One Man's Gamble
How to pull off the largest non-drug money laundering scheme in U.S. history
By Willy Stern
MARCH 1, 1999: To his neighbors and clients in Crossville, Jake Gamble was a kind and decent country lawyer. With his soft blue eyes, drooping mustache, and easygoing manner, he had the look of a man you could trust.
Jake Gamble, people say, never met a stranger. Jake Gamble was someone you wanted to do business with.
The good life had not come easily to Gamble. The son of a rural Kentucky mail carrier with an alcohol problem, Gamble was the first member in his family to go to college, working full-time to pay his way through Austin Peay State University. After graduation, he became the football and basketball coach at Harriman High School, which explained why many of his former students still referred to him as "Coach." From Harriman, Gamble would make the 120-mile drive to Nashville four evenings a week to attend YMCA Night Law School. In 1977, when he graduated, he hung a shingle on his door, and, after some time, was making a decent--if modest--living in Crossville.
Gamble appeared to be living the normal, ordinary life of a country lawyer. In the morning, he'd head to his office, situated in a single-story brick building off the town square, where he often performed free legal services for needy individuals. He'd often conclude his day with a prayer meeting at his home with fellow congregants from Young's Chapel Cumberland Presbyterian Church. Because his acts of good will became so well known across the mid-Cumberland plateau, Gamble sat as a part-time juvenile court judge in Morgan County, and as a temporary judge in Cumberland County. But there was another side to Gamble, one that his neighbors rarely noticed.
Another typical day for Gamble might begin with him climbing easily into a passenger seat of a Lear jet at the nearby Maryville/Alcoa airstrip. A few hours later, the mild-mannered country lawyer would be sipping Jack Daniel's with drug runners and money launderers on the veranda of a beachfront hotel in St. John's, Antigua. Gamble, the unassuming attorney, who would scarcely seem the high-flying impresario of a major crime enterprise, was, in fact, something else entirely.
Today, the 56-year-old Gamble is assigned to a federal prison camp in Manchester, Ky. A white emblem on the chest of his prison-issue green workshirt identifies him as inmate #15215-075. In May 1997, he pleaded guilty to one count of money laundering. He has served seven months of a 41-month sentence. In all, Gamble--and his cohorts--are said to have taken a reported $60 million from a group of unwitting clients who spanned five continents--from the Middle East, to Asia, to Europe. Federal officials say Gamble was the front man for what is the "largest non-drug-related money laundering investigation ever conducted by the U.S. Customs Service." More than a dozen swindlers around the country have already been indicted in the scam. Eight have pleaded guilty, and another is on the run.
The story that Gamble has related, in more than 20 hours of interviews with the Nashville Scene, is one that would seem to have evolved more from the hands of a Hollywood scriptwriter than from the mind of a simple country lawyer. And yet what Gamble says has been corroborated by more than 100 pages of internal FBI files obtained by the Scene, the accounts of federal agents and analysts in both the U.S. and the Caribbean, and documents on file in the U.S. District Court in the Middle District of Tennessee, the Northern District of Florida, and other courts around the country.
As Jake Gamble jetted back and forth between the Caribbean and Crossville, he did not escape the notice of federal officials. Around the country, federal officials were being told of Jake Gamble's exploits. The Knoxville FBI started drawing a bead on him. And yet, none of them would take the plunge into what they knew would be a painstakingly difficult case, one that would take months of tireless investigation to prosecute.
Then one day someone called Bob Washko, in Nashville. He took it from there.
Washko, who has been an assistant U.S. attorney in Nashville for 20-plus years, is a nuts-and-bolts kind of guy. He is built like a fire plug, with a personality to match. Washko, 55, is a former Army prosecutor who also flew combat missions as a door gunner on assault helicopters in Vietnam.
A native of Bethlehem, Pa., he does not mince words. His businesslike bearing almost seems a stereotype of a federal prosecutor. Humor is not something he offers up with abandon. There is no irony, just a steadfast fixation on putting away bad guys. Ask his colleagues to describe Washko, and they offer up words like "tenacious," "single-minded," "no-nonsense."
Washko's office in the federal building at the corner of Eighth Avenue and Broadway is tiny yet functional, much as you would expect in a federal government space. It is cluttered with plenty of UT orange and mementos from his Army days.
