The world’s biggest banking fraud

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The world’s biggest banking fraud

Reprinted with permission from Offshore Alert (http://www.offshorebusiness.com/) January 31, 2000

Offshore Alert can this month reveal further disturbing details about the massive financial fraud that is being committed on the island of Grenada in what appears to be a joint effort between the island’s government and the private sector. What is currently taking place on Grenada mirrors what happened on Montserrat in the late 1980s when approximately 300 “paper” banks, established with phantom capital, defrauded foreign clients of tens of millions of dollars before eventually being closed down by the U.K. police in 1989–1990.

This month we report on two more Grenada-registered banks that are involved in suspicious activity: Wellington Bank & Trust and Sterling International Bank & Trust.

We also disclose details of a new “stock brokerage” firm, Founders Brokerage Services Inc., which has been set up in Grenada by the First International Bank of Grenada to exclusively facilitate the first trading of shares on the sham World Investors’ Stock Exchange (WISE). We can also report that FIBG has registered 182 different telephone and fax numbers with Cable & Wireless in Grenada that are being used by various entities claiming to be independent of the group, such as the World Investors’ Stock Exchange, the Offshore Educational Institute, Sattva Investment Bank, Olympic Investments Meridian Trust & Savings, Meridian Investment Bank, and Granite Registry Services.

We also found out this month that IDIC, the fake insurer that claims to insure all deposits with the FIBG group and all investments on WISE, has no physical offices anywhere and no employees. What is remarkable about the Grenada scandal is that the island’s government is willingly and openly involved in the activity and appears to be doing everything it can to ensure that losses for victims, who are mainly North Americans, are as high as possible. Grenada’s chief regulator, Michael Creft, even swore an affidavit in favor of FIBG, WISE, and IDIC when they filed a libel action against the publisher of this newsletter last year in Florida. After missing several court deadlines, the plaintiffs’ attorneys contacted us this month and indicated that the action will not be pursued. For this month’s installment of the remarkable events unfolding in Grenada, settle into a comfortable chair and read on.

February 29, 2000

The founding chairman of the First International Bank of Grenada has informed Grenada’s chief offshore regulator, Michael Creft, that FIBG has made a net income of $60 billion in its first two years in business. The astonishing claim is made in a rambling, 26-page letter sent by Van A. Brink (a.k.a. Gilbert Allen Ziegler) to Creft on December 23, 1999, in an effort to assuage the regulator’s concerns about the bank. “First Bank has now accumulated over $60,000,000,000 (not a typo, $60 billion) in profits held in cash equivalent instruments issued by top 100 banks,” wrote Brink. The parenthetical comment is his, not ours.

Since the bank reported net income of $26 billion in its “audited” financial statement for the period from January 1, 1998, when it began operations, to March 31, 1999, Brink is effectively claiming that it made an additional profit of $34 billion in the nine months between then and the date of his letter to Creft. It seems that Creft and the Grenada government have accepted the figure as genuine since they have made no attempt to close down the bank. Brink’s letter was in response to one that Creft had written to the bank on December 14, 1999, seeking answers to a number of allegations that had been published in Offshore Alert over the previous 12 months.

“Some of the allegations raised in your December 14th letter to First Bank would seem to justify a detailed response,” began Brink’s letter. “While not all of the following matters are at issue, I’ve attempted to cover as many controversial topics as I can think of or remember as relates to myself and the bank.” His letter is titled: “Overview of the Quasi-Facts Used to Support the Allegation that Van A. Brink and/or First International Bank of Grenada Limited is Operating a Ponzi Scheme, an Illegal Pyramid Scheme and/or a Money Laundering Facility.” It is a bizarre document in which Brink spins a colorful tale of conspiracy and unfounded allegations against FIBG by a number of individuals and organizations, such as the FBI, the SEC, Offshore Alert, and even someone called the “Rev. Gregory Peck.”

He admits that several U.S. authorities are investigating the bank and/or related parties, including Nauru-registered Fidelity International Bank, which is effectively the same bank as FIBG. According to Brink, it was a complaint by Peck that led to a police raid on an office in Oregon that the local authorities suspected was being used to sell unregistered and fraudulent investment programs. Peck’s complaint was motivated by the fact that the husband of one of his woman parishioners — Fidelity International Bank director Robert Skirving — “took up with another woman,” according to Brink. Brink also intimated that Peck was unhappy that he had been turned down for a directorship of Fidelity International Bank. “The focal point of the investigation was a program I designed for Legacy Trust Company (Island of Nevis) called The Private Legacy Trust System (PLT),” wrote Brink. He said that the Oregon Securities Division could find no evidence of wrongdoing by the bank and had turned the matter over to the SEC. “For its part, the SEC with the U.S. attorney have convened federal grand juries in both Portland, Oregon, and San Francisco, California, and have summoned witnesses (more former PLT participants, First Bank’s American accountant and a former bank director) to attempt to build a case against the bank and myself for securities fraud,” he wrote.

