(FORTUNE Magazine) – The dispatches from John Quirk arrived by telephone at breakneck speed:

The country's reserves are completely depleted.... The ambassador is in shock.... He's saying $40 billion went out of the country.... There's no more money [in Brunei].... Your story is the largest fraud that's ever taken place in the world.

It was every reporter's dream: The biggest financial crime in history had been perpetrated against the world's second-richest man--and here I was with an exclusive source ready to unfold it all. Quirk, a Florida-based sleuth with an intriguingly apt name, explained that he'd just arrived in Washington, D.C., for a Labor Day weekend dinner with Pengiran Anak Dato Puteh, the Sultan of Brunei's ambassador to the U.S., and attorney Thomas C. Ferguson, a former American ambassador to Brunei. Quirk said he remembered Ferguson from his days in the CIA. I was all ears:

It's a little difficult to talk because I'm at Ferguson's house in D.C.... They estimate that Jefri took more than $15 billion. The other $25 billion was divvied up by six ministers and a number of vendors and suppliers.... He [Brunei's ambassador] said, "People who do this to us, whether they are Muslims or not, they die. They are murdered."

Newspapers were already filled with rumors that the Sultan's brother, Prince Jefri, was in exile, while billions of dollars seemed to be missing from the tiny Southeast Asian monarchy. (For more, please read the preceding story.) But Quirk's numbers were high enough to rattle the economies of several Asian countries. What's more, Brunei's ambassador--the Sultan's own brother-in-law--was suggesting the prince himself might get whacked! Quirk played me a short voice-mail message he claimed to have received from Ferguson, in which the former ambassador can be heard warning "John" against associating with the media. My ears were smoking as Quirk talked on:

The [Brunei] government wants to hire me.... The Bureau [FBI] is in a race with the Agency [CIA] to get this information. They've instructed me not to talk to any station chiefs.... I have the ability to find assets like nobody has.... You're not going to get anything in Brunei without me.

Fortunately, I was already en route to Brunei when I received most of these breathless messages. Quirk promised to join me, as FORTUNE had agreed to pay his expenses. But he never materialized. Nor did any of his hot tips, which he dispensed over the course of some four weeks. It later turned out that there had been no September dinner in Washington. (Ferguson sent me an airline ticket to help prove he spent the Labor Day weekend with his mother--in Kentucky.) Likewise, Quirk had made no call from Ferguson's house in the capital. (The property had been sold in August.) In the end, the only thing that was real was the voice-mail message from Ferguson. But the ex-ambassador insists he left it on the answering machine of a law client--a different "John"--on a matter unrelated to Brunei. "Spooky, very spooky," says Ferguson. "I don't know what this guy is up to, but it certainly gets my attention. I have no idea how he got my phone message. How do you spell his name?"

John Patrick Quirk runs International Research Group (IRG), a global asset-recovery and corporate "intelligence" outfit based in Boca Raton, Fla. His employees have included investigators from the world's leading law enforcement agencies, and he has counted some very well known names among his clients: Kroll Associates, Polo Ralph Lauren, Louis Vuitton, KPMG (accounting), Guess (jeans), and Prince (tennis rackets). Today they all have one thing in common--they rue the day they ever met Johnny Quirk.

With corporate intelligence one of America's fastest-growing industries, the story of John Quirk serves as a cautionary tale. CEOs and general counsels looking to give themselves an edge through better intelligence are finding themselves vulnerable to a large, and expanding, class of swindlers. As Quirk himself warned FORTUNE, in a rare flash of honesty, "There's a lot of fraud in the fraud business."

He should know. In 1996, while denying the charges, Quirk agreed to pay a fine to the state of Florida for operating without insurance, operating without a licensed manager, and employing an unlicensed investigator (he himself still doesn't have an investigator's license, although the state hasn't nailed him for this violation--yet). But nine months after paying the fine he was back on top of his game. He found himself in Washington, for real this time, playing the part of a star witness at a secret hearing before the House Intelligence Committee. Former Congressman Robert Dornan was so charmed by Quirk that he declared, "The logo of IRG should be here [in the committee boardroom] along with the other American intelligence services." Says Dornan today: "It was just a colorful compliment because they do good work. His testimony was superb.... He impressed me as a patriotic American."