Seated at his desk some four years ago, Washko was burdened by countless other cases. The job of an assistant U.S. prosecutor, after all, is spent pursuing drug cases, car thefts, extortion, kidnapping, even speeding on federal lands or defacing Smokey the Bear signs in national parks. To the extent that federal prosecutors develop expertise, Washko has built a reputation for going after white-collar fraud cases and crooked lawyers. He is perhaps best known for twice winning convictions against former state legislator Tommy Burnett, who is now a popular radio talk show commentator.
As early as 1994, complaints and phone calls began flowing into Washko's office from people who said they had been taken in by a money scam. They had lost not just in the low thousands of dollars; many had lost $100,000 or more. The person at the center of the scam, they charged, was Gamble.
Numerous prosecutors around the country, including some with far more resources at their disposal, had also received similar calls and had looked into the money laundering case. For whatever reason, they had already decided not to prosecute. The scam was complicated. It would be a difficult conviction. But Washko had a fair bit of experience with "up-front money scams"--a type of confidence game in which victims are convinced to put up money with the promise of a larger return, only to see the money disappear. With veteran FBI agent Richard Knudsen, who has since retired and now works for Columbia/HCA in Nashville, Washko had, in the early 1990s, successfully investigated and prosecuted Nashvillian Micheal Leek, the mastermind behind a similar up-front money scam.
"I was a reluctant warrior," explains Washko. "But I saw the money going offshore and that nobody else was going to prosecute or stop it."
Washko had good reason to be reluctant. A federal prosecutor in West Palm Beach, Fla., had studied the case for some time, only to conclude the fraud was "so sophisticated it couldn't be prosecuted." But after the Leek case, Washko knew an up-front money scam when he saw one. More important, he knew how to prosecute one. Explains Ben Purser, who ran Nashville's FBI office for 17 years before retiring last October, "Mr. Washko was willing to take on a very complex and convoluted fraud--and see it through to its conclusion--when other prosecutors around the country were not willing to accept responsibility."
In mid-1994, Washko and Knudsen drove to the federal courthouse in Cookeville, where the FBI maintained a small office. It was on this fateful day that Washko viewed for the first time an informal complaint from one of Gamble's early victims. It was a complicated file, packed with financial documents. Desk space was tight, and Washko got down on his hands and knees and started spreading the papers around on the dusty floor. He quickly pieced together the money scam. "I knew immediately what Gamble was doing," recalls Washko. "I said, 'Shit man, there's no question this is criminal fraud, and Gamble is up to his eyeballs in it.' "
What Washko had no way of knowing was the depth of Gamble's involvement, and the swirl of the activity around him. If there was a beginning to Gamble's illicit activity, the late 1980s would be a convenient place to start, as it was then that Gamble expanded his law practice into banking matters. Gamble soon fell under the scrutiny of federal authorities who were investigating banking irregularities in East Tennessee. Federal authorities are legally prevented from ever disclosing exactly which laws Gamble violated at that time. But this much is certain: Gamble was only able to avoid bank fraud charges at that time by agreeing to become a "confidential informant" for the FBI office in Knoxville. To the outside world, Gamble had become a "rat."
Gamble's job was secretly to provide information to the FBI on unsavory characters he met or knew, from Nashville to Knoxville. He would meet his contact, special agent Walter "Grey" Steed from the FBI's Knoxville office, for regular debriefings in "clandestine" spots like the Cracker Barrel restaurant in Harriman.
During the summer of 1993, even as Gamble continued to feed information to Steed, Gamble was introduced to a man from Waldo, Fla., named Larry Sangaree. At their initial face-to-face meeting, which took place in the Fort Lauderdale airport, Gamble at first mistook Sangaree for a bodyguard. Sangaree is a bear of a man, standing 6 feet, 3 inches tall, and easily weighing 250 pounds, who favors open shirts and topsiders. Sangaree and his business associates told Gamble that they had access to offshore venture capital, and that they wanted to loan the money to small businesses and individuals who qualified to receive the funds.
According to legal documents that Sangaree gave to Gamble, Sangaree had set up a complicated financial scheme in which those who had been approved to receive venture capital funding would have to pay to Sangaree's group an up-front processing fee, usually in the amounts of $100,000 to $250,000. Sometimes the fee ran far higher. The "clients" of the swindlers were typically hoping to receive loans of $3 million to $70 million, or even higher. Rather than actually make any loans, however, Sangaree's group would stash the processing fees offshore in banks on the Caribbean island of Antigua. Once moved offshore, the fees would be out of reach of the long arm of the U.S. government.
