The Wells Fargo Stickup

By Charles Alexander

Boxing's biggest promoter is charged in a $21 million computer swindle

It was a bank heist bigger than the Brink's job, but the bandits used no guns or getaway cars. Rather than being fast on the draw, they had fast fingers on computer keyboards. The Wells Fargo Bank of San Francisco last week filed suit charging that a group of boxing promoters and a key accomplice inside the bank had pulled off a colossal $21 million embezzlement. The alleged sting was by far the largest computer bank fraud in history and raised some troubling questions: How could such an unlikely ring of conspicuous sports personalities so easily rob a multibillion-dollar bank? How vulnerable is the banking industry to a wave of similar computer capers now that punch cards and print-outs have replaced ledger books?

The central figure in the affair is Harold Smith, 37, who has already been dubbed "the black Jesse James" by Don King, a rival boxing impresario. Virtually unknown two years ago, Smith suddenly burst onto the boxing scene in 1979 flashing mysteriously huge sums of cash. As chairman of Muhammad Ali Professional Sports (MAPS), he became almost overnight the leading big-time fight promoter. One of the members of the MAPS board of directors is Benjamin Lewis, 47, who until three weeks ago was an operations officer at a Beverly Hills branch of Wells Fargo and had authority to use the bank's computers.

Wells Fargo contends that the two men and associates illegally withdrew a total of $21 million from that Beverly Hills branch and one in Santa Monica, where MAPS had deposits. Wells Fargo officials refuse to reveal how the scheme was accomplished, except to say that it involved elaborate computer transfers of money over at least the past year into 13 accounts controlled by MAPS.

Despite his name on the firm's front door, Muhammad Ali is not involved in the scam. But he admits that he received at least $10,000 for the use of his name for each fight. Said Ali last week: "If you're looking for something dirty or crooked, you're looking in the wrong place. Me a bank robber? Are you kidding?"

Smith and Lewis allegedly first made a series of legitimate deposits in the bank, some in excess of $500,000. That was done so that bank officials would not become suspicious later when MAPS began transferring large sums of money. Then someone working for Wells Fargo, purportedly Lewis, began to type bogus instructions into a computer terminal, perhaps transferring money from other deposits into the MAPS accounts. When Smith later started making large withdrawals, he attracted no notice. After all, he was a lord of the boxing rings and regularly paid fighters six-figure purses. Three weeks ago, however, the ruse unraveled. During some routine accounting work, a bank employee spotted serious irregularities in the records and sounded the alarm. Before the investigation picked up steam, both Smith and Lewis were gone. Smith's whereabouts were unknown at week's end, but TIME has learned that last Wednesday Lewis secretly turned himself in to the Los Angeles office of the FBI. Since then, he has been giving his version of what happened at the bank in the apparent hope of becoming a witness rather than a defendant in the case.

The affair took another bizarre twist last week, when Smith telephoned newspaper and radio reporters in New York City and Los Angeles to give his version of the story. In a defiant but desperate voice he maintained that he was the "scapegoat" in a pervasive plot that involved 35 Wells Fargo officers in 20 branches of the bank. The amount stolen, he said, was actually between $200 million and $300 million. Smith claimed that when suspicions began to surface at Wells Fargo three weeks ago, a group of bank employees raided his Pacific Palisades home and kidnaped his four-year-old son. They returned the child, the story went, only after Smith promised to take his family and flee the country. Smith said he first went to Switzerland and then returned last week to a secret location in the U.S.

Wells Fargo Chairman Richard Cooley promptly called Smith's charges "preposterous." An extensive investigation, he said, showed that the bank had lost no more than $21 million. But because of the complicated nature of the crime, no one could yet be sure how much money was missing. Bank officials later admitted that the investigation was still under way, and they were not certain that Lewis was the only employee in on the plot.

The alleged leader of the heist, Harold James Smith, is a strapping 6 ft. 2 in. and sports a bushy beard usually complemented by a cowboy hat and gold-rimmed sunglasses. His past is something of a mystery. During the 1960s, he worked in the civil rights movement with Stokely Carmichael. In 1976 he turned up in Los Angeles promoting concerts with stars like Shirley Bassey. His business association with Muhammad Ali began a year later, when Smith sponsored some amateur track meets.

