In Print

The mandarin, the mogul and the missing millions

By Kevin Steel ⋅ June 19, 2006 ⋅  Email this post ⋅  Print this post ⋅ Post a comment

He went from the legislature to a high life of private jets and caviar parties. They feted him as a brilliant lawyer and philanthropist. Only when the cops came looking for millions in laundered, stolen cash, did Edmonton’s elite discover who Michael Ritter really was

“Everyone was hiding their true identities.” When Michael Ritter wrote those words to Larry Osaki in August 2002, he knew what he was talking about. Ritter was a man who knew all about how to hide a lot of things, which is why Osaki had tracked him down in the first place. Osaki needed someone who knew how to get a lot of money out of the U.S., and out of the reach of Securities and Exchange Commission authorities who were closing in on his illegal pyramid scheme. Ritter was going to help him relocate his Ponzi scheme somewhere where they couldn’t reach it. Osaki also wanted Ritter to ensure that all the foreign employees knew enough to keep quiet in case they were ever subpoenaed by police, to plead the fifth if they had to. “Will do, Larry,” assured Ritter in an e-mail, adding that it wasn’t likely that would happen anyway, since all the employees would be operating under fake names: “Everyone was hiding their true identities.”

Ritter had spent a career concealing the realities of his own life. With charm and connections, he managed to become a personality in his hometown of Edmonton. He was, at various times in his career, a successful nightclub impresario, a top provincial government mandarin, and a celebrated millionaire philanthropist. He also claimed (falsely) at various times to be a foreign diplomat, a Swiss banker, a United Nations official and a decorated lawyer. He lived the lifestyle of the rich and famous: full of high-end cars, private planes, caviar and European villas. Sometimes he was Michael Ritter, sometimes Peter Knight, and sometimes Adam Michael Philipp d’Orleans.

But the fanciful charade couldn’t last. Despite his assurances to Osaki, the law moved in on the pyramid scheme, and no one ended up pleading the fifth. In fact, every single person involved in the scam–which rolled over more than US$250 million–would eventually plead guilty to fraud. Everyone, that is, except Ritter himself.

In a Los Angeles courtroom in December, Larry Toshio Osaki, 56, of Upland, Calif., was sentenced to 20 years in federal prison for the crimes of money laundering, conspiracy to commit securities fraud, two counts of securities fraud, and one of obstruction of justice. He was also ordered to pay US$145 million in restitution to the 7,000 victims of his swindle. U.S. authorities are now training their sights on Ritter, hoping to bring him up on similar charges–if they can get their hands on him.

For more than two years, the U.S. has been trying to get Canada to extradite Ritter. With all the hard work done on Osaki, the California DA says it has financial records, letters and e-mails gathered through investigations by the FBI, the IRS and the SEC–nearly all it needs to nail Ritter, too. “We intend to pursue Michael Ritter’s extradition with the utmost vigour,” says Assistant U.S. Attorney David Willingham from his office in L.A.

He’ll have to wait. For, right now, the 49-year-old Ritter is sitting in the Edmonton Remand Centre waiting for his June trial on charges of money laundering and theft related to another matter entirely. In this case, Ritter is charged with helping New York-based energy trader Daniel Gordon launder US$43 million stolen from his employer Merrill Lynch. After helping clean the cash, Ritter allegedly skimmed more than US$10.5 million, without telling Gordon, and used the money to buy a villa in Italy, Piper and Cessna airplanes, and to pay off employees of his own firm, Newport Pacific Financial Group. Before he faces a judge in California, Ritter will first have to face the music here, in what Alberta Crown prosecutor Greg Lepp says is one of the biggest money laundering cases in the province’s history. It’s a long way from Ritter’s days hobnobbing with some of Alberta’s most powerful politicians, lawyers and businessmen.

