Nelson Sakaguchi was the director of the international division of Banco Noroeste, a family-controlled Brazilian bank. Between 1995 and 1998 he transferred approximately two hundred and forty-two million dollars — around forty percent of the bank's total capital — to accounts in Hong Kong, the Cayman Islands, Switzerland and elsewhere.
He believed he was funding his participation in the construction of a new international airport at Abuja, the new Nigerian capital.
The scheme was run by Emmanuel Nwude Odinigwe, a director of Union Bank of Nigeria, working with several associates. One of them impersonated Paul Ogwuma, the sitting governor of the Central Bank of Nigeria. Sakaguchi was told the contract was worth several hundred million dollars, that he would receive a personal commission of ten million, and that the arrangement required advance payments to secure it.
This is the advance-fee structure, and its power is arithmetic rather than psychological at the outset. The first payment is small relative to the promised return, so the expected value calculation — even at a low estimated probability of success — is favorable. The trap is that the same calculation applies to the second payment, and the third, and each time it is applied the sunk investment grows, which makes abandoning the sequence progressively more expensive.
Barry Staw's escalation of commitment describes what happens next: the decision-maker is now defending not only the money but the judgment that spent it, and the person with the most authority over the project is the person least able to stop it.
Sakaguchi paid in installments for three years, and when the bank's cash position required it, he funded payments by borrowing on the bank's own account.
Two further mechanisms compounded it.
Impersonated authority, from chapter 7. A central bank governor is exactly the sort of figure whose participation renders a transaction plausible and whose word does not get checked, because checking would be an insult.
And secrecy framing, which is the recurring device of this whole part. The contract was politically sensitive and confidential, so Sakaguchi could not raise it internally — which meant that for three years no colleague reviewed the largest set of transfers in the bank's history.
It was discovered in 1997 during due diligence for the sale of Banco Noroeste to Santander, when auditors found the Cayman accounts. The bank's controlling family covered the loss to complete the sale, which is why it took years for the scale to become public.
Nwude was arrested by Nigeria's newly created Economic and Financial Crimes Commission and convicted in 2005 after pleading guilty. He forfeited assets and served time. It remains one of the largest frauds in banking history, and it was conducted with letterhead, telephone calls and a man pretending to be a central banker.