Brink partly blamed the bank’s problems with the SEC on a businessman called Paul James Peiffer, who he said promoted the PLT system in the U.S. against Brink’s recommendation. Of Peiffer, he said: “He is not now nor has he ever been an owner, officer, director, employee, representative or agent of Legacy Trust Company (Nevis), Fidelity International Bank (Nauru) or of First International Bank of Grenada.”

In his letter, Brink addressed the dismissal of FIBG’s first auditor, Grenada- based Wilson & Co., and its replacement by Kenneth Nelson Craig, who had his CPA license revoked in California in 1996. It was Craig who had signed off on FIBG’s financials for its first 15 months of operation in which it reported net income of $26 billion. “First Bank had retained Wilson & Co., a local accounting firm, to prepare its quarterly and annual reports,” wrote Brink. “The firm refused to return phone calls from the bank and was terminated. The firm’s senior partner wrote a letter to the Prime Minister saying that he had ‘strong suspicions’ that the bank was engaged in money laundering. Since it would be extremely difficult (if not impossible) for a private offshore bank to serve as an effective money-laundering facility, we have ‘strong suspicions’ that this particular auditor either (a) did not have the competence required for the auditing project or (b) based on his discovered past links to the world’s biggest ‘dirty tricks’ agency, that the senior partner of the firm had become a witting participant in a wider plot to completely discredit the bank and Grenada itself as an offshore jurisdiction.” Wilson & Co. was replaced as FIBG’s auditor by “Mr. Kenneth Craig and Mr. Dennis Christie,” said Brink.

While Offshore Alert has previously published information about Craig, including his long history of disciplinary problems with the California Board of Accountancy, we had not heard of Christie before and his name does not appear on FIBG’s financials. Like Craig, Christie has a dubious past, including spending time in prison, according to Brink. “When Wilson & Co. refused to return the bank’s books and records, I called upon Mr. Christie, an acquaintance of mine who used to be a CPA, to see if he could find a big- name international accounting firm to do the job and if he, in the interim, would come to Grenada and oversee the reconstruction of the books and records which were no longer in the bank’s possession,” wrote Brink.

Meanwhile, First Bank also had quarterly and annual financial reports that were required by the government. “I had met Mr. Christie a few years previous to this. He was a financial advisor to a man who was approaching Fidelity for funding of research and development of a new technology. At our first meeting Mr. Christie informed me that he had been to federal prison but wanted to make good to the wife and family who had stood by him and that all he knew was accounting and management. Over the year that followed this first meeting I had many occasions for getting to know Mr. Christie in the context of that project and had agreed for him to serve in accounting management for the project that was funded by Fidelity. He proved himself to me to be both knowledgeable and competent in the field of accounting, as well as someone I could trust. And when I explained the situation First Bank was in over the Wilson & Co. matter, he said he would do what he could to help.”

“Mr. Christie gained the commitment of one international accounting firm. We arranged tickets and were set to receive their team when the day before they were to come they received orders from their home office that the firm would not perform the audit of any bank in Grenada (how many Grenada banks would be shopping, do you suppose?).” Mr. Christie then approached another international firm and received a quicker turn-down. “Meanwhile, the clock was ticking on reports being due to the government. I asked Mr. Christie if he had any other ideas. He said he knew someone who used to do audits of banks, savings and loans and credit unions for the State of California but that he really didn’t do much of anything anymore. I said, ‘Great, let me see his resume.’ He sent me Mr. Craig’s resume, which does attest to his competency in bank auditing, even to the point where he prepared fraud cases for the State of California in the days of the S&L crisis. I have been in business for nearly thirty years and have never once asked a CPA to prove to me he was a CPA before I gave him a job. I hired Mr. Craig to do the bank’s annual report.”

“As it turns out, Mr. Craig had his California CPA license revoked a couple years ago. I don’t have any complaints as to Mr. Craig’s attentiveness to the work First Bank hired him to perform and I was unaware of the past or present legal problems he may have had or may have and of his present lack of the CPA designation. I understand that First Bank has identified a CPA to perform the actual audit, but I have recommended that this auditor’s name be withheld pending completion of the work and acceptance of the annual report by the Government of Grenada.”

