A REPORTER AT LARGE
The F.B.I needs informants, but what happens when they go too far?
BY EVAN RATLIFF
THE NEW YORKER, MAY 2, 2011
Last January, Michael Grimm, a forty-year-old United States congressman from Staten Island, sat for an interview in his Washington oﬃce with Greta Van Susteren, of Fox News. Grimm, a freshman representative who had recently been named to the House Financial Services Committee, is a former marine and F.B.I. agent. He has blue eyes and perfectly combed dark hair. An American ﬂag was positioned behind him. Van Susteren quickly turned the conversation to the eleven years that he had spent at the F.B.I., which had been the centerpiece of his campaign. “You went undercover?” she asked. “Deep undercover, yes,” Grimm said. He was, he added, “the ﬁrst and only F.B.I. agent to successfully inﬁltrate Wall Street.”
Van Susteren asked him if he had ever slipped and revealed his true identity. “Not once,” he said, smiling. He then described the rigors of undercover work. “People think the F.B.I. goes out with this big net, and whoever gets caught up in it, but that’s not how it works. We do a tremendous amount of investigating before we are out there as an undercover. So we know the crimes they’ve committed in advance.” When she introduced the segment for her live audience, Van Susteren said, “Our next guest sounds more like James Bond than a congressman.”
Grimm started working as an F.B.I. agent in 1995. His “most notable case,” as he described it to Van Susteren, was called Wooden Nickel, and it began in 2002. Working out of a corner oﬃce in the World Financial Center, Grimm adopted the persona of Michael Garibaldi—nicknamed Mikey Suits, for his impeccable dress—a Mob-connected stock and currency trader who ran a hedge fund called Centurion Consulting. The main investigation concerned a company that was suspected of illegally manipulating currency markets. Some months into the case, the F.B.I. added a further target: Albert Santoro, a thirty-one-year-old lawyer from Queens, who had recently come into contact with a man named Josef von Habsburg, one of the Bureau’s more colorful—and complicated—paid informants.
Von Habsburg, whose full name was Josef Franz Prach von Habsburg Lothringen, was in his early forties and was known to his acquaintances as an international businessman and the heir to an Austrian royal fortune. He spoke with a vaguely European accent and wore blocky designer eyeglasses and ﬂashy three-piece suits. He would talk of spending weekends skiing in Switzerland or visiting family castles in Croatia. Von Habsburg claimed to be well connected in the ﬁnancial industry, and he was a regular source of tips and targets for the F.B.I.’s New York oﬃce. He handed oﬀ potential criminals to undercover agents, like Grimm, who ran stings and busted them as they committed illegal acts.
Santoro, von Habsburg’s mark on this occasion, was a stocky man with slicked-back hair. He had been an amateur race-car driver, gone to law school, and become a Brooklyn district attorney. Now he ran a solo legal practice downtown, and he was struggling. For months after September 11th, his oﬃce had been cordoned oﬀ. He lost business and fell tens of thousands of dollars behind on car payments, credit-card debts, and rent for a one-bedroom apartment in Queens. His wife worked as a bartender four nights a week. He was desperate for clients.
Santoro had met von Habsburg through a mutual friend in September, 2002, at a night club. Afterward, von Habsburg treated him to a series of extravagant meals at the Four Seasons and the Waldorf, and told him about his global empire of hotels and other businesses. Von Habsburg ﬂattered Santoro about his business acumen, and said that he wanted to hire him to help restructure his companies. Von Habsburg promised Santoro a luxury apartment and a Ferrari. “He said he was going to ‘make me’ in New York,” Santoro recalled.
In mid-October, von Habsburg arranged to introduce Santoro to Grimm, posing as Garibaldi. The three met for lunch at the St. Regis Hotel, and Santoro commented on Garibaldi’s polished bearing. “You look like a federal agent,” he observed. Von Habsburg called Garibaldi his “right-hand man” and the “brains” responsible for his foreign-currency business. Santoro admitted to Garibaldi that he knew little about currency exchange. (“I thought he was talking about those little places at the airport,” Santoro told me later.) But, when he mentioned that he had helped a German musician open bank accounts in the U.S., Garibaldi seemed interested.
Santoro began going to meetings at Garibaldi’s oﬃce at the World Financial Center, and, before long, Garibaldi was speaking openly about transferring money overseas illegally. Santoro, eager to impress, made audacious claims, which the F.B.I. captured on tape. He told Garibaldi that he could wire money to Central and South America without it being traced. He said he could convert cash into gold and smuggle it out of the country in special shipping containers. Through the fall, he continued meeting with von Habsburg as well, generally in strip clubs, night clubs, and fancy restaurants. The Prince, as Santoro began calling him, told him not to take Garibaldi’s talk seriously. “We were all trying to outdo and out-bullshit each other,” Santoro recalled. He had a sense that something was wrong, but he was enjoying the life style and saw no reason to extricate himself. “We’d be sitting there like kings in a night club, drinking Cristal,” he said. “It wasn’t costing me anything.”
In November, 2002, Garibaldi told Santoro that a friend who sold steroids had a hundred thousand dollars in cash that he needed to transfer out of the country. In late December, Garibaldi suddenly informed Santoro that he’d obtained the money. Garibaldi took it in a leather suitcase to Santoro’s oﬃce. They counted it, and Santoro locked it in a cabinet.
