Thursday, June 8, 2006

What Happens When the Donation Is Made With Money Obtained by Fraud

Former New York University undergraduate Hakan Yalincak entered a guilty plea to bank and wire fraud charges related to a scheme to float worthless multimillion dollar checks between banks in Connecticut, New York, and Switzerland.  Yalincak and his mother were indicted after it came to light that his purported hedge fund was non-existent and he was not a member of a wealthy Turkish family.  According to a press release (here) issued by the U.S. Attorney's Office for the District of Connecticut at the time of his indictment in May 2005:

[O]n March 14, 2005, YALINCAK sent two counterfeit checks totaling $17,748,000, purportedly from his business account at Bank of New York, to his account in a bank in Switzerland, UBS Zurich AG. The checks, which appeared to be official Bank of New York checks, were marked “certified funds.” On March 23, YALINCAK deposited a counterfeit J.P. Morgan Chase check in the amount of $25,000,000 into that same business account at the Greenwich branch of Bank of New York. The day before depositing the counterfeit $25,000,000 check, YALINCAK instructed UBS Zurich AG to transfer $2,500,000 to a second business account at Bank of New York that he controlled. UBS Zurich AG transferred the funds as instructed. On March 24, YALINCAK attempted to withdraw $1,700,000 from the business account into which the $2,500,000 had been deposited by UBS Zurich AG. By that time, however, Bank of New York had determined that the $25,000,000 check was counterfeit and froze all accounts on which YALINCAK was a signatory.

The government alleges that investors in Yalincak's bogus fund lost over $7 million, although he disputes the amount of the loss, and that he used the money to purchase a Porsche, Tiffany diamond, and, somewhat incongruously, made a $1.25 million donation to NYU.

An AP article (here) states that the school plans to return the donation, which was the first payment on a $21 million pledge by Yalincak's family, once it determines who the money should be given to.  The article also notes that an NYU development director was used by Yalincak to speak with two investors to verify the gift and pledge, part of his scheme to make it appear that he and his family had a significant net worth.  The explains why the money was given to the school, which is not the usual modus operandi in a fraud scheme  Yalincak's mother has not entered into a plea agreement with the government and is scheduled to go to trial. (ph)

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I consider it quite amazing that someone would donate $1.25 million to an institution to get an endorsement to prospective investors, though perhaps NYU verified the $21 million prospective value of the gift.

I guess I don't share the criminal mind.

Posted by: Kelley Ritchey | Jun 8, 2006 2:36:52 AM

Read and you better will understand the Yalincak fraud.

Posted by: wcw | Jun 10, 2006 10:08:09 AM

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