Gamble quickly agreed to act as the escrow attorney for Sangaree. His job would be to control the fees that clients gave to Sangaree before the venture capital funding was paid out to the borrower. As a former judge with a fine reputation, Gamble seemed like the ideal choice. What would-be borrowers wouldn't trust the Tennessee country lawyer to watch over the processing fees while their loan documents worked through the system?
In Jake Gamble, we had what appeared to be a well-respected attorney in Tennessee who vouched for the legitimacy and availability of the funds," says Thomas Eck, a Reno, Nev., attorney who represents one of Gamble's victims.
Gamble professes that he initially had "no idea" he was dealing with "crooks." Certainly, he says he had "no idea" that Sangaree was a high school drop-out who had served 17 years in prison for murder before he got into the "venture capital" business. In 1970, Sangaree shot a high school teacher in the back of the head with a .45 automatic in a dispute over a 1969 Corvette.
In any event, Gamble flew with Sangaree on a Lear jet in mid-1993 to Antigua. There Gamble chartered a private bank for the single purpose of laundering money. Gamble sat on the bank's board of directors. On this and subsequent trips to the islands, Gamble also set up dozens of shell companies. These dummy companies, and the private bank, provided an appearance of legitimacy, hid the actual ownership of assets, and made it impossible for anyone to follow the money trail. The bank, in particular, enabled Sangaree and his cohorts to deposit the money offshore, have it disappear, and then rewire it back to them for their own use without anyone's knowledge.
Who called? Hundreds of folks, dozens of whom eventually arranged to borrow money from Sangaree or his associates. Among those who paid the processing fees were entertainers, surgeons, and a professional athlete. Executives at High Five Entertainment, a production company on Music Row in Nashville, were reportedly on the verge of paying a $1 million up-front fee when FBI agent Knudsen tipped them off to the nature of the scam. High Five declined comment.
In one instance, an applicant was required to pay an up-front processing fee of $2 million. Applicants signed a complex financial document that detailed what requirements had to be met to receive the venture capital money. No venture capital, however, was ever distributed. After accepting the processing fees, Sangaree and his cohorts would eventually tell the borrower by letter that they had "failed" to meet the terms of the agreement and that the processing fee had been forfeited.
In fact, the loan agreements were written in such a fashion that no borrower could live up to the terms of the contract. Few read the fine print. U.S. District Court Judge Thomas A. Wiseman Jr., who sentenced Gamble, was among those who didn't feel too sorry for the victims. At Gamble's sentencing, Wiseman used these words to describe the motivations of those taken in by the scam: "desperation," "greed," "gullibility," and "stupidity."
If Gamble was initially unaware that he was involved in an illegal scheme, it couldn't have taken long for him to realize otherwise. As complaints started to pour into Gamble's modest Crossville office from victims of the scheme, he said he "began to wonder" about his new business partners.
Regardless, from 1993 through 1996, Gamble didn't come fully clean on the scam in his discussions with FBI agent Steed as they met for their regular debriefings. Gamble had good reasons to keep his mouth shut, chief among them money. Gamble continued to fly by private jet to the Caribbean to "verify assets" for Sangaree, and for his legal work alone, Sangaree was paying him as much as $5,000 a day. Sangaree was also picking up his expenses, and often, Gamble and Sangaree would wine and dine top Antiguan government officials at fancy dinners. Sangaree was always quick to pick up the tab.
Meanwhile, government offices around the U.S. were being beseiged with complaints about Sangaree's venture capital deals. From Philadelphia to Reno to Seattle, investigators heard lurid tales of "processing fees" that had disappeared in various venture capital loan deals. Still, no one prosecuted the case.
What was particularly strange was the apparent lack of action on the part of Knoxville's FBI office. Some think that due to the office's associations with him, the Knoxville agents had to have known that Gamble was the escrow attorney for the multimillion dollar scam. But neither FBI agent Steed, nor his colleagues, put a stop to the swindle. While Gamble and his partners were taking millions in processing fees and moving them into offshore accounts, Steed went on debriefing Gamble on a variety of matters in Middle Tennessee and in the Caribbean. A spokesman for the FBI in Knoxville says his office was "not aware of any illegal activity by Gamble in our jurisdiction at the time" and therefore appropriately took "no action other than passing along relevant information."
Meanwhile, Gamble's simple office in Crossville had become the focal point for an international honor role of money launderers and world-class swindlers. They included a man who ran illicit arms shipments into Bosnia. There was a veteran hashish smuggler who had allegedly been sprung from a Columbian jail by armed commandos. Another apparently avoided a hefty jail term by agreeing to work undercover as a government operative in Europe.