A week later, Garibaldi returned to pick up brochures that Santoro had acquired describing how to legally open overseas bank accounts. After he left, Santoro’s intern, a student at New York Law School, said she recognized Garibaldi. “That guy’s not a stockbroker,” she told Santoro. “He went to law school with me.” His real name, she said, was Michael Grimm.
Santoro called Garibaldi to confront him. The F.B.I. agent, who had attended law school at night under his real name, said the intern was mistaken. “She doesn’t know me,” he told Santoro.
That night, ﬁve F.B.I. agents knocked on Santoro’s apartment door, then threatened to break it down. When Santoro opened it, they tackled him, handcuﬀed him, and drove him to the Metropolitan Correctional Center, where he was charged with laundering a hundred thousand dollars in drug-traﬃcking proceeds.
“He was arrested early,” Grimm told me. Santoro’s knowledge of Grimm’s true identity “could have jeopardized” the rest of the operation. While Santoro remained in jail for ﬁve months awaiting bail, Grimm continued working on Wooden Nickel, which culminated in dozens of arrests for rigging currency trades and defrauding investors. In a press conference announcing the bust, an assistant director of the F.B.I. singled out Grimm for praise, citing his “dedication, sacriﬁce, and commitment to the cause.”
Most of the defendants pleaded guilty. But there were hints that something was amiss in the Santoro case. Prosecutors claimed that he had laundered millions of dollars. When a judge asked, at Santoro’s bail hearing, why there wasn’t more evidence of that contention, the prosecutor replied that “there obviously is none because—we’d submit because it’s been done successfully.” Santoro chose to ﬁght the charges.
The case would dramatically alter his future, as well as that of the informant who had joined forces with Michael Grimm: Josef von Habsburg. It also raised questions about just how much the F.B.I. can control its conﬁdential informants—and how much those informants can control the F.B.I.
The Federal Bureau of Investigation maintains more than ﬁfteen thousand “conﬁdential human sources.” The Drug Enforcement Administration has its own tipsters, as do the Secret Service and the Bureau of Alcohol, Tobacco, Firearms, and Explosives; over all, the Justice Department pays informants as much as a hundred million dollars a year. Trained agents like Grimm generally create new identities for their jobs, and spend months or years building up connections and gaining the trust of criminals. Conﬁdential informants like von Habsburg simply operate within their normal lives.
Informants are especially valuable because they can collect evidence that would require court orders if they were government agents. In almost every successful case against a large-scale criminal enterprise—from the one against John Gotti’s Mob operation to those involving terrorists plotting against New York synagogues and subways—an informant has played a central role. “The human-source program is the lifeblood of the F.B.I.,” an assistant director of the Bureau told a congressional hearing in 2007.
Useful C.I.s are often paid thousands of dollars, and sometimes hundreds of thousands, in retainers. For certain crimes, such as those related to drug traﬃcking and money laundering, informants can make as much as twenty-five per cent of conﬁscated proceeds. “The entrepreneurial nature of informants makes them dangerous,” Alexandra Natapoﬀ, a professor at Loyola Law School, in Los Angeles, said. “We see time and time again that informants not only are capable of ginning up business for themselves and the government but have deep motivations to do so.”
Other informants are accused criminals who, in exchange for leniency, agree to assist the government by turning on their fellow-conspirators. An informant might also suspect that he’ll have future legal problems for which government help might come in handy. Such agreements aren’t formalized, but criminals are aware of the advantage of knowing a friendly law-enforcement agent. “They are acquiring this information either for their own beneﬁt or to rat out the competition,” Kenneth Walton, a retired F.B.I. agent and a former deputy assistant director of the Bureau’s New York oﬃce, said. “And simultaneously they’ve ingratiated themselves with the government, as a buﬀer, so someone down the road will come to their aid.”
Law-enforcement agencies have gone to considerable—and sometimes illegal—lengths to protect well-placed informants. And the agents who work closely with them risk forming friendships that can favor protecting the source over solving the crime. In 1999, it was revealed that two F.B.I. agents had for many years helped the Boston gangster Whitey Bulger, who was working as an informant, cover up crimes and avoid arrest. “You work with a source, you need the source for your case, and you develop a bond and a friendship,” one former F.B.I. agent said. “You start to think of them more as a friend, rather than as a source.”
Courts and cops have long recognized that criminals often make the best C.I.s. “You don’t get productive informants out of a monastery,” Walton said. “You have to step back and realize that they are basically con men. They are conning their own associates, and you have to say, ‘If this guy is going to con and lie to his friends, why not me?’ ”
In October, 2005, Albert Santoro’s defense team hired Steven Rambam, a private investigator in his mid-forties. The team was particularly interested in learning more about von Habsburg. “There’s a guy claiming to be the Prince of Austria who is the primary witness,” Santoro’s lawyer, Jack Litman, told Rambam. “We’d like you to ﬁnd him, because nobody knows who he is.”
Rambam has short, dark-brown hair, an angular face, and a Brooklyn accent. In the world of private eyes, he is something like an investigative Charles Barkley: brash, controversial, and good at his job. He is well known for having tracked down fraudsters and former Nazi war criminals for network-television news shows.