Many of Quirk's former employees have a different view of the man. "An out-and-out crook," says Mary Clark-Fischer, an 18-year CIA veteran who worked briefly for Quirk. "A scam artist," snaps Tom Means, a former Army Special Forces officer who once served as IRG's head of security. "Full of deceit, from top to bottom," echoes Paul Whybrow, a former British police detective who quit working for Quirk in 1995. "Most every case was a lie," concludes James Whitehead, a U.S. marshal for 14 years before joining IRG in 1994. What does Quirk have to say? "Go ahead. Investigate me," he dares FORTUNE. "You'll find nothing but good dealings and good references.... We've had no unhappy clients. Except one--the CIA."

Media profiles have portrayed the 53-year-old Quirk as a dashing CIA veteran who has outwitted the Russian mob, smashed counterfeiting rings, and performed other breathtaking feats. Business Week once likened him to something out of "a John le Carre spy novel." In fact, The Secret Life of Walter Mitty would be a better description. In that classic 1947 film, loosely based on a James Thurber story, Danny Kaye plays a magazine proofreader who--inspired by the pulp fiction he reads for a living--concocts extravagant fantasies that spill over into real life, projecting himself as a Western outlaw, a World War II fighter pilot, and a courageous sea captain. Similarly, Quirk had been a small-time editor and publisher of education texts in Connecticut when, in the 1980s, he switched to writing and publishing books about the CIA and FBI. He joined the Association of Former Intelligence Officers (AFIO), where he rubbed shoulders with retired spies. Eventually he simply became one. "He was very clever," recalls Herbert Saunders, a former deputy director of the CIA. "The old-boy network would have a couple of pops at lunchtime and tell war stories. Quirk would listen very adroitly and incorporate them into his own background. He's a total, absolute fraud. He is capable of anything. And this guy needs to be stopped."

At some stage in his metamorphosis, Quirk managed to entice former CIA directors Richard Helms and William Colby into writing the forewords for two of his books about the agency. One was a photo collection that U.S. News in 1987 called the "closest thing yet to an official history of the CIA"; the other was a career guide for agency recruits. Both books seem slapped together, but the participation of Colby, Helms, and other top spooks gave Quirk instant credibility. "Quirk is the biggest con artist I ever met," says Robert Van Beever, who spent more than 20 years as a CIA agent. "And he conned some of the top people in the CIA, who were too embarrassed to go after him."

In fact, Quirk can't even decide if he was ever actually in the CIA. He told FORTUNE he "ran proprietaries" (or secret front companies) for the agency, and he faxed over an article that described him as a former agent. In 1994, in a court deposition, he stated under oath that he had worked for the CIA "in the collection of information" from 1965 to roughly 1986. Yet in a subsequent deposition in another case, he stated--again under oath--that he never worked as a CIA agent. A recent letter from the agency's Office of General Counsel may be the final word on the subject: "A thorough and diligent search" of the CIA's records found no evidence that Quirk "has had any relationship with the CIA, either employment, contractual, or operational."

Nevertheless, Quirk's fantasies are almost novelistic in their detail. "When John opens his mouth and says something, I think he truly believes it," says Larry Neaves, a former FBI agent who once worked as IRG's general manager. In one of Quirk's yarns, he places himself in the middle of the CIA's scheme to use mules to carry missiles and other supplies to the Afghan mujahideen in the 1980s. It was Walter Mitty all the way: "We got [the 2,000 mules] on the ships and everything. Two of the leading mules we called Jake and Elroy--the Blues Brothers.... That [operation] really turned the war around. It was one of the biggest U.S. government successes.... I had a cover name called John D. Kass--Jackass." The name may fit, but Quirk's account means nothing to Milt Bearden, the former CIA station chief who actually ran the Afghan mule operation. "We didn't deal with anyone who sounds remotely like this guy," says Bearden. "You're just getting jerked around. There are great mule stories, by the way, but he doesn't have any of them."

Nevertheless, armed with his ersatz resume, Quirk was ready to do what most retired spies do: get corporate work. His big break came in 1989. At the time, the Marciano brothers of the Guess jeans empire were mired in a massive and vicious legal war with rival Jordache. At one point in the feud the Marcianos suspected that a known Jordache agent was planting bogus information with government officials in France in an effort to get designer Georges Marciano deported from America. The Marcianos asked their investigators, Kroll Associates, to look into the matter. Kroll subcontracted the job to a Virginia-based outfit called Varicon, which, in turn, farmed the assignment out to Quirk.