Michael Ritter, the son of a Catholic high school principal, first turned heads on an otherwise sleepy Edmonton social scene in the mid-eighties, as owner of the ultra-hip Flashbacks nightclub. Flashbacks, popular among the city’s gay and lesbian partiers, was so in vogue that Rolling Stone magazine blessed it as the fourth- best nightclub in North America.

More success followed. In 1987, while still operating Flashbacks, Ritter was hired by the Speaker of the Alberta legislature, David Carter, to serve as chief legislative counsel. Though he wasn’t a member of the province’s bar association, Ritter was commonly known, and referred to in news stories, as a “legislature lawyer.” He boasted an impeccable pedigree, telling colleagues that he had graduated from the London School of Economics and had been accepted as a member of Gray’s Inn, one of the four Inns of Court in London, around England’s Royal Courts of Justice, that constitute the British bar. Cherie Blair, the wife of British Prime Minister Tony Blair, is a member.

For six years, Ritter was treated as one of the province’s brightest legal minds, even appearing before the Supreme Court. He certainly dressed the part, attiring himself in the “tweeds and scarves of an English parliamentary scholar,” recalls a former co-worker. He acted it, too: Ritter earned a reputation as a dandy, but an arrogant one. Colleagues have said that he always considered himself the smartest man in the room. One former colleague, who asked not to be named, says his co-workers resented that while everyone else worked hard to move up, Ritter seemed to have promotions gifted to him. Also, the former colleague always wondered why such a bright and learned mind was always passing off the toughest legal questions to other staff–whom Ritter referred to as “real lawyers.”

Still, as far as the public at large was concerned, Ritter was the top government attorney in the province. Even after he left the legislature in 1993, his name appeared in newspapers throughout the nineties, usually referred to as a former “parliamentary legal expert,” offering his opinions on conflict of interest guidelines and the auditor general. In 1998, he was a forceful opponent of the province’s plan to use the notwithstanding clause to trump a Supreme Court ruling on the Delwin Vriend case, in which the court ruled that the province must insert sexual orientation protections into its human rights code. An April 4, 1998, article in the Edmonton Journal (which referred to Ritter as “an authority on constitutional law”) noted that Ritter said, for the first time, that he was speaking out not just as an expert, but as a gay man.

Increasingly, Ritter turned his clout in legal circles into activism. In 1999, he embroiled himself in a defamation lawsuit against then Alberta treasurer, and outspoken social conservative, Stockwell Day (now the federal minister of public safety). Day had written a letter to Red Deer, Alta., school board trustee and criminal defence lawyer Lorne Goddard, criticizing Goddard’s representation of an accused child molester, implying–falsely–that Goddard himself supported child pornography. When Day arranged to have taxpayers foot the bill for the libel lawsuit, Ritter submitted an “expert” report to the court on the limits of parliamentary privilege, that challenged Day’s application. He joined a coalition of lawyers, led by his former boss, David Carter, to fight Day on the matter, funded by an anonymous $250,000 donation. No one knew for sure where the money came from, but some who knew Ritter (who had by then left the public service to start a successful financial management firm) couldn’t help but wonder if it was his. The Goddard case was eventually settled out of court. “Ritter was one of the go-to guys, the behind the scenes architect who was trying to keep the thing [the suit against Day] going,” says a former legislative staffer who worked closely with Day. “He was always quoted as an expert in the media. Most of the media now, don’t remind people that they were quoting a fraud and a con.”

In fact, Michael Ritter was never a lawyer. As his involvement in the shady world of corporate crime intensified, police began to investigate the background of the high-flying Albertan. He had never graduated from the London School of Economics. He was never a member of Gray’s Inn. In 1988, he was even charged under the Legal Profession Act for operating without a licence, but the case was dismissed for lack of evidence. Ritter himself–who would soon face accusations of running much larger, more lucrative frauds–was nothing but a “con man,” says David Elzinga, a forensic accountant and partner with Grant Thornton LLP consultants in Calgary. “The whole premise of what Ritter is is a Ponzi scheme, and it’s one of the oldest scams going,” says Elzinga, who has been investigating fraud cases for 18 years. Confidence men live in a world of false information. “They falsify their résumé or they try to associate themselves with other people of influence who are not con men,” he says. “It’s all about developing this thing that people can latch onto and say so-and-so is a great guy, he’s a philanthropist, he’s well connected, well known in the community. Then people never start digging too far into the person’s past until it’s too late.”

