Looking for Mr. WinCapita
By Anu Nousiainen
An interrogation is taking place at the police station. It is December 14th, 2004. The clock on the wall says that the time is 10:08. The person being questioned is an ordinary-looking Finnish man in his 40s, slightly balding, of average height and moderate build.
He is suspected of bookkeeping crime and aggravated dishonesty by a debtor.
The interrogation protocol bears his personal information: born in 1962 in Pirkkala. Served as an undersergeant in the Finnish Army, divorced, no children, IT professional, no employer.
Why is this Tampere man of interest to anyone? It is because the National Bureau of Investigation (NBI) considers him to be the main suspect in the WinCapita pyramid scam.
In March 2008 he disappeared. At the same time the WinCapita website shut down. Ten thousand Finns were left waiting for their money.
Police say that investors put nearly EUR 100 million into WinCapita. Most of the money has been redistributed in a manner typical to pyramid scams: some raked in profits worth hundreds of thousands, while others, mainly those who were the last to get on board, lost everything - tens of thousands of euros in some cases.
Most joined WinCapita believing the promises of the shady investment club. It said that it engaged in currency trading with euros and dollars, making annual profits of nearly 400 per cent. Not even this aroused suspicions, although it obviously should have.
Joining the investment club required a recommendation of another member. These “sponsors” were awarded with a 20 per cent share of the profits earned by the other member. Many tuned out all warnings when they saw their friend’s bank statement. Greed and envy: how blinding they can be!
The case has been called Finland’s biggest economic swindle. WinCapita certainly does look like this: the police have found no evidence that any currency trading had actually gone on.
On Thursday, the NBI confirmed that it has a document in its possession, in which a man from Tampere says that WinCapita was involved in fraudulent activities. A few people questioned during the preliminary investigation have also said that they received information from him about the fraudulent nature of the activity.
Dozens of people have been interrogated, and many have been held in custody for several weeks. More than EUR 12 million in assets have been sequestered, or temporarily confiscated. The first indictments are expected this year.
But the Tampere man has not been heard from since last spring. His trail grew cold in Spain.
We can call him H.
In the 1990s H had a restaurant in Tampere, or more specifically, it was an erotica club, but this was not his only enterprise. Companies have come and gone in H’s life almost like the seasons of the year.
The first was a software company, in which H became a shareholder and head of development at the age of 26, or at least that is what he told the police shortly before Christmas in 2004.
H had attended primary school in Tampere, and secondary school in Pirkkala. After that, he studied computers at a vocational school in Raisio.
In August 1989 H set up his first company along with his girlfriend. He persuaded his brother to join it as well. The last months of the economic upsurge were underway. Banks were actually looking for people to lend money to. These were the days of the “casino economy”, apparently with enough money available for everyone.
H filled the form for the establishment of his company carefully with a pen. But the corporate world was new to him, and the official receiving the form had to make corrections. H defined his company’s line of business as “the production and sales of telephone and videotext services, and the import and sales of electronics and IT goods and leisure clothing and goods.”
The paper can be found in the archives of the National Board of Patents and Registration of Finland. H’s handwriting is small and vertical, and very neat.
Four years later the company went bankrupt.
The bankruptcy was not his last one. In the early 1990s Finland went into recession. The Finnish currency, the markka, was left to float on the currency market, prices of housing collapsed to an unprecedented degree. H and his partner had to sell the home that they bought with borrowed money. Such events were quite common at that time.
H worked as an employee at the IT department of a large Finnish company for a couple of years. A second company that he was involved in also went bankrupt. H’s name began to appear in court records.
According to demands by his creditors, the entrepreneur has been ordered to hand over his property in bankruptcy.
Many would have given up, but H was dreaming of making millions. He worked hard to get to a situation where he would not have to work.
A branch office of the Tampere Savings Bank was being shut down in Tammela - one of the consequences of the recession. H rented the premises and set up a music bar in it. When it did not attract enough local residents, he turned the place into an erotica club.
The strippers were Finnish, Russian, Estonian, and Swedish. The customers were men - often taking part in loud, drunken stag nights. No food was served, but salted nuts and crisps were available.
H was also a shareholder in a company which kept a beer cellar. It went into receivership, but the erotica bar was successful. Nevertheless, H sold it for some reason, and bought it back again a couple of years later.
This time the erotica bar was put in the name of H’s new wife. H himself owed so much in arrears that he could not take anything in his own name.
The wife studied in another city, and would not have wanted to bother with the bar. She was confident that things were going well, as that is what H said was the case. A year later, in March 2000, H placed the erotica bar under the name a childhood friend who did not know anything more about the restaurant business than H’s wife did.