Quirk flew to France and was soon sending memos to his bosses about how a U.S. consular official in Nice confessed to him that he had met with the Jordache agent. Quirk's memos were explosive, and they helped fuel a preexisting federal criminal probe of Jordache, as well as a civil racketeering suit against the agent. There was just one problem: Quirk was lying. In a sworn declaration, the consular official denied ever meeting or speaking with the Jordache agent. Moreover, Varicon's CEO at the time, Herb Saunders, the ex-CIA official, turned up evidence that Quirk had falsified his memos and stolen expense money from Varicon by double-dipping. Saunders says that when confronted with all this, Quirk threatened retaliation from a hit team: "He said he had boys in Venezuela who would take care of me. He said, 'I will piss in your soup at the CIA.' "

Quirk had started the fire, and now he was feeling the heat. But our Walter Mitty had one more trick up his sleeve. In August 1989, within days of being grilled about his memos by a federal prosecutor, Quirk switched sides. He met secretly with the Jordache agent, turned over his memos, and tried to pin the blame for the frame-up on his bosses at Kroll. "Quirk came to me like a knight in shining armor, but he was running for his life," recalls the Jordache agent, Octavio Pena. "He's a con man. He betrayed his client. But his memos were very useful to me." Transcripts of taped conversations reveal that Quirk was trying to get hired by Pena, but Pena insists no money changed hands. In the end, the criminal and civil cases involving Guess and Jordache were dropped or settled; otherwise, Quirk's actions could have devastated Kroll, the country's largest corporate-investigations agency. "It was a mortifying experience," recalls founder Jules Kroll. "There's a group of guys like this--the John Quirks of the world--and they are what I have been fighting against and trying to distinguish us from for all of these years."

After his narrow escape from the Guess-Jordache debacle, Quirk was ready for a fresh start. In Connecticut, judgments against him were piling up, many of which remain unpaid. He lost a home and an office to two different banks, but he quickly bought one of the properties back under a corporate shell in 1993. He also moved to Florida, where a homestead act protects houses from being seized by creditors.

In Florida, Quirk expanded IRG by hiring other investigators and taking on numerous clients. One was Polo Ralph Lauren, whose in-house attorney, Lee Sporn, was so impressed by Quirk's picaresque CIA past that he hired the investigator to capture counterfeiters. Once again, it was Mitty to the rescue! Quirk went undercover in 1993, printing stationery describing himself as a dealer in "genuine" Polo goods. He then found two unsuspecting garment brokers, whom he enticed into an agreement to make nearly 50,000 Polo golf shirts in China. The brokers thought they had struck the deal of a lifetime, but they were in for the sting of their lives.

The Polo case, which wound up before a jury in federal civil court in Boston two years ago, illustrates the chaos a sham investigator like Quirk can visit on a major corporation. In this instance, he tricked the two brokers into believing he was an authorized Polo dealer. Then, out of the other side of his mouth, Quirk told Polo's lawyers the brokers had confessed to previous counterfeiting scams. It wasn't true, but it led to a fruitless raid by police and federal marshals of the home of one of the brokers, Barry Eavzan. In a 1993 declaration that prompted a judge to approve the raid, Quirk had sworn that a particular customs agent had told him Eavzan was a suspected counterfeiter. But at the trial, four years later, the agent testified that she had told Quirk nothing of the sort and that the only person who ever spoke poorly of Eavzan was Quirk himself.

Not surprisingly, Polo lost the case. Indeed, Polo's star witness--Quirk himself--hadn't bothered to appear at the Boston trial. Apparently he was "away currently on another investigation," testified Sporn, the Polo lawyer. But Eavzan's lawyer, Edward Epstein, argued to the jury that the sleuth was not produced because "they know Quirk is a liar." Epstein was probably right. FORTUNE has obtained a private letter that Polo's outside counsel had written to Quirk two years before the trial, complaining about his "totally unacceptable" behavior. The 1995 letter stated that Quirk's work for two other clients was unauthorized and that his bills "will not be paid." Quirk, it concluded, should expect "no further work" from the attorneys.