In his search for von Habsburg, Rambam looked through private and public databases that covered everything from credit information to property records. Finding little about the man’s past, he suspected that von Habsburg was a pseudonym. People who change identities tend to carry details from their previous lives to their new ones. “What saved us was the way that this guy spells his name,” Rambam told me. Scanning for public records under the Germanically styled “Josef,” he identiﬁed a man who had grown up in Michigan with the same ﬁrst name and the same approximate age as von Habsburg. His last name was Meyers.
It wasn’t much to go on, but Rambam got in touch with a P.I. friend in Detroit named Robert Kowalkowski and went to Michigan. They dug up documents across the state, hunted down Josef Meyers’s friends and family, and quickly determined that von Habsburg and Meyers were the same man. They also found, in the magazine Kiplinger’s Personal Finance, a 1995 article about early Internet scams detailing how a Josef von Habsburg had disappeared with more than a hundred thousand dollars in investments for a hedge fund that he had solicited. The case had never been prosecuted. The P.I.s now realized that they were chasing someone who was both an F.B.I. informant and a con man.
Josef Meyers was born in Highland Park, Michigan, in 1960, and grew up in a modest ranch house in Birmingham, a suburb of Detroit. His parents divorced, and he and his brother lived with their mother, a Ford employee who had emigrated from Eastern Europe. Their father moved to Illinois and became a farmer.
In his late teens and his twenties, Meyers began to have problems with the law. His crimes included car theft, forgery, drug possession, and intimidation. He was arrested several times in Michigan. After a crime spree in Florida, he was sentenced to four years’ probation there. He spent a few terms at colleges in Michigan, dropped out, and moved back home. One evening, his mother called the police to report that Josef was threatening her. “When we pulled up, she said, ‘He’s out of control,’ ” recalls Roger St. Jean, a police oﬃcer, now retired, who was summoned to the scene. “And then she said something really strange. ‘If you have to shoot him, that’s O.K.’ I thought, Whoa, that’s a dysfunctional family.” Josef was arrested and forcibly committed to a local mental hospital, Clinton Valley Center. The center diagnosed a violent, “unspeciﬁed psychosis” and “latent schizophrenia.”
After he was released, Meyers hired a bodyguard, and began claiming that he had attended Harvard. The people around him didn’t know exactly what he did for a living. “He always had that air about him,” Dennis Kearns, who worked as Meyers’s bodyguard in the early nineteen-eighties, recalls. “He said somebody was after him, so I followed him around.” Kearns quit after Meyers wrote him a bad check.
In June of 1985, Meyers met a woman named Marianne Maio at the Detroit Grand Prix auto race. They got married three years later, and opened a retail store in the Detroit area called Such a Deal, selling oﬀ-season designer clothes. Meyers tried to expand the store into a local chain. “He always wanted to hurry up and make tons of money,” Marianne said.
He was, she added, “like a chameleon.” On a trip to Boston, Meyers gave her a tour around Cambridge, and reminisced about what he described as his college years there. “Every time he talked to you, you felt like you had a kindred spirit, someone that you could trust,” she said.
In January, 1986, Meyers called the Detroit oﬃce of the Drug Enforcement Administration and told agents there that he had worked as a money launderer and enforcer for drug dealers. He wanted to switch sides and become a paid informant. The D.E.A. agreed, and Meyers helped oﬃcials arrange a cocaine deal that led to a bust the following May. But, a week later, Meyers contacted the local branch of the F.B.I. He complained that the D.E.A. wasn’t paying him enough and accused his D.E.A. handler of asking for a kickback. Meyers took a polygraph on this accusation and failed, but the Bureau had such a need for informants who could work drug cases that it decided to overlook the deception—as well as Meyers’s mental-health history. He was placed under the direction of a young agent named Richard Mazzari. “I thought, This guy is not going to solve the Brinks robbery for us,” Walton, who was in charge of Michigan operations at the time, said. “But if he’s going to provide ongoing narcotics information, and Mazzari can handle him, and H.Q. says it’s O.K., let’s take a shot at him.”
Meyers worked for the F.B.I. for nearly a year, until the evening of March 26, 1987, when D.E.A. agents arrested him for dealing two kilograms of cocaine. When Mazzari spoke with him three days later, Meyers told him that the D.E.A. had set him up, as a way to get revenge for his accusation about the kickback. After it was revealed that Meyers was working for the F.B.I., the prosecutor withdrew the charges and said that he had done so because of a “strong issue of entrapment.”
The F.B.I. decommissioned Meyers, but in December, 1990, he returned and, according to internal communications, oﬀered to “furnish valuable information concerning illegal inﬁltration of legitimate businesses by LCN”—La Cosa Nostra—“and money laundering.” The F.B.I. reinstated him and gave him the code name Harvard. Meyers’s Michigan F.B.I. ﬁle records that he soon provided information on a conspiracy to sell counterfeit Levi’s; the Bureau called it Operation Knickers. Four months later, his tips led to a large seizure of counterfeit Ralph Lauren shirts. Before long, Meyers was also supplying information to the A.T.F. and to the Royal Canadian Mounted Police.