What Gamble provided the sordid bunch was, according to former FBI agent Knudsen, an aura of legitimacy. "Jake had to know his day of reckoning would come," Knudsen says. "But he got to work with the very best international money launderers around, world-class at their craft. They traveled by private jet, did business from yachts. They stayed at only the best hotels. What's extraordinary is that the entire scheme could not have happened without Jake Gamble right here in Middle Tennessee."
Far more than even he could have imagined, Gamble became deeply immersed in the political and banking communities of Antigua, a lovely tourist destination where Europeans and Americans sunbathe topless on soft white beaches. But Gamble wasn't spending much time on the beaches. The island paradise he found was much in keeping with what Time magazine had reported in 1996, when it described Antigua as one of the "most corrupt (countries) in the region, long known for sheltering traffickers in armaments and drugs." As Gamble soon learned, the corruption had already spread to a smaller, nearby island, Dominica, which was only minutes away by private plane.
On numerous trips to Antigua and Dominica between 1993 and 1996, Gamble's working days and nights were spent with South American drug dealers, gun smugglers, even frontmen for the Russian mob. When he arrived in Antigua for his first visit to the island in July 1993, Gamble was escorted around the customs check to a fleet of waiting cars. He was whisked away to an office to meet with V.C. Byrd Jr., a member of parliament and brother to Antigua's prime minister.
When Gamble asked Byrd about setting up a new bank for his clients in Antigua, Byrd assured him the application would be approved "within an hour" if Gamble gave Byrd $45,000 up front and 25 percent of the bank's profits. Gamble took this offer back to Sangaree, where the offer didn't meet with much cooperation. According to Gamble, Sangaree said he wasn't going to pay bribes to "stupid niggers."
Nonetheless, Gamble was successful in opening up several banks and accounts in Antigua. The soft-spoken Tennessee lawyer quickly developed friendships with a number of well-placed government sources in the islands. Through these connections, Gamble was retained to write Dominica's bank secrecy laws--in an apparent effort to lure some of the dirty offshore money away from Antigua. These laws, drafted in Crossville, Tenn., are on the books today. "Obviously, we are concerned about the use of Antigua and Dominca's financial services sectors by criminals," says Jonathan Winer, deputy assistant secretary in the U.S. State Department.
Gamble spent much of his time funneling money into the offshore accounts, reaping the fruits of the venture capital scam. But his days were numbered. Washko was on his trail. And the noose was tightening.
Washko had in his possession numerous complaints about Gamble from around the nation that outlined the venture capital operation. He had interviewed people who had been taken in by it; he knew how it worked, what it was, and who was perpretrating it. More importantly, he had actual bank records showing the money moving offshore and coming back.
Washko figured that if he could secure Gamble's cooperation, the rest of the scamsters would likely be brought to justice. After a period of tense, bureaucratic wrangling, the FBI and U.S. Attorney's offices in Nashville finally wrested Gamble's case away from Knoxville.
Gamble caught a break in April 1996, when Washko underwent open-heart surgery that required six bypasses. But, by August, the tenacious prosecutor was back at his desk and getting ready to indict Gamble.
To save his skin before the Nashville agents, Gamble crumbled. Once again, he agreed to become a "cooperating defendant." For the second time in his career, he was a "rat."
This time, Gamble's interrogator was FBI agent Knudsen, a soft-spoken man Gamble still refers to as "a friend, as decent of a man as you'll ever meet." Gamble agreed to tape conversations with Sangaree and others, and feed information on the scam back to Knudsen and other federal agencies. Gamble did so without any preconditions; he says he was under the impression that he was "helping" the U.S. government, and that the U.S. government, in turn, would "look out" for him. His only hope was to get a lesser sentence in return for his cooperation.
At the same time Gamble began spilling the beans on Sangaree's operation, U.S. Customs agents were snooping around north Florida, looking at people they suspected were tied to money laundering in the Caribbean. They had long been aware of Sangaree's apparent money laundering, but did not have enough hard evidence to arrest him.
Cracking Sangaree's operation, they had discovered, was no easy task. Holed up in an 80-acre ranch north of Gainesville, Fla., Sangaree's compound was equipped with an infared laser security system so advanced it could detect approaching aircraft. He also had sophisticated scanning devices, an arsenal of semi-automatic weapons, and a 40,000-watt generator fueled by an underground tank. Inside the home was a bunker with reinforced concrete walls and controlled access to his security system.