In March 1993, Michael Ritter retired from provincial politics, and announced a radically new career direction. Flashbacks had gone out of vogue and out of business a year earlier, and Ritter unveiled plans to start a company that would manufacture and market greeting cards for kids. “It’s kind of a moral thing and it makes children happy,” he told the Edmonton Journal, where reporters had eagerly followed the career of the capital gadabout.

But barely a year later, the irrepressible Ritter was back with a splash–and on a different track altogether. He opened Canadian Offshore Financial Services SA, which he would later rename Newport Pacific Financial Group–described by a website ad as “a leading provider of offshore bank accounts designed to enhance your asset protection.” In spring 1994, Ritter rolled up to Edmonton’s Manulife Centre for his grand opening bash, in a luxury Infiniti. There was no sign of the beat-up Chrysler K-Car with the bad muffler he’d driven to the legislature for years. High above the city, in Newport’s new offices, he once again endeared himself to Edmonton’s movers and shakers by spoiling them with beluga caviar and champagne. There was no sign of any greeting cards for children, and none of his former co-workers, who lived frugally on the same civil servants’ salaries Ritter supposedly collected, could figure out how he had suddenly become so wealthy.

The first clue wouldn’t come until eight years later. On January 22, 2002, six days before the SEC launched a civil complaint against Larry Osaki’s California pyramid scheme, J.T. Wallenbrock and Associates, Ritter was busy setting up another business. This one was called Village Capital Trust Services, Ltd., and had addresses in Belize and Edmonton. The company’s chief financial officer was listed as Peter Knight, one of Ritter’s aliases (Ritter means knight, in German), and the whole firm, it appears, was created to take over Osaki’s scam, and get it off of U.S. soil.

Osaki had bilked investors of millions, convincing them that Wallenbrock was making money through a practice known as factoring–buying outstanding debts from other companies at a discount, and then trying to collect. Whenever he collected more than he paid for a debt, investors made money. Osaki, who said he was focusing on factoring with latex glove manufacturers in Asia, issued investors 90-day promissory notes that guaranteed a 20 per cent return. In reality, the SEC would later find that there was no debt-collection business. Osaki paid the interest with money coming in from new investors, and pocketed the difference. It’s estimated that he earned more than US$140 million.

Less than two weeks later, documents show that Village Capital assumed responsibility for the Wallenbrock notes, and on Feb. 21, a U.S. court appointed a receiver to take possession of Wallenbrock’s California offices. Four days later, Osaki was ordered to turn over all assets, but by then almost everything had gone to Canada, including some employees, who flew to Edmonton and set up a boiler room–calling prospective investors–out of Newport’s boardroom. Eventually, Ritter took over the operation.

Employees at Newport were unsettled by the peculiar operation that was running out of their boardroom. Some–including Paul Hoag and Susan Edwards (who were married), Howard Yeung, and Suan Lee–quit. In August, one of Ritter’s employees sent an anonymous letter to the SEC, informing them of Newport’s association with Osaki, still under investigation by the security watchdog. But that was just the beginning of Ritter’s troubles.

On Sept. 2, 2002, Ritter typed out an e-mail to his recently estranged employee, Paul Hoag. The wording was friendly and composed, but it almost surely disguised a mountain of anxiety in Ritter. “I have emptied out the rest of the papers in your desk,” he wrote to Hoag. “The only outstanding documents that I could not find were the ‘red files’ for ‘Ostrich’ and ‘Falcon.’ I am not sure if you placed these files in a cabinet or even if you have them. Please advise me as to their whereabouts if you know. Thanks.”