In 1979 Smith joined the professional fight game and suddenly began flaunting great wealth. He carted around flight bags full of cash and paid boxers four or five times as much money as other promoters did. Last May he offered Larry Holmes, the World Boxing Council heavyweight champion, $1.5 million to sign an exclusive contract with MAPS. Holmes says that Smith came into the boxer's office with two Wells Fargo cashier checks for $500,000 each and a bag stuffed with $50 and $100 bills.

Smith enjoyed the trappings of money. He owned homes in fashionable sections of Southern California, like Pacific Palisades, where President Reagan used to live, and Marina del Rey. He also owned a brown Cadillac Seville as well as a $60,000 custom-made Cadillac convertible, an $84,000 cabin cruiser and a Beechcraft plane. When asked where his gold mine was located, Smith sometimes replied that his wife's family was wealthy. On other occasions he mimicked the TV commercials of the Smith Barney investment firm and said, "We make money the old-fashioned way. We earn it."

MAPS, however, did not earn money. It lost heavily. Last December, for example, MAPS paid two welterweights more than $300,000 for a Sacramento bout that generated less than $90,000 in gate receipts. Boxing sources estimate that cumulative MAPS losses could have approached $10 million.

Law enforcement officers and computer experts say that the MAPS caper was typical of the kind of embezzlement that computers make possible. Transactions that once required several signatures on a piece of paper are now carried out instantly by the use of silicon microchips. With modern communications networks, money can be sent in a moment to a bank branch in the next county or in the next country. For example, the transfer of $7.9 billion last month from American banks to the Bank of England as part of the deal to free the American hostages in Iran took less than ten minutes.

The sophisticated technology multiplies the opportunities for theft. Warns Philip Wynn, deputy district attorney for Los Angeles County: "Computer crime is an extremely serious problem. I see it as a monster." No one knows exactly how much computer con men are raking in, but the numbers are big. Federal officials say that the average loss in a bank robbery is $3,200. A typical nonelectronic embezzlement comes to $23,500. But the average computer fraud is $430,000.

Moreover, computer criminals are rarely caught. Jay Becker, director of the National Center for Computer Crime Data, estimates that 99 out of 100 electronic swindles go totally undetected. In most cases security procedures are lax, or clever crooks have learned how to beat the system without leaving a trail. Says FBI Agent Paul Nolan: "In many instances, the criminal can punch just one button, which tells the computer to forget everything. Once that's done, the evidence is destroyed."

Recognizing the threat from computer cons, many banks have installed complex safeguards. Complicated codes are used to thwart unauthorized computer use, and some systems use special programs called audit trails that record every transaction and the user. Computer-security experts, however, admit that many criminals are easily staying one step ahead of the precautions. Says Robert Campbell, president of Advanced Information Management Inc.: "I guess we're at the same stage as when we first started putting locks on the doors of our houses. They kept schoolchildren and stray animals out, but for the person who is really determined, there's still little or no challenge."

Banks are not the only targets. Computer criminals are pilfering money from all kinds of companies. Employees at large corporations, for example, have used computers to print out paychecks to fictitious persons. Department-store workers have credited their charge accounts with a thousand dollars or so and have then gone on shopping sprees.

The Federal Government is now beginning to face the problem. The FBI has given 500 of its 7,800 agents a course in computer-crime detection. A bill before Congress would provide new and tougher penalties for computer tampering: up to 15 years in prison and fines as high as $50,000. When he introduced the legislation last year, Republican Senator Charles Percy of Illinois warned that computer theft could be as high as $3 billion per year. Even with stepped-up law enforcement, companies themselves will have to be much more vigilant. The MAPS scandal showed how simple it is to bilk a bank electronically. Though the scheme was discovered, the alleged leader had plenty of time to drop out of sight and reportedly to stash much of the missing $21 million in numbered Swiss bank accounts. By Charles Alexander. Reported by Joseph Pilcher/Los Angeles and Paul A. Witteman/San Francisco

With reporting by Joseph Pilcher, Paul A. Witteman

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