Marianne said she learned of his law-enforcement connections only when the F.B.I. called to inform her of his arrest on the cocaine charges. In subsequent years, she said, Mazzari and other agents came by the Meyerses’ house. Josef, Marianne said, seemed to relish his role as a kind of auxiliary F.B.I. agent. “You know how somebody gets in trouble, and you got them in trouble?” she said. “It was, like, ‘Ha-ha, I got him.’ ”
Meyers had told Marianne that one of his grandmothers was descended from Austrian royalty. In 1990, when he was between stints working for the F.B.I., he and Marianne legally changed their last names to von Habsburg-Lothringen. The couple had two daughters, who took the last name as well. Von Habsburg may have been inspired by Archduke Stefan von Habsburg-Lothringen, who had settled in the Detroit area decades earlier. He and his wife, Jerrine, lived in a nearby suburb and had ﬁve children, including two sons close to Josef Meyers’s age. “My husband was a direct descendant of Queen Victoria and the Tsar of Russia,” Jerrine von Habsburg-Lothringen said. She’d never met Josef Meyers. “He is an impostor, a total impostor.”
Shortly after changing his name, von Habsburg forged a check for a hundred thousand dollars in a bogus real-estate transaction, but his F.B.I. connections again helped him avoid legal problems. Tried as Josef Meyers, he pleaded guilty in 1991. The state’s sentencing guidelines called for him to serve between eighteen and sixty months in prison.
Von Habsburg’s lawyer told the judge that the plea deal should take into account “his status, which I would not like to go into on the record.”
“Well,” the judge said, “it’s a situation with the F.B.I. Right? Right?”
“Judge, may we approach for a moment?”
The judge adjourned after a short oﬀ-the-record conference, and von Habsburg walked out with two years’ probation and no prison time. Someone labelled his ﬁle, incorrectly, “not guilty by jury.” His work with the F.B.I. was proving to be extremely valuable.
Von Habsburg was facing other legal troubles, though. His Such a Deal stores were failing, and creditors were suing him under his various aliases. A man from Long Island showed up at the von Habsburgs’ door, angry about money he’d lost to Josef over the Internet.
Around this time, von Habsburg began making mysterious trips to New York and Europe, telling Marianne he was pursuing work in the ﬁnancial industry. He persuaded his father-in-law, a former Chrysler worker, to sign over his retirement stock, which he promised to invest. On September 5, 1993, the day his third child, a son, was born, von Habsburg left his family and moved to New York City. At the child’s baptism, F.B.I. agent Mazzari stood in as the child’s sponsor. (Mazzari, who did not respond to requests for an interview, later told an F.B.I. investigator working on the Santoro case that von Habsburg had asked him to attend because he had “no friends to act as witnesses.”) Marianne said that she never spoke to Josef again. Her father never got his money back.
Von Habsburg rented an apartment in Tribeca, decorated it with paintings by prominent Eastern European artists, and began to live like an Austrian royal. He started to pursue investment schemes built around his royal identity.
Renne Gjoni, an American actor who sometimes works in Croatia, met von Habsburg in the fall of 1993, at a popular spot called the Buddha Bar. “The bouncer said, ‘Renne, you have to meet this guy, he’s a prince from the von Habsburg family,’ ” Gjoni said. Gjoni found von Habsburg alone at a reserved table and they began to converse in Croatian, which von Habsburg had learned from his mother, in Michigan. “I asked him how he came to speak Croatian,” Gjoni said, “and he said he’d lived outside Zagreb, where his family had a palace. As part of the Habsburg Empire, he had to live in every place the empire had extended.”
The two men became close, and they’d visit the Metropolitan Museum, where von Habsburg would point out the pieces donated by “the Habsburg family.” “He would take me out to expensive French restaurants in SoHo, to expensive night clubs,” Gjoni said. Gjoni was attending N.Y.U., and von Habsburg persuaded him to switch to Harvard, his adopted alma mater.
After spending years living as a royal bachelor in New York, von Habsburg met Michelle Trico, a tall, striking-looking woman, at a night club. On their first date, he told friends, he treated her to dinner on a friend’s yacht, with bottles of wine labelled with their names. They eventually moved into an eight-thousand-dollar-a-month apartment in SoHo, where they kept a photo album of von Habsburg relatives in the living room, and a picture of one of the family’s European castles on the refrigerator. They invited friends out to dinner at expensive restaurants like Per Se and Masa, and hosted catered parties. Gjoni recalls wandering into the von Habsburgs’ bedroom and finding an open bag filled with stacks of hundred-dollar bills. The couple had three children—two of whom with names that von Habsburg had given to his children with Marianne.
To friends and acquaintances, von Habsburg presented himself variously as an expert in foreign-currency markets, an investment banker, a stockbroker, a former retail baron, the head of an arbitrage firm, a private-equity manager, and a real-estate developer. At times, he claimed to have retired from Wall Street to run “the family office,” managing a billion-dollar fortune. But public records indicate that he never registered as a broker, held a license, or passed a financial-industry exam in the United States.