Ostrich and Falcon were two birds that could be very dangerous. Ritter had allegedly set up two companies–Ostrich Capital Partners Inc. and Falcon Energy Holdings SA–to help another client launder large sums of ill-gotten cash. In this case, the client was energy trader Dan Gordon, who had embezzled US$43 million from his employer (he pled guilty to the crime in 2004). Like Osaki, Gordon had somehow tracked down Ritter all the way from New York. Somehow, the Albertan had made a name for himself that was familiar to crooks more than 2,000 miles away.

If the Ostrich and Falcon files fell into the wrong hands, the results could be disastrous for Ritter, Gordon, or both. Not only did they reveal details about Gordon’s embezzlement, there was the matter of the extra US$10.5 million that Ritter allegedly filched from his client, Gordon. (Ritter claims he did not originally know that Gordon’s money was stolen, and none of the allegations against Ritter have yet been proven in court.)

Ritter clearly suspected one of his former employees of making off with the incriminating files. Panic set in. Four days after he sent the e-mail to Hoag, Ritter filed a lawsuit against him–and the other resigned employees, Edwards, Lee and Yeung. Thanks to his acquired legal sophistication, Ritter cleverly applied for an Anton Piller order, a highly unusual warrant that allows search and seizure, without prior warning. By convincing the court that his former employees had stolen his files as part of a plan to start a competing firm, he received the order on Sept. 19.

Ritter’s agents never did find the Ostrich and Falcon files in the search of the former employees’ homes. Actually, Hoag–who claims that Ritter had given him the files several months earlier and asked him to destroy them–had given them to his lawyer. On Oct. 20, Hoag’s lawyer turned the files over to the RCMP, and the Mounties began to unravel Ritter’s tangle of deceit and corruption. On Dec. 10, police raided Newport’s offices and Ritter’s home, and seized all the evidence they could get their hands on, in what would become one of the biggest fraud investigations in Alberta’s history.

Even as storm clouds threatened his sunny lifestyle, Ritter kept up his brave public face. He continued to gab to the media about legal issues, from same-sex marriage to the ongoing legal troubles of Stockwell Day. Meanwhile, to his friends on the Edmonton cocktail circuit, Ritter’s connections to thieves and hustlers were concealed by his increasingly grand public gestures. In January 2002, around the time that he was setting up Village Capital to take over Osaki’s business, Ritter wowed Edmontonians by pledging $4 million to buy celebrated conductor Grzegorz Nowak–who had been fired by the Edmonton Symphony Orchestra–his own, alternative orchestra (he would eventually renege on the promise). At an April 2003 arts fundraiser hosted by Ritter, the philanthropist, as the papers had taken to calling him, made light of his situation when he opened the gala by declaring, self-deprecatingly: “I’m Michael Ritter, the city’s most infamous board chair.” The shtick worked. The next day, in the Edmonton Sun’s “Hicks on Six” gossip column, Graham Hicks noted that “. . . Michael Ritter, up to his eyeballs in court actions with former associates, hasn’t lost his sense of humour.”

But protecting his reputation as a flamboyant and admired member of Edmonton’s smart set would take all of Ritter’s crafty legal and PR skills. In January, he apparently planted a story in the Edmonton Journal, which reported that he was filing a $300-million lawsuit, in Calgary, against the Wallenbrock receiver, James Donell, and the SEC. Ritter claimed that the two had linked his Village Capital Trust to Osaki’s Wallenbrock operation on Donell’s website, and implied that the companies were involved in financing terrorists. The Journal piece was clearly bogus–and not simply because the reporter erroneously described Ritter as “an English barrister who has worked in the House of Lords legal division and the United Nations secretariat in Geneva.” The biggest giveaway that the reporter had been duped was that the story revealed details of Ritter’s statement of claim–including the yarn that he had been appointed consul general to Belize, but was being held back from moving there by the SEC allegations. In fact, Ritter would not actually file his statement of claim until Sept. 10, 2003–nearly eight months later.

