Capital Crime

Bilking a money-market fund

When he was asked why he robbed banks, Willie Sutton reportedly gave the legendary reply, "Because that's where the money is." If Sutton were still alive, he might be robbing money-market funds. In the past three years, Americans have put $113 billion into money-market funds, often by taking their cash out of low-interest savings accounts. The increasingly popular money funds pay high interest (last week an average of 16.9%) by investing in short-term securities like U.S. Treasury bills.

Last week the booming money-market funds passed yet another milestone: their first reported theft. The FBI alleged that a Brazilian couple, an accounting clerk and her boyfriend, embezzled $1.55 million from the $788 million First Variable Rate Fund for Government Income in Washington by using an almost routine bank fraud scheme. Vera Lucia Campos, 27, and Andre L. Prestes, 26, who were illegal aliens according to the Government, appeared to have planned the ploy carefully.

Last April, five months after Campos had gone to work as an assistant in First Variable's payment transfer office, Prestes opened a $2,500 account with the fund.

On May 5 she allegedly instructed First Variable's bank, Riggs National, to credit him with $1.55 million and transfer the money to an account in the Pentagon branch of his bank. Campos moved nearly the maximum amount of money that could be transferred without triggering additional security checks by First Variable officials.

Two days later, Campos quit her job. Prestes withdrew $50,000 from his bank and had the remaining $1.5 million transferred to a Swiss bank account, fund officials said. Not until June 2 did accountants discover that the money was missing, and by then Campos and Prestes had vanished.

Though the couple have not been found, their purported crime was not quite perfect. A Geneva court last week ordered the Union Bank of Switzerland to freeze Prestes' account, which contains almost all of the $1.5 million.

Money-market funds are not federally insured like banks and savings and loans, but First Variable's 70,000 shareholders would have been protected, its lawyers say, even if the missing cash had not been found. Money funds are required to carry insurance against employee theft, and by sheer coincidence First Variable's policy covered losses of up to $1.5 million. qed

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