He approached investors about a variety of corporate takeovers, real-estate transactions, and private-equity placements. A business associate of von Habsburg’s speculated that some of his deals may have required an up-front retainer, which von Habsburg would keep if the deal fell apart. Von Habsburg once approached a hedge-fund manager saying that he was looking to invest a hundred million dollars in cash and that he could deliver other rich European clients. Von Habsburg took the manager and his colleagues out for a thousand-dollar dinner, the hedge-fund manager said, “but I never saw a dime of this money.” After Bernard Madoff was arrested, in December, 2008, von Habsburg called. “He said, ‘This is unbelievable! I can’t believe he pulled this off.’ ”
In conversation, von Habsburg would casually refer to his powerful connections, including Liliane Bettencourt, the French billionaire and heiress to the L’Oréal empire, and an Iranian prince who was a nephew of the former Shah. Occasionally, his claims proved true. Gjoni was invited to spend one Thanksgiving with von Habsburg at the town house of Barbara (Bobo) Rockefeller, the ex-wife of the Standard Oil scion Winthrop Rockefeller. Gjoni noticed framed photographs of the von Habsburg children scattered around her house.
Von Habsburg often mentioned his close relationship with Eugene Sullivan, a former federal judge. Sullivan is a law partner of Louis Freeh, the former head of the F.B.I. “He always talked about him and Freeh,” one acquaintance who had lunch with von Habsburg and Sullivan said, noting that the two were friendly. (Freeh issued a statement, through a spokesperson, saying that he “never met, knew, or had any business dealings with” von Habsburg. Sullivan refused repeated requests to discuss von Habsburg. “I don’t want to hear what your story is about,” he said.)
Even von Habsburg’s oddities seemed the indulgences of a royal. “I deal with a lot of people who are very wealthy and very weird,” the hedge-fund manager said. “He had this facade, and he made it seem like it was real.” Some of his SoHo neighbors told me that he dressed himself and his three children in lederhosen and hung a fishing line with a twenty-dollar bill on the hook from his second-story window, which he would yank away when passersby reached for it. He called it “people fishing.”
At some point between his arrival in New York and 2001, von Habsburg’s Detroit law-enforcement handlers had passed him on to the F.B.I. in Manhattan. Von Habsburg said that he wanted to fight white-collar crime and that his new identity was to shield him from dangerous people in Detroit. The F.B.I. knew von Habsburg’s history and his real name, but officials saw his flamboyant persona as an advantage. “He was a character,” recalls a former F.B.I. agent who served as one of von Habsburg’s handlers for two years in New York. “So he wasn’t anybody that someone would think was law enforcement.” The agents gave him a new code name: Bobo Rock.
By the late summer of 2002, Michael Grimm had become Michael Garibaldi and established the office in the World Financial Center. That September, von Habsburg suggested to his handler that the Bureau go after Albert Santoro. Several weeks later, von Habsburg made the handoff to Grimm.
Von Habsburg supplied other Wooden Nickel targets, including the C.E.O. of a small company who, in June of 2003, came to New York to try to raise capital. The C.E.O. attended half a dozen investment meetings set up by a banker, one of which included Garibaldi and von Habsburg. Garibaldi did all the talking, the C.E.O. recalls, while von Habsburg wandered around the room and stared out the window. Late that evening, over drinks, von Habsburg proposed making his own investment in the company. He said, “I have all this money offshore that I can’t get into the country,” the C.E.O. told me. Von Habsburg said he could deliver the money in hundred-thousand-dollar cash lots, but he didn’t want the deal registered with the Security and Exchange Commission. “I said, ‘If you want to buy stock, you can pay cash in a suitcase, or check, we don’t fucking care,’ ” the C.E.O. said. “ ‘But we report it to the S.E.C.’ ” The C.E.O. told me, “I thought he was just a small-time crook.”
A few weeks later, F.B.I. agents arrested the C.E.O. and accused him of conspiracy to engage in securities fraud. The charges proved baseless and were soon dropped, but the C.E.O.’s name appeared in a list of Operation Wooden Nickel suspects, and then on the nightly news. He was forced to resign. “It was the destruction of a person’s life, for no reason, based on nothing,” he said. “The system is very scary. This Josef guy seems like he was almost on a fee basis: I’ll go find a crime and you give me a fee. Anybody could do that. If you had the F.B.I.’s money in a briefcase, you could get anybody to do anything.” The C.E.O. spoke anonymously, because he feared that the F.B.I. might target him again. “Our fine government ruined my life,” he said.
Von Habsburg was often paid in “expenses,” according to portions of his F.B.I. file. A typical report during the C.E.O.’s case details fifteen hundred dollars for rent, five hundred for child care, three hundred for a cell phone, two hundred and fifty for utilities, and seven hundred in “miscellaneous” expenses for a month’s work. The agency also covered von Habsburg’s entertaining in night clubs as part of Operation Wooden Nickel.
The F.B.I. won’t respond to specific questions about von Habsburg, but James Margolin, a spokesman for the F.B.I.’s New York office, downplayed his involvement with the Bureau. “As a matter of public record, he was going to be a coöperating witness, on a witness list, for one or more trials,” he told me. Beyond that, “we don’t comment on someone’s information, or work as a coöperating witness.” Margolin added that the relationship, which, according to documents and interviews, stretched across at least a few years, lasted only “eleven months, I think.”
One former U.S. prosecutor on the Santoro case acknowledged that von Habsburg’s motives seemed typical of informants. “There are quite a few people who like having contact with the F.B.I.,” the attorney said. “It makes them feel important to turn people in. They like living in this mysterious world. I would put him in that category. And maybe he felt that if he did things wrong they would protect him.”