"Virtually every room in that house had a gun in it," said U.S. Customs agent Mickey Pledger, who was in charge of the Florida wing of the investigation. Pledger, a swashbuckling customs agent with a reputation for breaking tough cases, oversaw the effort to bring down Sangaree's empire. But he didn't get far. After opening up a surveillance operation of Sangaree's compound, the customs team made two crucial mistakes. First, despite having been briefed on the presence of Sangaree's detection devices, the agents failed to use encrypted walkie-talkie communuications.
Sangaree was soon listening in on the chatter between the customs operatives; the agents' cover was blown. Then, not long thereafter, Sangaree left the compound, leaving an embarrassed customs team in his dust. Sangaree was on the run.
This is where Gamble came in. At Pledger's urging, Gamble contacted Sangaree. Speaking over a satellite telephone with a range of 5,000 miles, with internal software designed to foil cryptographic interception, Sangaree and Gamble agreed to meet. Gamble asked for the meeting under the pretext of discussing how to respond to the pressure from the federal government. In effect, Jake Gamble was to be used as bait. It was an assignment that Gamble didn't have to be pressured into doing. Despite putting his own life at risk, he volunteered for it.
On short notice, the U.S. Customs Service flew Gamble into Florida. On a rainy date in late February 1997, at a luncheonette in the lobby of an office tower in downtown Jacksonville, the two men were preparing to discuss business when customs agents stormed the eatery. Sangaree was arrested at gunpoint. To conceal from Sangaree the fact that he had been double-crossed by a rat, customs agents held a gun to Gamble's head and "arrested" him as well. Sangaree's wife and another attorney, who were also at the lunch, were detained and released.
Gamble had been instrumental in assisting Pledger with his investigation of Sangaree. And during this time that Gamble had agreed to cooperate with the U.S. Customs Service, he says Pledger "on several occasions" made promises that there would be a "job" waiting for him working undercover at customs. However, once Sangaree was picked up, Pledger failed to deliver on the deal.
"There's a code of honor among federal law enforcement, and Pledger violated that code," charges one law enforcement official familiar with the case. For his part, Gamble now says, "I would never, ever help any government agency again. You can't believe what they tell you." Pledger vehemently denies ever making a job offer to Gamble.
Gamble wasn't the only person who found the tactics of the U.S. Customs Service troubling. After Sangaree and others were rounded up in Florida by customs agents, the U.S. Attorney for the Northern District of Florida called a news conference. Customs essentially took full credit for bringing down the money laundering scheme. The story was juicy, and was picked up by many major papers across the country, including, ironically, some of the very same papers that Sangaree had advertised in a few years earlier. No mention was made whatsoever in the press release, nor in the articles, of the key roles played by Washko or Knudsen, or for that matter, of any law enforcement personnel in the state of Tennessee. These omissions raised eyebrows in Nashville.
"Prior to the time that Jake Gamble's cooperation was obtained by agent Knudsen and Washko, it's my impression that the investigations in Florida were of no significance," says Purser. Nobody would be going to prison today if Gamble hadn't agreed to cooperate with Washko. And Gamble wouldn't have agreed to become a snitch if Washko hadn't decided to prosecute the case.
In May 1997, the case of United States of America vs. Donald Jake Gamble was brought before a federal judge in Nashville. Gamble pleaded guilty to a money laundering charge for his role in this scheme. And he tried to help his own criminal defense attorney prepare a "sentencing memorandum" in the hopes of attracting the mercy of the court.
Gamble had hired a nationally known criminal lawyer, Charles Fels of Knoxville, to defend him. In the court memo, Fels wrote: "Intent on providing himself, his wife, and his stepson a comfortable house, expensive cars, and the appearance of a successful law practice, Jake Gamble chose to suppress the truth from himself and from others."
In May 1998, Gamble was sentenced by Judge Wiseman. The normally quiet federal courthouse in Cookeville was packed with a battery of federal agents, including a contingent of U.S. Customs operatives who had flown up from Florida. Curiously, no one from the FBI office in Knoxville showed up. Wiseman sentenced Gamble to serve 41 months, even though the sentencing guidelines would have allowed a lesser term.
Sangaree, meanwhile, pleaded guilty to money laundering. He's in prison, awaiting sentencing. For his part, Gamble is not sure he's going to live long enough to be released from prison. He told a visiting reporter last month, "I'm scared out of my mind that Sangaree's going to hire somebody to kill me."
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