damage to our economic system and our society. Wealthy individuals and brokerage firms which seek and sponsor illegal credit extensions to Americans through secret foreign accounts abroad undermine our Government's attempt to control inflation. Those who engage in securities frauds and major stock market manipulations turn to the secret account as the means to carry out schemes that bilk the trading public and escape detection. Persons with large incomes and assets to conceal from taxation find the secret foreign account an indispensable adjunct to their evasion plans. And finally, the use of secret foreign accounts has become integral to a large number of diverse criminal activities, furthering the most pernicious and blatant violations of law. Of course, I will continue to make every effort to bring before the bar of justice those who use secret foreign accounts to further illegal activity. But if the administration of justice is to be truly evenhanded, all law violators must be equally vulnerable to the criminal process; no one should be allowed to place himself beyond it. I am confident that this committee, with its great knowledge and judgment, will act to insure that result. Chairman PATMAN. Thank you very much, Mr. Morgenthau. These disclosures are shocking and disturbing. I think we can well afford to take plenty of time to go into this and make sure that we enact the very best bill that's possible to remedy these terrible situations. You have rendered a great service to the people of the United States by making available this testimony and performing your duties in such a satisfactory way as you have. It is in the public interest. I am glad to know that the Department of Justice is behind you and also anxious to make sure that these awful situations are cleared up and remedied and the people not be required in the future to be led into such awful frauds, international frauds, I guess you would call it, but they get down to the local level. Here are copies of four checks that were stolen and forged from the Human Resources Agency, a poverty agency, in New York. They are dated on the same date in amounts ranging from $105,000 to $466,000. As you can see, the payees are questionable and the signature is ambiguous. These checks were deposited in the Banque Populaire. The bank accepted them and routinely forwarded them to the Chase Manhattan Bank for collection. These checks, together with two New York Times articles are inserted in the record at this point, without objection. There are four checks, one for $340,063.38, dated October 9, 1968, and it required the signature of two people. Only one was presented. Therefore, it was discovered. The other one is $466,179.24. They are all on the Chase Manhattan Bank, but the Chase Manhattan Bank refused to cash them because they did not have the required two signatures. They only had one, I want to add the man whose name does appear on the checks was found not to be implicated in any manner with this scheme. The other one is $105,366.80, and the last one is $106,005.59. We will make them a part of the record. (The checks and articles from the New York Times referred to follow:) CITY OF NEW YORK. MANPOWER & CAREER Pay to the order of DEVELOPMENT AGENCY GENERAL FUND ACCOUNT 40 WORTH STREET, NEW YORK, 14, Y. 100:3 October 968 ***Department of Finance Tecliuca Associates THE SUI 340063 DOLS 38 CTS THE CHASE MANHATTAN BANKILO 7233270 Nataral AssOCIATION lia. 1387 1-2 210 $340,063.38 Dolars AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE No. October 68 liuca Associates order of ***Department of Finan THE SUMI06005 DOLS 59 CTS THE CHASE MANHATTAN BANK 0723800 1. National Association Worth Street at Church Street, New York, N PAY 41-642-70- -3 1:0210-00021: 0221054018 1686 1-2 210 $106,005.59% Dollars THORIZED SIGNATURE [From the New York Times, Jan. 15, 1969] AMERICAN SEIZED IN NETHERLANDS IN PLOT ON HRA ADMITS LINK TO AN ATTEMPT TO SHIFT $1-MILLION TO BANK IN SWITZERLAND The 40-year-old naturalized American has been arrested in the Netherlands and has admitted he was involved in a complicated plot to transfer more than $1-million from accounts of the city's Human Resources Administration to a bank in Switzerland. The police in Venlo arrested a man identified only as G. F. Cöeppicus when he attempted to collect $137,000 in cash at the Amsterdam-Rotterdam Bank. A second man is still sought by Interpol, the international police organization in connection with the attempted theft of $1,017,651.01 in four fraudulent H.R.A. checks. HOGAN HAS THE CHECKS The four fraudulent checks are now in the possession of the New York County District Attorney, Frank S. Hogan. Two to three months ago, according to a statement released by his office yesterday, he notified the Chase Manhattan Bank to watch for checks drawn on the account of H.R.A.'s Manpower and Career Development Agency. Payment was stopped on the checks-four of seven stolen from an H.R.A. checkbook-when they were presented to Chase Manhattan for collection last Dec. 23. As yet there is no indication whether or not Mr. Cöeppicus is in any way associated with the Human Resource Administration. The arrest last Friday added an international aspect to the problems of the superagency. Other situations involving H.R.A. include: The House Education and Labor Committee announced yesterday that a bipartisan "task force" of committee members-headed by Representative Hugh L. Carey, Brooklyn Democrat-will investigate the city's antipoverty program. The Office of Economic Opportunity, one of the Federal organizations that largely finance local antipoverty programs, said that its staff of three inspectors for New York and the New England region could not effectively monitor all antipoverty programs in eight states. United States Department of Labor monitors