark and his colleagues traced the money through numerous banks and engaged 43 firms of lawyers world-wide to freeze and recover assets. In Britain alone, orders were made by more than 20 judges.

"The extra money recovered involves our claims for interest and the cost of recovery," he said. "We have been able to put the charity back in the position it would have been in had this money not been stolen."

A police investigation concentrating on Ford and Naguib is with the Crown Prosecution Service. Glantz is held in New York pending extradition to the Netherlands, where Guido Haak, his associate, was jailed last year for embezzlement.

Col Burn has been removed from his job, and the Salvation Army has since initiated controls that should prevent a recurrence. The Charity Commission said it was satisfied with the new arrangements.