By Canadian Press

Political donor helps fraudsters, bettors and pornographers

Aug 2, 2018 | 7:39 AM

NEW YORK — One customer was a debt collector that threatened to jail people if they didn’t pay back loans that they never took out. Another was an offshore gambling operation that hid bets behind innocuous-sounding websites, including one dedicated to orange cats. A third was a phone-sex business catering to men with diaper fetishes or fantasies of raping women.

Ahmad “Andy” Khawaja made his fortune in online payment processing for a host of companies, providing a key conduit in e-commerce for “high risk” merchants by helping route customers’ credit card purchases to banks. And recently Khawaja has shared that wealth in the form of multimillion-dollar political donations, first to Hillary Clinton and then to Donald Trump.

But thousands of internal company documents obtained by The Associated Press reveal that Khawaja’s company, Allied Wallet Inc., has profited from guiding dubious businesses past the gates of the banking system. The records, which include email conversations as well as business and financial documents, show Allied Wallet executives helped deploy sham websites and dummy companies to hide these businesses’ tracks, even in cases where Allied Wallet’s own staff deemed the underlying business activities to be “very, very illegal.”

The company’s actions in these cases flout bank policies, credit card network rules and potentially U.S. laws designed to prevent money laundering. In one instance, a company official complained to Khawaja that a colleague had provided “specific instructions on how to set up and operate an illegal gaming operation online.”

Khawaja and a company lawyer didn’t address a detailed list of questions from the AP about Allied Wallet’s business, as well as Khawaja’s political giving, for over a month.

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This week the Los Angeles-based company’s marketing director, A.J. Almeda, said in a statement that “any accusations of illicit or prohibited activities are misleading and categorically false.” Almeda called the AP’s line of inquiry “a political hit job due to the Allied Wallet’s contribution to President Donald Trump’s inauguration and support of his tax cut agenda.”

The Lebanese-born Khawaja gave more than $4 million to Clinton’s failed presidential campaign and other Democrats, then began extending his largesse to Republicans after a lunch with Republican fundraiser Elliott Broidy two weeks after Trump clinched the presidency.

Within days of that lunch, Khawaja met Trump at a $5,000-per-person transition fundraiser in Manhattan. Soon after he contributed $1 million to his inaugural committee, eventually earning himself a photo with the president inside the Oval Office.

The documents reviewed by the AP provide an unprecedented look behind the scenes of Khawaja’s company, which claims to process billions of dollars a year in online transactions.

They also come against the backdrop of a previous run-in with federal authorities over processing illegal online gambling proceeds: In 2010, Khawaja and his company were forced to give up $13 million in a civil forfeiture stemming from a sprawling FBI probe into the online poker industry.

“The reason they had to forfeit the money was they were acting on behalf of an illegal gambling outfit,” said Roy Pollitt, a former FBI special agent who worked the case. “Based upon the agreement that was made years ago, it’s troubling to hear there might be similar behaviour still occurring.”

Allied Wallet’s past hasn’t stopped Washington from accepting Khawaja’s political generosity.

In all, Khawaja, his company and its executives have contributed at least $6 million to politicians and political organizations since late 2015, according to an AP review of disclosure reports.

Since Trump’s inauguration, the company and its executives have given nearly $1 million more to Republican candidates and committees, including $200,000 from Khawaja to Rep. Ron DeSantis, a Trump-backed candidate running for governor in Florida.

Donations to Democrats include nearly $2 million to the Democratic National Committee, along with a who’s who of top candidates, including Missouri Sen. Claire McCaskill.

In June, the Senate minority leader, New York Democrat Chuck Schumer, appointed Khawaja as one of nine members on the U.S. Commission on International Religious Freedom. In April, Charlie Kirk, the outspoken head of the pro-Trump super PAC Turning Point USA, touted Khawaja on Twitter as a beneficiary of Trump’s tax plan.