Brink then went on make some interesting claims about the repercussions to Craig and Christie of becoming FIBG’s auditors. He claimed that “Mr. Craig has been summoned before the Federal Grand Jury twice since accepting the assignment with First Bank and Mr. Christie’s office was broken into by the FBI, all records seized (although none had anything to do with First Bank), that when Mr. Christie last went home he was greeted at the airport by the FBI, handcuffed and questioned, and that when he left his home to return to Grenada the FBI went to his home, pointed a gun in his school-aged daughter’s face and seized her personal computer as well (which also had no First Bank information on it).”

“Accountants in the United States are understandably not eager to accept an engagement to prepare financial statements for First Bank,” he wrote. “Rumor has it that both Christie and Craig have told the FBI that First Bank has been uncooperative in freely providing them the bank’s books and records. Good for them. This suggests to me that Christie and Craig are living up to their non-disclosure agreements with the bank.”

On the fake insurer known as IDIC, Brink confirmed that it was effectively being run by Dominica-based attorney Gerald Burton, even though Burton was told last year by Dominica’s regulators to close down the company.

As for the existence of the “red ruby” that formed FIBG’s start-up capital, Brink wrote: “It has been rumored (not alleged in print by any source) that the bank never owned the stone.” He said that FIBG had a “lawfully executed deed of assignment to the stone, an appraisal for the stone and evidence that the stone was insured for its appraised value.” “The stone itself has been kept in a vault, the keepers of the vault being known and trusted parties by the bank.”

In conclusion, Brink claims that the bank’s net income of $60 billion within two years of starting operations is the product of a secret part of the banking system that other banks keep hidden from their balance sheets. “First Bank has a cash equivalent base equal to over 600 times the total amount of its liabilities to depositors,” wrote Brink. “A Ponzi scheme? No. Just a bank that chose to report accurately on its balance sheet those matters other banks long ago decided to keep on an ‘off ledger’ basis. Naive, perhaps, but not dishonest, unethical, immoral, unlawful or illegal.”

In the letter, Brink wrote that he had stepped down as FIBG’s chairman and CEO, and was now just a “consultant” to the bank, which begs the question of why he was chosen to write this letter in response to Michael Creft’s questions.

August 31, 1999

Grenada prime minister clears FIBG of illegal acts

The massive financial scam being committed in Grenada by Canadian and American crooks has reached new levels of farce after the island’s government announced that it had investigated — and cleared — the First International Bank of Grenada of any wrongdoing.

Grenada’s Prime Minister Keith Mitchell gave the bank a clean bill of health at a press conference held on July 23 and attended by local journalists.

“Preliminary reports on an investigation into First Bank International have cleared the offshore banking institution of money laundering or any other illegal activity,” reported the Grenadian Voice newspaper. “This was reported by Prime Minister Keith Mitchell at his Press Conference last week Friday.”

There was a similar account of the event in Grenada Today newspaper, which stated: “Dr. Mitchell said government had asked the U.S. Federal Bureau of Investigation (FBI) to look into the operations of the bank and from the correspondence received there is nothing irregular in the operations of FIBG.”

Mitchell was quoted as saying: “We had not received any indication as to any illegality on the part of the bank at this particular time.”

Mitchell’s comments have caused deep embarrassment to legitimate offshore providers operating in Grenada’s fledgling offshore industry. They had been expecting the government to close down FIBG and its business partners after Offshore Alert exposed it as a fraud in January of this year.

The bank is capitalized by a “precious stone,” is run by a former bankrupt who goes by at least two names, was reported to the government for alleged criminal activity by its first auditor, and has been offering depositors annual interest rates of up to 250 percent, with clients being promised that all principal and interest is guaranteed by a bogus insurer that has been closed down by regulators in Nevis and Dominica.

Mitchell’s words of comfort were seized on by FIBG which immediately put out a press release that was partly distributed by its partners in crime, sham insurer IDIC and the Grenada-based World Investors Stock Exchange.

“First International Bank of Grenada today expressed its thanks to Prime Minister Dr. Keith Mitchell for having had the fortitude to resist the pressures of nay-sayers and objectively determine the facts concerning its banking operations,” stated a newsletter distributed by WISE, which promises investors that all monies invested in WISE-listed shares are “fully insured” for principal and interest by IDIC, a sham insurer that exists purely as a web-site.

WISE quoted FIBG’s chairman, Van A. Brink, as saying “in a telephone interview from Uganda” that: “I feel completely vindicated in our decision to come to Grenada.”

“Offshore banking is not a popular thing among the governments of industrialized and heavily taxed nations,” Brink told the WISE newsletter. “We knew that, if we were successful, there would come a lot of pressure against us by way of unsubstantiated allegations that can be made against a financial institution.