John Boaden and Paul Whybrow spent a combined 48 years as British police investigators, specializing in white-collar crime. But even that wasn't enough to prepare them for Quirk, whose company they worked for briefly in the mid-1990s. Both men claim Quirk tried to persuade them to break into the offices of an agent from the Food and Drug Administration who was conducting a probe of an IRG client--a now-defunct pacemaker manufacturer called Telectronics. "He was suggesting that we break into a federal agency if necessary," says Boaden. "You don't suggest that sort of thing to two ex-police officers."

Whybrow recalls that Quirk regularly provided Telectronics with false data. "It was just to keep the thing rolling and to keep billing," he says. "And they (Telectronics) were paying because they were desperate." Indeed, when told that FORTUNE was writing a story about Quirk, the pacemaker company's lawyer, Jim Gale, slips into what sounds like a cardiac arrest: "Ohhhhhh, God! Ohhh, my gosh! You tell me yours, and I'll tell you mine! In retrospect, after we cut him loose, I didn't think anything he told me was true. I thought he just took our money."

For FORTUNE's Brunei story, the lies Quirk spun were staggering. On several occasions he stated that he currently does "all" the asset-recovery work for the Canadian operations of KPMG, the accounting giant. He suggested that I contact his "good friend" Norman Inkster, who runs the firm's forensic unit in Canada. Quirk also stated that Inkster had recently asked him to fly to England to "bail" the firm out of difficulties involving its Brunei account. However, when reached by telephone, Inkster says that he is not Quirk's friend and that he'd never enlisted Quirk's help on any matter involving Brunei. Quirk did work briefly for KPMG a year ago, on a few unrelated cases, but the experience proved unsettling. "We do not anticipate that John Quirk will be doing any further work for KPMG," says Inkster.

And so it went, on and on and on:

--Quirk said he was meeting with Secret Service and Scotland Yard agents at a certain law office in Florida regarding "illegal currency transactions" by Brunei's Prince Jefri.

--He said that the FBI was setting up meetings for Quirk and FORTUNE with legal attaches around the world on the subject of Brunei. ("For what I do with the government, I call the shots.")

--He said that Alistair Brown, who runs an investigative firm called Bermuda Research, had informed him that Prince Jefri may be seeking control of the Sultan's alleged bank accounts in Bermuda.

--He said that Tom Ferguson, the former ambassador to Brunei, had signed a secret contract with him in September regarding the recovery of Prince Jefri's assets. --He said his was "the only private company" doing extensive "counter-intelligence investigations" for the FBI.

--He said that he had done pro bono work for the World Jewish Congress concerning the Swiss. ("I gave them lectures on how the Swiss will lie to them.")

--He said he was "just hired by the Bush family to do all the intelligence work for his sons...Jeb and George."

The bottom line: Every individual and organization named in the previous seven paragraphs disputes Quirk's statements.

Despite many promises, Quirk never made it to Brunei. In one phone message he complained that the CIA had "blocked" him on several fronts and that "I hope you mention those pricks in your article." But in fact, Quirk became increasingly hard to find. When I finally did run him to ground to confront him, he responded that some enemy might be using FORTUNE as a "cutout" in an effort to "hurt" him. He says his former employees are "not very credible" and that he has "extensive files on every one of those people."

As for his hot leads on the Brunei story, like Thurber's Walter Mitty a half century ago, Quirk doesn't seem to know when the jig is finally up. "I know where at least $3 billion has gone," he explodes. "I swear on my kids I know the whole story." So where's the money? "Why should I tell you that now? Thank God I never gave you the names of the people where Jefri put his money. Jesus, these guys would chop me in half."

Some time ago, in a more reflective mood, Quirk set down the following observation on his Website: "The fraudster's creed is deception, dishonesty, and total disregard for the human suffering he inflicts upon careers and institutions." Perhaps with that in mind, Quirk in 1997 announced his intention to sell stock to the public and to build a 40,000-square-foot "smart building" in Florida--to service "Fortune 500" companies and the federal government. Given his past, we can only hope Quirk builds a really smart building: For as Clark-Fischer, the CIA veteran, puts it, "Three-quarters of the people who ever worked for John would probably like to put a hit on him--if they could find him." That's a sentiment echoed by Tom Means, the former Special Forces officer and Quirk's ex-security chief. "Golly, if murder wasn't illegal, he'd have been gone a long time ago," Means says. "Crush him. Crush him like a Pepsi can. I will hang your picture on my mantle."