19910403a La Potts Memo

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~STRONG'

Mr · Baker:\f7

RE:

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-iitpf1-s f~ 9dr2~ 4/3/91

CONNIE/C. JR., AKA 9HIP~STRONG; DBAvHAMILTON TAFT AND COMPANY; 32ND FLOOR, SPEAR STREET TOWER, SAN FRANCISCO, CALIFORNIA; FRAUD BY WIRE; MAIL FRAUD; TAX FRAUD i

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SAN FRANCISCO

San Francisco has initiated a Fraud By Wire investigation based on information received from the former Comptroller of Hamilton Taft and Company (HTC) that the sUbject, Armstrong, has'embezzled over $100 million from the firm's clients over the last three years. ,These allegations continue to be front-page news in San Francisco and on 3/15/91, the Wall street Journal ran a front7page article detailing the allegations (copy attached). HTC contracts ,with companies who owe taxes to numerous state and local taxing authorities. Client companies make a lump sum wire transfer of funds to the HTC account, and thereafter, HTC issues checks to whatever taxing authority is owed money. The former Comptroller, I I, has alleged that Armstrong diverted lump sum payments to his own use and thereafter, incurred penalties associated with late payments and 7(:

passed these costs along to the client companies who were not notified of the late charges. In essence the allegation is that Armstrong is running a "Ponzi scheme ll of considerable magnitude Which requires increasing amounts of cash to keep the operat'on

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going ·

left HTC in Februar

of 1991

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and on 3

You will be kept apprised of pertinent developments. NOT APPROPRIATE FOR DISSEMINATION TO THE PUBLIC

L.~S Enclosure 1 - Mr. Jones 1 - Mr. Baker 1 - Mr. Potts 1 - Mr. Bryant GDM:gdm/sw (9)

(JA~

1 - Mr. OIHara 1 - Mr. Esposito 1 - Special Assistants, CIn