Nobody in Washington, Democrat or Republican, appears to have questioned how Khawaja earned his money, and what exactly Khawaja might hope to gain from his political giving is not entirely clear. The records reviewed by the AP show that Khawaja has pursued foreign business deals, including an investment by a United Arab Emirates-controlled wealth fund, a prospective deal with an Iranian bank and a potential business arrangement with Lebanon. Some U.S. senators he has supported are on the banking committee, which writes laws governing his industry.

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‘IT JUST SCARED ME SO I PAID IT’

Last August, the Trump administration ended a Justice Department effort called Operation Choke Point that investigated banks and other financial institutions working in industries such as payday lending that carry high risks of fraud.

That kind of policy change could be helpful for Allied Wallet customers like Stark Law LLC of Chicago, an aggressive debt collector that posed as a law firm and threatened tens of thousands of Americans into giving them money — often for payday loans they never even signed up for.

That’s what happened to Mary Liz Nogueras when a Stark debt collector called her at work in late 2015 and threatened to take her to court if she didn’t immediately pay $890 to cover an outstanding payday loan. Nogueras didn’t recall owing any money but was frightened by the collector’s abrasiveness, so she offered up her credit card number over the phone.

“It just scared me so I paid it,” said Nogueras, who lives in Cape Cod, Massachusetts, with her husband and their two children, one of whom has special needs.

A few months later, in March 2016, Federal Trade Commission regulators and Illinois prosecutors charged Stark’s owners with running a massive fraud operation, eventually forcing them out of the debt collection business entirely, issuing a $47 million judgment against them and making them personally forfeit $9 million — along with a 1-kilogram gold bar — to settle the claims.

Eight months before Stark was busted, Allied Wallet set up credit card processing for a web of online merchants that supposedly sold home goods but actually were owned by payday loan-related companies with names like Clearwater Lending, the records reviewed by the AP show. The arrangement included some indications of suspicious activity: The websites lacked inventory, were unable to collect payments and failed to correctly spell words like “towels.”

Whenever a bank caught the obvious misconduct, Allied Wallet would shut down the site and notify the bank of its actions — but then route the same payments through a new fake company, the records show. In just one month in late 2015, consumers filed hundreds of fraud complaints with their credit card companies about bills from Stark and a web of other front companies, the documents show.

In October 2015, just three months after Allied Wallet began processing for Stark Associates Ltd., a UK shell company that handled the Stark debt collections, a risk analyst warned Allied Wallet about questionable transactions on the account, examining in detail the sale of a yellow curtain valance supposedly shipped to a nonexistent address: 123 Main Street in Townsville, New York.

Not only had one of the banks processing Stark’s payments — OCBC Wing Hang Bank in Macau — noticed multiple fraud complaints on the account, the analyst wrote, but also the websites on the account itself were fishy, designed exactly like another site that Allied had recently shut down for engaging in “transaction laundering,” according to the email.

A month later, the risk analyst followed up with top Allied employees, this time certain Stark was not legitimate: “In case it is of interest to you, we have now received a chargeback case that confirms that the merchant STARK, which you already closed, was indeed misrepresenting its business and offering loan services instead of home decor,” the analyst wrote.

But the risk analyst was mistaken.

Allied Wallet hadn’t stopped processing for Stark and continued to do so until February 2016, one month before regulators busted the company, the emails show.

The account itself was moved to a related company called Rolling Plains Ltd., according to a November 2015 email to Allied Wallet’s chief operating officer, Moe Diab, from Tom Wells, an intermediary who brought Allied the Stark accounts in exchange for a percentage of the business.

“They never stopped processing,” Wells wrote. “In fact you made payment to new acct this week.”

Regulators named Gaurav Mohindra as a key player in the Stark debt-collection scheme. He told the AP he had never heard of Allied Wallet. Incorporation records show he was the director of Stark Associates Ltd., the UK corporation Allied Wallet created for the supposed home decor website jvalances.com that was used to disguise Nogueras’ $890 fake debt payment when it was passed along to Visa.