A hired manager dealt with personnel, ordered supplies, did business with the wholesale drink supplier, and the local grocery store. H handled the bookkeeping and administration, and had access to the bank account.
With his red Fiat Bravo H drove strippers between the bar and the building where he had rented an apartment for the “performing artists” to live.
At that time H was involved in at least three other companies. One of them promised to push down the prices of mobile telephone calls.
In 1997 the prices of mobile phone calls were fairly high. H’s company said that it would transfer calls by taking advantage of cheap numbers of Tele (later Sonera) and Radiolinja (later Elisa). Customers were promised telephone calls at half the normal price.
The office was in a conspicuous location on Hämeenkatu in the centre of Tampere. H was responsible for the development of the company. He envisioned that advertising time could soon be sold, and played at the beginnings of phone calls, and that such calls with commercials could be made free of charge.
“It is my staunch belief that already next year, customers will be able to make their calls for free thanks to the advertising revenue”, he said in an interview with the late-edition tabloid Iltalehti. It was the only time that H ever appeared on the pages of a large Finnish publication before WinCapita became big news.
“The restrictions on competition have been eliminated in this field. Telecoms operators in a commanding position have to put their own products up for resale”, H said.
People at Tele were busy wondering what was going on. Had H actually found a lucrative loophole in telecommunications legislation?
Let us stop briefly here, in 1997. It may have been an important year in the life of H. that is when he seems to have tried network marketing for the first time in his business life.
His former companion was interested in network marketing, and H had been seen in events hosted by Herbalife. In the spring of 2008, when journalists were looking for members of WinCapita to interview, there appeared to have been many network marketing veterans among the group.
Network marketing involves direct sales, where independent representatives sell the products of some company. At the same time, they recruit new sales representatives, and get a commission from their sales income. The activity is also referred to as multilevel, and persuasion marketing. In public it has a poor reputation: illegal fund-raising and pyramid schemes often take place in the guise of network marketing.
H recruited representatives to market telephone cards costing nearly 1,000 markka each. Sales personnel were lured with the promise of good money, which was supposed to pour in “from the doors and windows” as one seller recalls.
In addition to telephone cards, representatives were supposed to sell computers, time-shares, and all kinds of bric-a-brac, such as flashing pens.
Soon the problems started. The rules changed. The promised free telephone calls required the dialling of long series of numbers, which often did not fit onto the displays of the mobile phones available at that time. The overloaded servers of H’s telephone exchanges were constantly crashing. Servicing of the home computers marketed by the network sales people did not function, and customers complained.
It was time to move on
H sold his company to an entrepreneur in the south of Finland. After the deal it was revealed that H’s invention of virtually free phone calls was fraudulent, and lawyers were called in to solve the dispute.
But H got it right in one thing: after a few years the prices of mobile phone calls really did go down.
In addition to the network marketing, H was managing the erotica bar in Tammela. He leased an Alfa Romeo in the name of the bar, and set up a new company, again in someone else’s name. H had learned how to put others nominally in charge of his business operations.
The new company published an adult entertainment website and a free distribution newspaper. It is not hard to guess that it ended up in bankruptcy as well. The bailiffs fetched the computers and other equipment.
The year was 2000. H’s wife had filed for divorce, and his father died. The manager of the erotica bar quit and opened his own lunch restaurant.
At the end of 2000 H’s erotica bar was permanently insolvent and overextended. It was no longer enough for H to behave in a smart manner, with an ability to persuade others to join his business activities: “he could sell ice to Eskimos”, is what some people said about him.
H's telephone was disconnected, bills were overdue, including insurance premiums. His auditing service had stopped keeping his books, because H had failed to pay that bill as well.
In November 2000 H also stopped paying VAT, tax at source, and social security contributions. At the end of 2002, the bills, with interest, amounted to more than EUR 90,000.
“The activities did not stay under control”, H said in the police interrogation during Christmas 2004.
In July 2000 H got a letter from the tax office, politely reminding him that his tax return had not been filed. That was the least of his worries. There were more urgent bills. He needed to get rind of the bar quickly.
H found a man who had been convicted of economic crimes to buy the bar. He brought him the receipts in a plastic bag.
At this point at the latest, H began to look like the chronic failure of a businessman that he has later been described as.
The bankruptcy application of the erotica bar was refused by Tampere District Court in 2002 because of a lack of funds. Tax authorities say that in the same year H was paid wages totalling EUR 21,457 from a Finnish software company, as well as per diems and driving compensation worth EUR 2,854. H worked as an applications consultant in the IT branch. He had no more companies.