“On Friday, Prime Minister Mitchell gave a final report on the FBI investigation he had requested be conducted concerning First Bank and its officers and directors, noting that the FBI had concluded that there was no evidence of money-laundering or other criminal activities on the part of First Bank.

“No-one likes to sit still for a long investigative process but we were comforted by the even-handedness of the Prime Minister in refusing to give in to pressures absent a thorough investigation and determination of the facts.”

After allowing tens of millions of dollars to disappear and the crooks to flee the island, Grenada’s government finally took over the First International Bank of Grenada this month. Government accountant Garvey Louison was appointed receiver of FIBG on August 1 and immediately started preparing to liquidate the bank and all of its sub-banks. It is generally estimated that at least half of Grenada’s 29 officially chartered offshore banks will have their licenses revoked, since at least 15 banks are believed to be part of the FIBG group. In the course of the last month, Offshore Alert has obtained documents that implicate not only Grenada’s government in prolonging the FIBG fiasco but also the Grenada Supreme Court.

Perhaps the most extraordinary new revelation is that Grenada’s chief offshore regulator, Michael Creft, allowed the crooks to carry out due diligence on themselves when applying for bank and trust licenses. According to FIBG’s first auditor, Lauriston Wilson, Creft delegated his department’s responsibilities to carry out due diligence on applicants to Granite Registry Services Ltd., which was part of the FIBG group.

Wilson tried to blow the whistle on FIBG as long ago as March 1999, but Prime Minister Keith Mitchell ignored him, and Supreme Court Judge Brian Alleyne actually awarded damages against him. Among Wilson’s shocking findings was that the bank appeared to have true capital of just $2 if generally accepted accounting principles were applied. Wilson was so alarmed at what he found during his audit attempt that he alerted Mitchell and refused to return documents to the bank, claiming that he was acting in the “public interest.”

In a letter to Mitchell dated March 26, 1999, he accused the bank’s founding chairman and CEO, Van Brink, of refusing to provide him with details of the bank’s assets. He also accused Brink of “general interference with and obstruction of the course of the audit” and said the bank was in “complete violation” of several provisions of the Offshore Banking Act of 1996. All of this had taken place “in the full knowledge of the Registrar of Offshore Financial Services, who has failed for apparently obscure reasons to take the necessary corrective action,” wrote Wilson. “Needless to state, Prime Minister, the above actions of the Registrar, Offshore Financial Services are suspect and lead to the inescapable conclusion that he is apparently corrupt.” “Moreover, the Registrar’s demeanor betrays total ignorance of his duties and responsibilities under the Offshore Banking Act of 1996 (Act No. 39 of 1996). This has brought the Offshore Financial Services Sector into such disrepute that the whole system is apparently in need of immediate revamping.”

He recommended that Creft should be placed “immediately on leave to permit a thorough investigation and cleansing of the Offshore Financial Services Sector.” Four days later, Wilson and Mitchell discussed the matter by telephone, and contemporaneous notes of the conversation taken by Wilson are filed with the Grenada Supreme Court. “The Prime Minister advised Mr. Wilson that he had political difficulty in getting rid of Mr. Michael Creft as Registrar, Offshore Financial Services, because the New National Party Executive considered Mr. Creft to be a loyal Party Member and because he, the Prime Minister, had a weak reputation of hiring people and dumping them, he was in an extremely awkward position,” according to Wilson’s notes. “The Prime Minister indicated to Mr. Wilson that he would implement immediately one of the recommendations contained in Wilson & Co. letter dated March 26, 1999, regarding the creation of a Supervisory Body over the Registrar, Offshore Financial Services.”

“The Prime Minister also informed Mr. Wilson that he could not dismiss Mr. Michael Creft from the post of Registrar, Offshore Financial Services because he does not have a ‘smoking gun’.” When Mr. Wilson advised him that he possessed a lot of sensitive information that was indicative of a “smoking gun,” the Prime Minister promised to arrange a meeting with Mr. Wilson at a subsequent date for the purpose of reviewing the material.

Mr. Wilson warned the Prime Minister of the danger of accepting money from these offshore bankers for the New National Party. These political contributions or donations tend to make the offshore bankers feel that they can do as they please and hold the Prime Minister and the country to ransom. “The Prime Minister replied that he generally did not know who contributed or donated money to the party and nobody could hold him or the country to ransom. In any event, he always put Grenada first in all his dealings.”