Grimm said that he worked only sparingly with von Habsburg during Wooden Nickel. “He seemed very animated,” Grimm told me recently. “He dressed boisterously, if you will. He was a bit odd. I think he had an accent.” Grimm said that he doesn’t recall the C.E.O.’s case, and that he was careful to maintain his distance from von Habsburg. “I remember trying to vet out who he was,” Grimm said. “I remember that I didn’t feel like I had enough on this guy to work that closely.”
As Steven Rambam, the private investigator, looked into von Habsburg for the Santoro trial in late 2005 and early 2006, he interviewed von Habsburg’s mother and brother, his estranged father, and dozens of other acquaintances and past fraud victims. The prosecution eventually turned over documents about von Habsburg, including parts of his F.B.I. informant file, his rap sheet, and a letter noting that, in addition to his arrests, he’d committed assault and extortion, sold counterfeit goods, and collected drug debts.
Santoro’s lawyers prepared to use what Rambam had gathered to claim that von Habsburg had entrapped their client on behalf of the F.B.I. According to the defense, an unsupervised informant had goaded an innocent lawyer, desperate and prone to making empty boasts, into the eager arms of Michael Grimm. One audiotaped conversation between Grimm and Tommy—an F.B.I. confidential informant who supposedly dealt steroids and whose money was given to Santoro—recorded the F.B.I. agent saying that he’d “caught” Santoro contradicting himself and making things up about his past. The U.S. Attorney’s office planned to argue in response that no one had enticed Santoro into breaking the law. He had claimed that he knew how to launder money, and Grimm had merely given him the opportunity to do so. Grimm told me that the tapes put Santoro’s guilt beyond doubt. “He explained how he did his money laundering,” Grimm said.
Still, the prosecution team and the F.B.I. seemed determined to keep von Habsburg as far away from the case as they could. When Litman, Santoro’s lawyer, announced that he planned to subpoena von Habsburg to testify, the prosecutors argued that they couldn’t find him. When Rambam, accompanied by a defense lawyer, rang the bell of von Habsburg’s SoHo apartment to serve papers, the U.S. Attorney’s office sent a letter accusing him of harassment. Rambam created a Web page seeking information on von Habsburg, but the F.B.I. contacted his Web-hosting company, he said, and had the page taken down. The defense discovered court documents showing that Josef von Habsburg had jumped probation in Florida—resulting in an arrest warrant that remained open for nearly twenty-two years—but, after the U.S. Attorney’s office coördinated with a Florida lawyer recently hired by von Habsburg, a judge voided the probation and withdrew the warrant.
In July, 2006, Rambam was preparing to give a talk about privacy and investigative techniques at the Hotel Pennsylvania in New York City when four uniformed F.B.I. agents approached him. He was handcuffed and taken to Brooklyn’s detention center and charged with obstruction of justice. A federal complaint accused Rambam of witness intimidation and falsely identifying himself as working for the F.B.I. during interviews with the parents of von Habsburg’s partner Michelle. A Washington Post headline read, “AGENTS ARREST BACKGROUND SPECIALIST AT HACKERS FORUM.” After forty-eight hours in jail, Rambam, who denied the charges, was released without having to post bail.
“The government has acted in a very unusual manner,” Judge Thomas Griesa told the lawyers in open court in late July. “I’ve never heard of this before. You’ve arrested the defendant’s investigator.” Not long afterward, as the deadline to indict Rambam neared, the U.S. Attorney’s office dropped the charges against him in New York; then the U.S. Attorney’s office in California refiled the charges. Two months after that, those charges were dropped as well.
By mid-2006, Michael Grimm had left the F.B.I. But he was still a key witness in Santoro’s trial, and the defense team began looking into his background, too. They were particularly interested in following up on a tip that another lawyer had given to Litman. Several years earlier, the lawyer said, Grimm had been involved in an altercation at a popular West Indian-themed night club in Queens called Caribbean Tropics, during which he was accused of misusing his F.B.I. authority. Litman sent Steven Rambam to look into the matter. Just as Rambam began gathering facts on the incident, however, prosecutors ratcheted up the pressure on Santoro to settle. For months, F.B.I. agents had been tailing him while he was out on bail and contacting his clients. Santoro said that one prosecutor threatened to bring his ailing parents into the case.
Nearly ninety per cent of federal indictments result in a guilty plea, and so, in the end, did Santoro’s. He pleaded to “operating an unlicensed money-transmitting business.” “The amount of time that he was facing if he went to trial and lost was monumental compared with what he ended up pleading guilty to,” Todd Terry, Litman’s co-counsel, said. (Litman died last year.) “Even if we did win this case, they were taking it very personally, given that they’d arrested Steven on obviously bogus charges. There was a risk they would keep coming after him and tear his life apart forever.” The judge sentenced Santoro to eighteen months in federal prison.
Santoro’s conviction was one of fifty-six associated with Michael Grimm’s undercover work in Operation Wooden Nickel, which brought in more than a hundred million dollars in fines.