There was no sign of H until the late summer of 2003, on the Internet. Now he was in online message boards looking for people interested in sports betting. H said that he had developed a betting system which brought in money. By joining Bettrust group games, you can more than double your gaming portfolio every week H claimed.
H had started to bet on horseracing in Britain. Before that he had collected football statistics and calculated that there were too few matches, and that the cash flow would not be sufficient.
Racing, on the other hand, seemed promising. Are you interested in MONEY? H asked in his e-mail message that he sent to a new acquaintance. The rules work better on the horse track than in team sports, and the turnover of the cash is truly fast, which means that there is much to play. The higher odds are not the only parameter in my own system – the most important factors are the involvement of so-called syndicates and !! taking into consideration its impact on how the odds behave –, the number of horses taking part in each race, the ratios between the odds of the horses, and the changes in the odds during the betting process.
Along with this came a wild-looking Exel chart onto which H had collected betting statistics.
H made bets at Betfair, a British betting operation that had started up three years earlier. The minimum contribution to get into H’s collective betting scheme was EUR 200. Initially the money was paid directly onto H’s bank account. The online money transfer service Moneybookers was used from late 2003.
In Betfair, players bet against each other. The sums are large - often hundreds of thousands of euros per race, and there could be about 20 races in a single day.
H said that he was making bets, but Bettrust had the characteristics of a pyramid scheme. Members could recommend new members, and the new members could recommend that others join as well.
What was it about H that made other people trust him with large amounts of their money? Perhaps it was the memory tricks that he liked to show off with.
H asked people to write numbers in the empty spaces on a grid with 10 X 10 squares. After looking at the grid for about two minutes he was able to say which number was in which square.
He had exercised his memory for a long time. The squares were a “room of the mind” which was “decorated” with numbers turned into objects. The trick is easy to learn for someone with a good memory and an ability to remember things. H told some of his friends how the trick could be mastered.
But H also had another skill: calendar memory. If given any date in any year he was able to say which day of the week the date fell on. The characteristic is often linked with those suffering from autism, and it is seen to be somewhat mystical.
Nevertheless, H had reportedly learned this trick as well. It is based on an ability to do big equations and a formula that can be found on the Internet.
The horse racing scheme brought plenty of money, or at least it seemed to.
Then H came up with currency trading. Many people who have met H have said that he really was interested in trading with currencies. People who know him are sure that in the spring of 2004 H really was trading in currencies using real money on the Forex.com foundation, while testing his trading strategies.
At that time H would appear at Tampere hotels to market his new currency trading scheme. Large crowds showed up. Word-of-mouth worked fine.
H performed his memory trick to enthusiastic audiences. For them, H was not a failed entrepreneur, but rather a mathematical prodigy and a self-taught currency dealer, a little like George Soros. H was developing his ingenious “Signal system”, which would make people rich, in a way that the cautious advice from bank personnel would not. Whether he knew it or not, H was becoming a - guru.
H’s activities became more systematic. The betting fund was named GiiClub. The URL www.giiclub.com was registered in October 2003. The first websites of the club were produced by Mikko, whom he had met on an online message board in the late summer of 2003 and joined the betting circle.
In the autumn of 2004, when Mikko drew up a list of the members of the GiiClub, there were thousands of names on it. A list of user names appeared on the Internet briefly in the autumn of 2007, when someone hacked it from the pages of the club.
The biggest personal deposits were worth EUR 40,000. Finnish men were serious about being H’s disciples.
H wrote new plans down on paper. With him in the Memphis Restaurant on the lower level of the Sokos building in the centre of Helsinki were Mikko and Heikki. The summer of 2004 was coming to an end. The GiiClub was now the WinClub. It sounded impressive.
It was at this meeting that the Worldwide Investment Company, the company behind WinClub, was set up.
Until now the business associates of H had been local entrepreneurs just like him. Heikki came from bigger circles. He had been convicted of economic crimes linked with the banking crisis of the 1990s in a highly-publicised case. Heikki’s car was a Cadillac Seville.
Heikki helped H register his company in the United States through a Spanish intermediary. Later the registration was transferred to Panama. It was not legal to set up a company in Finland with betting as its line of business. Besides, his name had been “written down”. He could not establish anything at all in Finland, but he never mentioned this to Mikko.
The advantage with Panama was that under local legislation, the real owner of the company could not be dug up without a court order.
H and Mikko owned the company together for less than six months. In the autumn of 2004 WinClub was administered through an Excel application made by Mikko. Then in late 2004, H offered to buy Mikko’s share.
