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Is FTI Consulting’s LatAm Division Ever Going to be a Shareholder Concern?

Public companies trade on their earnings, management team, and in great part on their name. How the market perceives a company has the most impact on stock price. It follows that multinational corporations apportion considerate amount of resources to PR and brand-reputation protection. Wall Street history is littered with examples of what happens to a stock’s price when a company becomes embroiled in scandals, corporate malfeasance, or fraud. FTI Consulting describes itself as "a global business advisory firm that provides multidisciplinary solutions to complex challenges and opportunities. With the full power of unique depth of thought combined with the global expertise of leading professionals, we are committed to protecting and enhancing the enterprise value of our clients." The $1.53 billion company (NYSE:FCN) "operates in five business segments: Corporate Finance/Restructuring; Forensic and Litigation Consulting; Economic Consulting; Technology; and Strategic Communications. It assists clients in addressing a range of business challenges, such as restructuring (including bankruptcy), financing and credit issues and indebtedness, interim business management, forensic accounting and litigation matters, international arbitrations, mergers and acquisitions, antitrust and competition matters, electronic discovery (e-discovery) management and retrieval of electronically stored information, reputation management and strategic communications. Effective March 19, 2013, the Company acquired C2 Group. In April 2013, it acquired Taylor Woodings. In May 2013, it announced that Compass Lexecon, LLC, a wholly owned subsidiary of FTI Consulting, Inc., has acquired Princeton Economics Group."

About twelve months ago, I received a phone call from Maria Jose Tobar, Director / Global Risk and Investigations Practice at FTI Consulting in Miami. Tobar, posing as a potential client, asked me a few questions about my day job -an online wine retailer- and wanted to know my address, so that she could send me stuff. What Tobar couldn't have known is that her disingenuous phone call would trigger an investigation on my part, which exposed her and her rather amateurish tactics. To this day it remains unknown to me just why Tobar -probably acting on orders from an FTI Consulting client in Venezuela now embroiled in a powerplant scandal involving bribery- wanted my address. But it piqued my interest, which prompted me to do even more research about her firm.

The more I researched the more I uncovered about FTI Consulting’s interesting record of shady Venezuelan clients. FTI Consulting’s Latin America division has done work for Rafael Sarria [see here and here], Moris Beracha [see here], Alejandro Andrade [see here and here], Ricardo Fernandez Barrueco [see here and here], Derwick Associates [see here] and Hugo Carvajal [see here]. These names may appear as innocuous Hispanic businessmen. In reality they include a man designated as a “Drug Kingpin” by the U.S. Department of Justice; a former “treasurer” of the government of Venezuela (who magically surfaced in South Florida spending hundreds of millions of dollars); a former parking lot attendant who claims to have made billions of dollars fishing for tuna in 6 years, and a number of financiers with dubious reputations. All of them have retained FTI Consulting for “due diligence.” In essence to clean up their reputations and discredit anyone who poses a threat to their storybook rags to riches tales. Their target lists include journalists, politicians, and whistleblowers.

The head of FTI Consulting's Latin America office, Frank Holder, is a man with a chequered past. Holder, a former CIA operative, has been involved in all manner of scandals: from Argentina all the way to Venezuela. He stands accused of stealing information, of extortion, of faking due diligence reports, of lying, of vilifying his clients perceived enemies, of stealing clients funds, and of forging documents: 

Holder "began his career with the U.S. Air Force as a political-military analyst for the U.S. embassy in Argentina and as a special agent for the Office of Special Investigations at Langley Air Force Base in Virginia." He cut his teeth in Argentina, where he set up some sort of risk assessment business called Buenos Aires Sistemas Inteligentes with none other than Luis Moreno Ocampo, who accused Holder of stealing information from his office. Holder then created Holder Associates and sold it to Kroll, becoming Kroll's man in Argentina. In 2000, Holder was found guilty of false claims and fraud. Holder was also accused of extorsion by former Governor of Entre Rios province Jorge Busti. In 2001, Holder produced an "intelligence  report" about Argentinean Congressmen Gustavo Gutiérrez and Carlos Balter, which was found by judge Raul Sanchez as something baseless, commissioned and paid for by banker Raul Moneta with the unique objective of vilifying the two congressmen. Holder also founded Holder International, another intelligence firm which FTI Consulting acquired for $9 million in 2007.