Wells did not return phone and email messages seeking comment.

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‘I NEED YOU TO HELP ME HELP YOU’

With most of the questionable customers Allied Wallet took on, the documents show, the company appeared to seek plausible deniability.

First, Allied Wallet helped businesses create dormant shell corporations in the United Kingdom to access its network of friendly banks from Malta to Macau, the records show. Then it coached clients on how to curate their websites to fool investigators performing compliance checks for banks and credit card companies, the documents reveal.

“Remove the video of the woman being tortured in the top left corner of the home page,” Amy Ringler, the company’s vice-president of operations, wrote to one pornography client in October 2012, noting the video would violate Mastercard’s standards.

Once websites passed muster, company officials would then route those businesses’ incoming payments to banks willing to accept them. If a merchant racked up too many fraud complaints — or a bank caught on to suspicious behaviour — Allied Wallet would sometimes simply shift the account to a new institution to start fresh. In exchange, Allied Wallet charged hefty rates and fees as a processor of last resort for especially risky clientele, the records show.

These merchants were then mixed in with others that Allied Wallet sent to banks which, though considered in the industry to be “high-risk,” weren’t necessarily legally problematic. Among them: clients peddling multilevel marketing deals, IT help desk services and natural supplements, the records show.

Not all customers were happy with Allied Wallet’s insistence on holding funds for long stretches to cover expected chargeback and fraud fees, but the nature of legally dubious businesses prevented many from finding an alternative processor.

“Why would anyone use a high priced processor unless they have a questionable product?” the frustrated CEO of an unusual Irish company that specializes in selling phoney ATM receipts, forged hotel bills and other fabricated documents wrote in a March 2016 email to company officials. “If I’m going to go to the bother of pretending I am a clean green business, then I’ll use a payment system that gets me more of the money in a quicker manner.”

To help the now-defunct website www.phonesexcoffeehouse.com get its payments processed by American Express — which the credit card company wouldn’t otherwise accept — Allied Wallet worked with the company to disguise its true business, the records showed.

The website charged callers in the U.S. $2 a minute to talk about various fetishes or engage in elaborate rape fantasies with female accomplices, according to an archived webpage.

To co-ordinate their arrangement, an Allied Wallet salesman used a private email address to communicate with Donna Jones, one of the sex line’s owners: “I’ll help you out but I need you to help me help you, notice the email I’m sending this from.”

To avoid raising the suspicions of American Express, Jones and Allied Wallet funneled the payments through another business Jones owned that had nothing to do with sex: a home-cleaning company called WKPS Group, according to the records.

“We will do whatever is asked, and keep our mouths shut,” Jones wrote. “You can make a lot of money with us, I will do as you say.”

Just 45 minutes after the arrangement started, Allied Wallet’s chief compliance officer issued an urgent internal warning based on a tip: The cleaning company had already been identified by a rival processor as a front for phone-sex transactions.

The November 2016 warning went unanswered. Some company officials knew the cleaning business was a front because they already were using it that way.

American Express declined to address Allied Wallet or the records detailing how it processed funds for the defunct sex site. In a statement, a spokesman, Andrew Johnson, said the company could require a processor to cancel processing for merchants that break the law, violate its rules or damage its brand.

Jones could not be reached for comment. She did not return a message sent to the email addresses she used to correspond with Allied Wallet.

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‘VERY, VERY ILLEGAL’

The records show that Allied Wallet also took extraordinary steps to disguise how it processed payments for online gamblers — a bold foray back into an industry that just years earlier had involved Khawaja in an FBI investigation.

To settle claims from a 2010 federal probe involving the website PokerStars, Khawaja enlisted former FBI Director Louis Freeh to negotiate with federal prosecutors in New York and write anti-money laundering policies for Allied Wallet, according to court records.

Since then, Khawaja appears to have avoided processing payments for U.S. bettors, the records show. But the documents show that his company has accepted and obscured international business from GVC Holdings PLC, one of the most prominent gambling outfits in the online industry, often in places where online gambling is prohibited or highly regulated.