Mikko agreed to this right away. He was angered that H would not let him see the betting activities of WinClub. Mikko would have wanted to know what kind of a strategy H was playing with. He decided to step back and become an ordinary member.
The company in the background of WinClub was now exclusively in H’s name. He opened an account for the company with the Swiss bank Credit Suisse.
In December 2004 the Tampere police began a series of interrogations over financial irregularities at the erotica bar. In March 2006 the local district court sentenced him to six months imprisonment for aggravated dishonesty as a debtor, and for bookkeeping crimes.
The sentence was a suspended one because H had no prior convictions. H appealed, but the Turku Court of Appeals kept the sentence in force. He was ordered to pay EUR 20,000 in damages.
H had moved to Spain’s Costa del Sol, but he also spent long periods of time in Finland. His last known addresses were in Fuengirola and Marbella. Avda Valle del Golf, 29660 Nueva Andalucia.
E-mail messages have been recovered from those days, where H details what he had done: I went to develop my own signal system – the job was a big one. I have been working night and day (perhaps I even became too excited) in connection with this project.
At one point H told his friends that he was living on the German-Swiss border.
It was said that he visited Panama, where the company that was behind WinClub was registered.
All this time the number of members in WinClub grew. New members were recruited from around Finland at events organised by sponsors. And as is typical for pyramid schemes, newcomers were always further and further away from the top. The newer the member, the less he knew about H. Money matters were dealt with by e-mail. The first to answer enquiries was Jaakko, then Minna and then Kim. Minna was supposed to be H’s partner. Nobody knew anything about Kim.
Once H himself sent feedback to a member who was bold enough to ask when he would see the profit that he was making: Should I go and sit in the corner? It is just so funny that there is always someone in a certain group in WinClub who finds reason to complain. Either the profits are insufficient, or they do not become available as soon as a person would want it, and so on.
He suggested that the person asking the question should read the book Who Moved my Cheese?, in which an American business guru teaches readers how to take a constrictive attitude toward changes at work and in life. H had a sense of humour.
The WinClub website operated first on a server in Espoo, and later in Luxembourg. The bills were sent by e-mail to H, who paid them on time with a credit card. He put down his mother’s address as his own, but he made up the postcode.
On December 1st, 2006, between 200 and 300 members of WinClub gathered at the Helsinki Club for a Christmas party.
Many came there directly from a Christmas concert at the Old Church. H’s partner Minna had sold tickets to the concert, which featured parts of the Christmas Oratorio by Händel, as well as traditional Christmas carols.
The atmosphere was pleasant. H mingled with the crowd, and did not draw too much attention to himself. He had a deep tan - it was clear that he had been in Spain.
The title of “Sponsor of the year” was given to a man from Varkaus, who was given a travel voucher.
Few among those attending knew that H had been given a suspended prison sentence in Tampere for economic crime.
For the club members, H was a mythical figure, who had mastered currency trading, and who shared his success with others as well.
The register of the distraint office knew H from a somewhat different perspective: he was a slick businessman who had left debts of nearly EUR 300,000 behind him in 1992-2004 in bank loans, tax arrears, insurance premiums, maintenance fees, parking fines, hospital bills...
In September 2007 MTV3 television reported that officials were investigating suspicions of a pyramid scheme. WinClub closed its website temporarily.
In November the secret society changed its name again. It became WinCapita. Talk of a pyramid did not frighten people away: membership kept growing faster than before. In the spring of 2008 there were 10,000 members.
Now they were also being asked to buy “shares in a foundation”. Many bought them.
Then came March 7th. WinCapita’s website disappeared from the Internet.
Also disappearing at the same time was H himself. His probation expired on March 16th.
E-mail messages circulated among WinCapita members, giving assurances that H would be coming back soon, and that everything would be all right. By the summer the messages began to take on a more desperate tone, and were running around in circles.
About 800 Finns have filed criminal complaints about WinCapita. Many still believe in H. There are old acquaintances who feel that it was not possible for H to have planned such a massive hoax on his own. But how are really good con operations ultimately planned? Perhaps the whole thing proved to be too big for H to handle.
In late August and early September, an international arrest warrant was being drawn up for H. Police believe that he is hiding somewhere in the Schengen zone. If he is caught, he will face charges of aggravated fraud and fundraising crimes. Aggravated fraud alone can bring a sentence of four years imprisonment.
One thing is sure: nothing has been heard from H himself since March. Nothing at all.
Helsingin Sanomat / First published in print 14.9.2008
The names Mikko, Heikki, Jaakko, Minna and Kim have been changed
ANU NOUSIAINEN / Helsingin Sanomat