Wilson then accused Michael Creft of delegating due diligence reviews for applicants for bank and trust licenses to Granite Registry Services, which was controlled by FIBG and run by Canadian Larry Barnabe. Barnabe’s past includes fines of over CDN$1 million against him and others on March 16, 1995, by the Ontario Securities Commission for involvement in an alleged CDN$79.1 million investment fraud. “Such an arrangement was highly questionable in terms of transparency, accountability and integrity,” noted Wilson. He added: “Finally, Mr. Wilson advised the Prime Minister of an incident in Trinidad earlier this year where Miss Marion Suite offered on behalf of First Bank TT$50 million for a Recording Studio that was in Receivership. The value of the studio was TT$12 million. The offer by First Bank of approximately 4.2 times the value of the Recording Studio raised serious concerns in Trinidad as to the nature of the operations of offshore banks in Grenada.”

Wilson warned Mitchell not to disclose their conversation to Creft because he suspected that Creft “was reporting everything to Mr. Brink.” His suspicions had been aroused when Brink sent Wilson a letter “terminating for cause” his appointment as auditor and asking for files to be returned. The letter was dated March 26, the same date that Wilson had sent his letter to Mitchell warning the Prime Minister for the first time about his concerns over FIBG. When Wilson refused to give back FIBG’s records, claiming he was keeping them “in the public interest,” FIBG sued Wilson and his firm, Wilson & Co. In his defense, Wilson cited whistle-blowing provisions of the Offshore Banking Act of 1996 and the Rules of Professional Conduct of the U.K.–based Association of Chartered Certified Accountants.

In an affidavit dated May 10 that was submitted to the Grenada Supreme Court, Wilson stated: “I am advised by my Attorney and verily believe that in light of the firm’s strong suspicion of the bank’s involvement in money laundering activities, false accounting and the repeated suppression of requested documents, the Defendant is entitled to make and retain copies of the Plaintiff’s documents. In addition, to hand over the said documents to the Government of Grenada in the Public interest pending the said investigations. In all the circumstances of this case, the Plaintiff will most actually destroy those documents if the Court deems it right and fitting to hand it back to him.”

However, in a judgment dated May 11, 1999, following a hearing held in private, Alleyne found in FIBG’s favor and ordered Wilson to return all records and prohibited him from copying them. Alleyne also ordered Wilson to pay damages “to be assessed by a Judge in Chambers” and additionally ruled that the accountant pay the costs of the hearing. Within a few weeks, FIBG had submitted a new audit to Creft declaring that the bank had reported net income of $26 billion for the 15 months ended March 31, 1999, which would have made it the most profitable company in the world. The “audit” was signed by Nevada-based accountant Kenneth Nelson Craig, who described himself in the opinion letter as a CPA even though his license had been revoked in California in 1996 for an appalling number of offenses, including swindling three clients out of $86,000.

Despite all the controversy involving FIBG up to that time, on July 27, 1999, Creft wrote a glowing letter of reference for FIBG to the Parliament in Uganda, where Brink was trying to form another bank. “First International Bank of Grenada is registered in Grenada and according to our records is in good standing,” gushed Creft. “It has grown to be Grenada’s leading offshore bank.” In a reference to the Craig audit, Creft added: “According to audited financial statements submitted by the bank, it is in a healthy financial position.”

Wilson’s fear that FIBG would destroy documents if he returned them appears to have been justified since Offshore Alert understands that Garvey Louison found few records when he took over the bank. Among the missing items are two computer hard drives, said a source. One of Louison’s first moves as Receiver was to send a letter to all former and current directors and consultants of FIBG on August 22 seeking information about the whereabouts of the bank’s assets. He wrote that it was “apparent that many millions of dollars have been transferred to Mr. Downes, Mr. and Mrs. Skirving, and Mr. Van Brink either directly or through companies in which the aforesaid have or had a beneficial interest in, either directly or indirectly.” He was referring to Richard Downes, the Chairman of FIBG at the time it was taken over; Van Brink, the founding Chairman and CEO; and Robert Skirving, who is believed to have been involved in the operation of the bank.

“I also note that Certificates of Deposit have been issued for many millions of dollars without any such funds coming into the bank and without any proper assets being in place which are immediately available or not available at all to meet such claims,” stated the letter. “This clearly is a breach of your fiduciary duties at best and at worst a fraudulent misrepresentation to whoever is relying upon the value of the CDs or Bank Statements which appear to have been issued and provided to you.” “Further, I am also aware that many millions of dollars have been transferred to Uganda and assets acquired there.” “I am also aware that other properties including land have been acquired with the use of monies belonging to the bank or its subsidiaries.” Louison gave the recipients of the letter seven days to provide full details of all assets held on behalf of FIBG adding, with a hint of sarcasm, that “I believe the last count was 62 Billion.”

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