The scrutiny that accompanied von Habsburg’s role in Wooden Nickel seemed to unhinge him. By the end of the case, his friends said, he was besieged by paranoia, and had wired his apartment with a bank of cameras. One morning in January, 2009, the von Habsburgs got into a drunken argument that prompted Michelle to call 911. Von Habsburg shouted at the police that he had connections to the F.B.I. and to Mayor Michael Bloomberg. The couple were arrested for child endangerment, but they soon entered counselling and the case was sealed. In March, 2009, the Oakland County, Michigan, prosecutor’s office, after years of Marianne’s petitioning to obtain child support from von Habsburg, issued a warrant for his arrest. That summer, the von Habsburgs were evicted from the SoHo apartment, owing thirty-five thousand dollars. They left no forwarding address. In early 2010, a Detroit News article broke the story that von Habsburg, a.k.a. Josef Meyers, was both an F.B.I. informant and among Michigan’s biggest deadbeat dads. After receiving no response from the F.B.I., the Oakland County sheriff’s office approached the U.S. Marshals to help bring him in.
Shortly afterward, I met Rambam in a restaurant across from von Habsburg’s old apartment. He was working pro bono on behalf of law-enforcement authorities in Michigan to find von Habsburg. He had promised Marianne that he would help her get child-support money from her estranged husband—and he also wanted to get back at the F.B.I. for, he believed, trying to intimidate him during the Santoro case.
“My first stop is always the last known address,” Rambam told me. He went across the street and rang the doorbell, where the current tenant reported that U.S. Marshals had already visited. Rambam then began crisscrossing SoHo, showing von Habsburg’s photograph to clerks and waiters. Eventually, he stopped by a local eyeglass store. The manager recognized von Habsburg and said that he came in often to have his glasses repaired.
Within a week, U.S. Marshals, acting on information gathered by Rambam, had found von Habsburg hiding in a closet in a one-bedroom apartment in Battery Park City, and he was extradited to Detroit. When I reached him by phone in custody, he at first seemed eager to discuss what he called his “agency relationships.” But, in a video chat at the jail the following day, he instead asked me to submit questions in writing. When I did, he never replied.
Rambam believed that von Habsburg would still somehow avoid prison. He enumerated all the instances in which von Habsburg had been aided by his association with the F.B.I.: from the time he dodged prosecution for cocaine dealing to the slap on the wrist he got for forging a hundred-thousand-dollar check to the withdrawn warrant in Florida.
While awaiting sentencing for failing to pay child support, von Habsburg requested that the probation officer writing his pre-sentence investigation report contact Judge Sullivan. There is no evidence that the officer ever made the call, and neither Sullivan nor anyone from the F.B.I. showed up for von Habsburg’s mid-August sentencing. But both P.I.s did, along with Marianne and the three children from von Habsburg’s first family. A sheriff’s deputy brought von Habsburg into the courtroom in hand-and-leg-cuffs and the standard-issue navy jumpsuit. He looked paler and thinner than when I’d first seen him, at his extradition hearing in New York. His two Michigan daughters, aged twenty-one and nineteen, testified. “You are nothing to me,” the nineteen-year-old said, turning to him from across the courtroom. “You are a filthy excuse for a father.”
The judge declared von Habsburg to be “not a good candidate for probation” and sentenced him to three and a half years in prison. “Good luck to the family,” she said.
Michael Grimm found himself on a more auspicious path. He is now featured regularly on cable news, and he was recently chosen to chair the House Republican Policy Committee’s Task Force on Foreign Policy. When I spoke to Grimm’s former F.B.I. colleagues, some applauded his undercover work, which also included public-corruption investigations in New Jersey and Florida. “I wouldn’t question his integrity,” Lawrence Ferazani, an agent who worked closely with him, said. “And he never, ever challenged the rules.” Others were taken aback that he had used his career as an agent to help him gain higher office. “He was not thought of very highly,” one former agent told me. Another agent called Grimm “a very good undercover” with “a big ego.” “He was an F.B.I. agent whom I would classify as a maverick,” he said. “Mavericks bring you big cases, and they can bring you big trouble.”
During Grimm’s congressional campaign, an F.B.I. spokesperson publicly chastised him for using Bureau imagery in his political ads. Recently, James Margolin said that Grimm’s contention to Van Susteren—which he repeated to me—that he was the first successful undercover agent on Wall Street was false. “Maybe he just doesn’t know the history,” Margolin said.
Not long ago, I finally found information about the night-club altercation that Santoro’s lawyers had been looking for when he pleaded guilty. It involved a lawsuit filed in the summer of 2000 against Grimm by a Guyanese-American former N.Y.P.D. officer named Gordon Williams. This winter, I spoke with Williams about the incident. “It was one of those days that I will never forget,” he said. “You lose a loved one and you remember the day. It was like that.” When I spoke with Grimm later, however, he declared that Williams’s account is a fabrication, that he had acted with professional probity, and that he had been cleared of any wrongdoing.
On July 10, 1999, Williams said, he was working off duty at Caribbean Tropics. Shortly after midnight, Michael Grimm walked in with a woman of Caribbean descent. The woman’s estranged husband, who is also of Caribbean descent, was at the club and confronted Grimm. The two men began to argue. Williams escorted Grimm away. Williams recalled, “He said to me, ‘Thanks a lot man, he don’t know who he’s fucking with.’ Then he said something frightening. ‘I’ll fuckin’ make him disappear where nobody will find him.’ ” (Grimm calls this allegation “insane.”) After that, Williams said, Grimm and the woman left, as did the husband.