For example, Allied Wallet handled processing for a company behind the now-defunct, bare-bones website totembazaar.com, which claimed to sell e-books and told credit card companies that it was selling miscellaneous general merchandise.

It wasn’t.

The website was a front, listed in 2012 business paperwork for LLJH Ltd., a company owned by Elizabeth Cullen, then a top corporate officer at GVC Holdings PLC, according to the records.

The records obtained by the AP show that top GVC executives collaborated with Allied Wallet and a trusted middleman to hide gambling operations involving currencies from countries where online betting is illegal or highly regulated, including Turkey, Brazil and Mexico.

Just before Christmas 2012, Jim Humberstone, GVC’s head of operations, worked with Wells, the intermediary who would later bring the fraudulent Stark debt collectors to Allied Wallet, the emails show.

The records show that Wells passed GVC’s information along to Khawaja and other top Allied Wallet company officials, who placed the business in an Allied Wallet account called Bluestar 7. That account handled payments for totembazzar, along with the site radialmarkets.com, which GVC claimed was owned by a company called JHLL Ltd.

“I’m concerned about the descriptor containing ‘GVC’ could we remove this and have ‘Radial’ and ‘Totem’ alone?” Lisa Lupi, then the head of GVC’s risk department, wrote in an email to Wells.

Allied Wallet made the changes and processed payments for the gambling sites, switching the Bluestar 7 account every week between two banks, Borgun in Iceland and Postbank in Germany.

In February 2016, Wells wrote to top Allied Wallet officials to inquire about leftover reserves in the Bluestar gambling accounts on behalf of GVC, noting they were handling Brazilian, Mexican or Turkish currencies, according to the email.

Online betting is highly regulated in Mexico and Brazil. In Turkey, it is prohibited altogether; an internal Allied Wallet guide to global casino regulations described it as “very, very illegal” there.

Humberstone and GVC’s head of corporate communications did not respond to emails and phone calls over several weeks seeking comment. Lupi and Cullen didn’t return emailed messages.

Allied Wallet’s chief operating officer, Diab, said in a brief phone interview that he didn’t know what GVC was and denied the company transacted for it.

“We don’t do gambling at all,” he told the AP, directing further questions to Khawaja and a company lawyer.

Khawaja and the lawyer did not respond to specific questions from the AP about the company’s business practices.

As recently as February 2017, Allied Wallet operated as many as two dozen Bluestar accounts, recycling old companies to host websites that served as fronts for gambling operations, the records show. The sites could be created as fast as they shut down.

“This is the URL that was closed the other day because the bank said the transactions were coming from a gaming website,” Ringler, the Allied Wallet vice-president of operations, wrote to Wells in May 2014 regarding a site called plusfigurines.com.

Plusfigurines.com was being processed via an Allied Wallet account called Bluestar 18, another account dedicated to gambling. But to keep the business flowing, Allied Wallet needed new fronts to disguise the transactions.

“I need a different website, descriptor and company from you,” Ringler wrote Wells in an email reviewed by The AP.

The risks from the gambling business weren’t lost on company officials, the documents show.

In May 2015, the company’s chief compliance officer emailed the top Allied Wallet executives that he had personally verified a company salesman giving “specific instructions on how to set up and operate an illegal gaming operation online.”

That prompted Khawaja to interject: “Guys, stop this… Come on.”

Nine months later, Wells, the trusted Allied Wallet intermediary, notified top company officials that he would be meeting with GVC in London and wanted to know what procedure to follow to open a new set of disguised gambling accounts, according to a February 2016 email.

“Can we create website and eu Corp as before or has anything changed?” Wells asked.

The response from Diab, Allied Wallet’s chief operating officer: “Set up will be the same.”

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Horwitz reported from Washington. Associated Press writer Chad Day and editor Ted Bridis in Washington contributed to this report.

Jake Pearson And Jeff Horwitz, The Associated Press