Holder's name also popped in Brazil in relation to a scandal related to Daniel Dantas about a report of secret accounts that Lula da Silva, Jose Dirceu and other leaders of Partido dos Trabalhadores allegedly had offshore (Dantas was trying to use the report to blackmail Lula et al). Holder authored the report, and first claimed that he had come about the information in the course of Kroll's investigation into Italy's Parmalat's bankruptcy. Brazil's Veja magazine found through authorities in Milan that Holder's version was false. Confronted by Veja, Holder then admitted that hackers working for utterly corrupt former Argentina's Interior Minister Jose Luis Manzano "got the information", which Manzano handed over to him as "a personal favour". As a result of his relation with disgraced Brazilian banker Dantas, for which he got $838,000, Holder was accused ofslander (he just fabricated "evidence" as in Argentina).

Apart from being a hired pen and a fabulist, FTI Consulting's Latin American director, Frank Holder, is meant to be an "expert" in "risk management... money laundering... forensic and litigation practice" and get this "fraud and public corruption investigations..." Holder is being sued in Florida ($6 million given to him gone missing) by Matias Garfunkel, another Latino 'businessman' involved in yet another massive corruption racket, in Argentina. In an attempt to acquire a controlling percentage of Telecom Argentina's shares, Garfunkel tried to use as guarantee two letters [see here, and here] from two Venezuelan banks owned by [guess who?] Ricardo Fernandez Barrueco, another client of Holder and FTI Consulting. Did Fernandez Barrueco knowingly participate in this, or is it another example of Holder's penchant for recklessness?

But it gets even better, Holder was also hired by Hugo Carvajal, an OFAC designated kingpin targeted by the U.S. Treasury for supporting the FARC, Colombia's narco-terrorist cartel. As if that was not enough, former CIA agent Holder, also served as proxy for Rafael Sarria in at least two Florida-registered companies [SAI Advisors Inc. link, and Noor Plantation Investments link] used to launder money through real estate acquisitions. Hence Holder, and FTI Consulting as a result, have been involved, at the very least, in money laundering, racketeering, and aiding and abetting wanted criminals. Holder started off as an employee of the U.S. government: is he a double agent or is he just cashing in on the needs of criminals in Latin America? While FTI Consulting and Holder cheekily pontificate about FCPA compliance, when will federal authorities start questioning their activities in Latin America?

In addition to that, Holder has failed spectacularly at keeping relations with clients at arms' length: Holder not only fronts companies for extremely dubious clients [see links to Rafael Sarria above], but he also appears to have made purchases, like private jet transactions, for clients who wouldn’t pass muster with America’s Federal Aviation Authority.

Sources have revealed to this writer that during his employ with a different investigative firm, Kroll Associates, Holder was retained by the owner of Venezuela's largest food conglomerate. The conglomerate, Polar Group, needed a due diligence report on Ricardo Fernandez Barrueco, a totally dodgy Venezuelan businessman who was suddenly granted enormous contracts with the Venezuelan state to be sole supplier of the very foodstuffs produced by the Polar Group. The government was clearly seeking to bankrupt the private sector competitor. It would appear that Holder took the work he was paid for by Polar and resold it to Fernandez Barrueco shortly afterwards, once Holder was helming FTI’s LatAm division. Another source claims that FTI's office in Panama (4th Floor, Dresdner Bank building) belongs to Ricardo Fernandez Barrueco.

FTI Consulting's Venezuelan clients is a true Who's Who of that country's most corrupt Boligarchs. Not one of the names mentioned above would pass a rudimentary KYC process. And open source links, or even basic googling reveals none of them pass the smell test. The reported activities of some of Holder’s Venezuelan clients go beyond mere money laundering of misappropriation of public funds: they include drug trafficking, assassinations, and aiding and abetting terrorism.

Is this the sort of clientele that bulks up FTI Consulting’s quarterly earnings? Wall Street friends assure me that FTI has a stellar reputation among U.S.-based attorneys and even judges, yet to anyone who cares to spend 5 minutes googling it’s clear that there is a little-known closet (or more like a warehouse) filled with skeletons at FTI. It would be interesting to know how would the market react should this information make it into the mainstream media. Will company directors ever take a close look?