studying the city's Neighborhood Youth Corps, which provides jobs for slum teen-agers, reported that major failures of the program included a lack of supervision and that agencies of the Human Resources Administration find “very few" permanent jobs for members. Secretary of Health, Education, and Welfare, Wilbur J. Cohen, said yesterday that all antipoverty programs should be improved by "politically insulating" proved programs, by transferring them from the Office of Economic Opportunity to older Federal departments. In the Netherlands yesterday, the police in Venlo said Mr. Cöeppicus opened an account under analigs with the Banque Populaire Suisse in Zurich last Dec. 12. In German, the bank is called the Schweizerische Volksbank. The police said the checks amounted to $1,017,615. They refused to confirm. that these checks were the same ones that are now in the possession of District Attorney Hogan, but the checks Mr. Hogan has are for the following amounts: $340,063.38; for $105,366.80; for $106,005.59; and $466,179.24. These add upto $1,017,615.01. Some time after the account was opened, the Zurich bank led Mr. Cöeppicus to believe that the checks had been presented for collection without problems, the Venlo police said. TRANSFER ORDER ALLEGED Mr. Coeppious is alleged to have then ordered the bank to transfer $137,000 to the Amsterdam-Rotterdam Bank in Venlo-to the account of a local businessman who was detained by police when he inquired about the money last Thursday. The police said the businessman, into whose account the money was supposedly transferred, was released the same day when he proved to their satisfaction that he had acted in good faith in the attempted transaction. However, the next day, last Friday-Mr. Coeppious, accompanied by his sevenyear-old son and his brother, a German who lives in Siegen, Germany, was arrested when he allegedly attempted to pick up the money. The police did not reveal the alias Mr. Coeppious used when he allegedly deposited the money in the Banque Populaire. On the back of the checks in the possession of Mr. Hogan, however, is an endorsement that shows the checks being deposited to the account of a George Jose Mendoza Muller. The payee on all of the checks is the city's Department of Finance and a concern called Pagliuca Associates. There is a Pagliuca Associates in New York City, and its owner, Angel Pagliuca, has been questioned by the District Attorney's office. No action, however, has been taken against Mr. Pagliuca, who asserts he has no knowledge of the checks. Of the seven missing H.R.A. checks, five are now in Mr. Hogan's possession. The fifth check, for $52,000, was also stopped by Chase Manhattan last December. It was made out to the name Saul Belinsky and was presented to the bank by an escrow company from Los Angeles. The check was supposed to have paid for a $50,000 house in Los Angeles purchased from Allen C. Woodward, a real estate broker. In an interview with The Times, Mr. Woodward had said he saw Mr. Belinsky only once-to make the deal-and later told Mr. Belinsky in a telephone call that the check was no good. "Okay, we'll do business another time," Mr. Woodard quoted Mr. Belinsky as saying. [From the New York Times, Jan. 17, 1969] REPORT BY JANUARY 31, UNITED STATES DIRECTS HRA CITY SAYS MOST IRREGULARITIES IN THE ANTIPOVERTY AGENCY HAVE BEEN CORRECTED The Federal Office of Economic Opportunity has instructed the city's Human Resources Administration to report before Jan. 31 on what action has been taken to correct a long list of alleged irregularities in neighborhood antipoverty agencies. The irregularities, which H.R.A. officials said yesterday had been "mostly" corrected, ranged from the fact that some local agencies used unnumbered checks to the hiring of consultants who have been paid $1,000 but apparently had no duties. Those problems were discovered by teams of investigators from the O.E.O., one of the Federal agencies that finances local poverty programs. The investigators visited local agencies last June and reported findings then and last December. The local organizations such as Brooklyn's Youth in Action and the East Harlem Block Nursery-get their funds from the OEO and are administered by HRA's Community Development Agency. The O.E.O. reports were studied by reporters of The New York Times during a three-month study of mismanagement and corruption in the city's $122-million a-year antipoverty program. The OEO and Labor Department together provide more than $80-million a year to H.R.A. for job-training programs, community corporations and the Neighborhood Youth Corps. The Labor Department supplies about $30-million for the Youth Corps and the OEO finances other poverty programs. Recent Labor Department reports disclosed by The New York Times's investigation have also charged mismanagement within the Human Resources Administration. CITY'S REPORT UNDERWAY The local troubles have been discussed by OEO and HRA officials for the last six months and a spokesman for H.R.A. Administrator Mitchell I. Ginsberg said last night that the city's report was being prepared. "Most of the conditions have been corrected," said Natalie Jaffe, H.R.A.'s public-affairs director, "but we take issue with certain OEO recommendations." Failure of the Human Resources Administration to correct or take specific action to correct the irregularities "may result in suspension, termination or remedial action" on city programs, according to OEO regulations. The Jan. 31 date, however, could be extended and H.R.A. could appeal to Washington on any OEO recommendation with which it disagrees. Other facts relating to the problems of the H.R.A.-the superagency that was set up 29 months ago by Mayor Lindsay to manage antipoverty programs and the city's $1.6 billion welfare budget-include the following: |