Around 2:30 A.M., there was a commotion on the dance floor. According to Williams, somebody was shouting, “He’s got a gun!” Following a crowd into the club’s garage, Williams discovered that Grimm and the husband had returned, and Grimm was holding a weapon. Grimm was “carrying on like a madman,” Williams said. “He’s screaming, ‘I’m gonna fuckin’ kill him.’ So I said to him, ‘Who are you?’ He put the gun back in his waist and said, ‘I’m a fucking F.B.I. agent, ain’t nobody gonna threaten me.’ ” (Grimm said he only moved his gun from an ankle holster to his waistband.) The bouncer at the front door told Williams that, when he patted Grimm down and found his gun, Grimm had showed his F.B.I. identification. The bouncer then let him pass through the club’s metal detector.
Grimm left the club, but at 4 A.M., just before the club closed, he returned again, according to Williams, this time with another F.B.I. agent and a group of N.Y.P.D. officers. Grimm had told the police that he had been assaulted by the estranged husband and his friends. Williams said that Grimm took command of the scene, and refused to let the remaining patrons and employees leave. “Everybody get up against the fucking wall,” Williams recalled him saying. “The F.B.I. is in control.” Then Grimm, who apparently wanted to find the man with whom he’d had the original altercation, said something that Williams said he’ll never forget: “All the white people get out of here.”
Nirmilla Jitta, a retired N.Y.P.D. officer who was at Caribbean Tropics that night, confirmed that Grimm “left and then he came back.” Grimm, she said, “forced everyone to stay in the club, saying that he was an F.B.I. agent. He was using his authority when he shouldn’t have been.” An employee of the club who was working that night remembers Grimm telling the white people to leave. Grimm “was really aggressive and really violent. You know, you put on a badge and you really think you are above everybody else,” the employee, who is white and who was allowed to depart, said.
No one was arrested, but later that morning Williams was informed that he was being investigated for “interfering with an F.B.I. investigation.” Grimm had told the N.Y.P.D. that Williams refused to help him. After Williams provided his account, the D.A.’s office declined to press charges. But Williams was suspended for moonlighting without department approval. Grimm “should have been arrested,” Williams told me. “People that night were petrified.” He’d filed the lawsuit against Grimm for slander because, “when the N.Y.P.D. and the F.B.I. have a fight, the N.Y.P.D. loses.” The U.S. Attorney’s office successfully filed a motion to shift the case to federal court, claiming that Grimm had been “acting within the scope of his employment.” It then moved to dismiss the suit. Williams chose not to reply, and the suit was dismissed. In 2003, he retired from the N.Y.P.D.
Recently, in his Washington office, Grimm told me that he’d been jumped by his date’s husband and four other men that night. He said that he approached Williams, who had refused to call 911. Grimm said that he then went outside, found a patrol car, and reëntered with the police. Although weapons were not permitted in the club, Grimm said that he’d been carrying his gun the whole night, and had flashed it only when pulling out his badge. As for threatening to kill people, he said, “That’s not my personality. I don’t need to speak that way. A guy with a gun who knows how to use it doesn’t need to say anything.” He denied that he had forced everyone to stay or declared an F.B.I. operation, saying that the N.Y.P.D. had been in charge. He suggested that witnesses may have confused him with the other F.B.I. agent. The police report, he said, would show that he was assaulted and acted with “incredible restraint.” Later, he sent an e-mail adding that the Department of Justice Office of Professional Responsibility had cleared him in an investigation. (I repeatedly asked the N.Y.P.D. about the incident, and attempted to obtain the police report under New York’s freedom-of-information laws, but by mid-April the N.Y.P.D. had turned over no files about the incident; this winter, the Justice Department denied a freedom-of-information request for files concerning Grimm.) “I was a hundred per cent by the book and fully exonerated,” Grimm said.
Albert Santoro served his prison sentence and was released in 2008. The following year, Judge Griesa terminated his supervised release early, so that he could return to work. Santoro moved to Miami, where he got a job as the interim C.E.O. at a helicopter-sales company, and then started his own marketing-consulting firm. He also spent hours with the Consequences Foundation, a group run by Lea Black, the wife of the prominent Miami attorney Roy Black, which steers juvenile delinquents away from jail. Lea Black told me, “He’s a guy that always wants to help people. I think he has learned his lesson that way, and he is committed to keeping other people from having that experience.”
I met with Santoro last year at the Pink Pony, a restaurant on the Lower East Side of Manhattan. Now thirty-eight years old, with shoulder-length blond hair parted down the middle, he said he hoped eventually to reclaim his New York reputation and his law license. He seemed chastened by the experience. “I was guilty of lacking sensible judgment,” he said. But he added that his chance encounter with von Habsburg and then Grimm had cost him years of his life. “This would never have happened, any of it, if I wasn’t in the wrong place at the wrong time and met this scumbag Josef Meyers,” he told me.
“They had this guy out there,” he said. “They didn’t monitor him, they created a crime that didn’t exist.” He had been “broke and stupid, and paid for it,” he said. “But the government is not supposed to be a moral pressure point. They’re not supposed to push you to see how far you will go.”