Despite Ritter’s efforts, all the publicity, popularity and parties couldn’t stay the march to justice. On Oct. 8, 2003, Larry Osaki was arrested. When he was indicted two weeks later, U.S. attorneys began extradition proceedings the same day against Ritter, who was arrested, released on a quarter-million-dollars bail and ordered to surrender his two passports, one from Canada and one from Belize. At his bail hearing, Ritter was surrounded by rich and powerful friends who had come to show their support, including Liberal-appointed Senator Tommy Banks and Edmonton City Councillor Michael Phair.

Others weren’t so loyal. In February 2005, Ritter’s former assistant, Jeremy Carter, pleaded guilty to conspiracy charges related to the Osaki scheme and agreed to co-operate with authorities. In March, with the heat closing in, Ritter applied to the Belize High Commission in London, England, for a new passport (up until 2002, anyone could purchase Belizian partial citizenship for several thousand dollars, something Ritter appears to have done at some point). This time, Ritter used a new moniker, Adam Michael Philipp d’Orleans–evidently a sly reference to Philip I, the duke of Orléans, the younger brother of France’s Sun King, Louis XIV. The duke had earned a reputation in the 19th century for being a cross-dressing bisexual. He was also known to be a shrewd investor and art collector. The passport application was notarized by Edmonton lawyer Casey O’Byrne, who later claimed that his signature was forged. Still, the Central American nation granted Ritter–or rather, d’Orleans–the passport. Was Ritter getting ready to flee?

That same month, in Los Angeles, Osaki pleaded guilty to money laundering and fraud. On Sept. 7, Canadian authorities charged Ritter, still in Edmonton, with money laundering and theft over the Gordon case. Two days later, Ritter turned himself in to police. He also surrendered his Belizian passport–not the new one, but the one he had been ordered to give up two years earlier. In fact, the Crown was completely unaware of the newer, Adam Michael Philipp d’Orleans passport until after the hearing, when Ritter’s former pilot, Patrick Mitchell, turned over a printout of a computer scan of the document to police. Mitchell had become disillusioned with his former boss at the bail hearing. “I felt like I didn’t know anything,” he despaired while testifying in court in April of this year. “Everything I had known for five or six years wasn’t true.”

But what exactly did Mitchell think was going on, when he saw Ritter regularly flying huge bags full of cash to Switzerland–one time as much as $2 million–as Mitchell testified he did? “Where did this money come from? Whose money is it?” asks Ron Parks, a forensic auditor with Blair Mackay Mynett Valuations Inc. in Vancouver. “We’re not talking about a wire transfer or some other financial instrument. We’re talking cold hard cash in a bag.” But the Alberta Crown prosecutors say they haven’t ordered any forensic audits of Newport’s business. We may never find out whose cash it was.

On Sept. 12, the court found Ritter to be a flight risk and denied him bail. The new Belizian passport has never been found, but the printout was enough for the Crown to add breach of recognizance charges to the long list of offences of which Ritter had already been accused. A preliminary inquiry into the theft charges begins on June 5. On June 19, Ritter will be tried for breach of recognizance.

Today, David Carter, the former legislature Speaker, is a historian living in Cypress Hills, Alta., and he stands by his decision to hire Ritter. He calls his former legal counsel “a man of impeccable honesty,” but refuses further comment.

Throughout his ordeals, Ritter’s defence has been a story that sounds every bit as fanciful as his claims to legal prominence and consular titles. Even as his world crumbled around him, Ritter would reassure his employees and friends that the accusations against him were unfounded, that he had become the victim of an elaborate conspiracy that was contrived by enemies he made in the Alberta government. With the RCMP, Scotland Yard, the SEC and district attorneys in New York and Los Angeles now involved, Ritter’s going to have a lot harder time convincing anyone of the cockamamie story. But if anyone can do it, he can.

[This article appeared in the June 19, 2006 issue of the Western Standard.]