Big, Fake Bonds: Why Crooks Like 'Em

Con men have fabricated billions in U.S. Treasury bonds.

(ABC News Photo Illustration)

It sounds like something out of a summer caper flick: Two men carrying Japanese passports were apprehended trying to enter Switzerland from Italy via commuter rail in June. The men looked out of place on the train, which tends to carry low-income manual laborers. That was enough to raise the suspicions of the Italian authorities, who detained the passengers and rifled through one of their briefcases. Inside was what appeared to be $134 billion in U.S. Treasury bonds labeled with denominations of $500 million and $1 billion. (This despite the fact that the Treasury has never produced bonds in denominations greater than $100,000.)  Later this summer, history seemed to repeat itself when Italian authorities intercepted another cache of false T-bills from the Philippines destined for the United States worth an alleged $116 billion. Why on earth would anybody create fake Treasury bondsâ€"in such eye-popping denominations?

From a purely practical standpoint, huge denominations have one big advantage for crooks: They don't take up much space. The $134 billion in false bonds were stashed in the false bottom of a briefcase. A comparable amount of counterfeit currency would take a lot more trouble to camouflage and smuggle about.

The idea isn't usually to cash them, since any bank would require the kind of verification that would bust the counterfeiters. Rather, peddlers of bunk bonds find people to whom they can peddle the phony paper. They promise a handsome chunk of the purported value in exchange for an upfront investment or they use the bogus bonds as collateral for loans from private investors. Once the cash is in hand, the con men make like Keyser Söze and vanish.