Tim Harper

Schemes, Scams, Frauds.

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Tim Harper has written several excellent articles on Prime Bank schemes and offshore investment scams. He has graciously consented to have a few of them reproduced here. For more information about this freelance writer and his work visit www.timharper.com

He is the author of License to Steal: The Secret World of Wall Street Brokers and the Systematic Plundering of the American Investors. The book recently won a Book of the Year 2000 award from the American Society of Journalists and Authors.


Offshore Investing Seminars

Ed Pankau, a Houston-based private investigator who often speaks at offshore investing seminars, said many of those who attend are well-off people who aren't super-rich, but would like to be. The seminars, which usually last anywhere from a weekend to a week, are typically held in exotic, luxurious surroundings. The people paying $3,000, $4,000, $5,000 or more to attend the conferences lap up the life of luxury, and buy into the message that they can live that way all the time if they invest.

"These people are all dreamers," Pankau said. "They're not millionaires, but they want to be. These aren't the people with $50 million or $100 million. These are people with $50,000 or $100,000 who want to turn it into $50 million. A lot of them are in their 30s or 40s."

Even seemingly sensible people, however, can be seduced by the sales pitches at the seminars, which they see as their entrée into the world of the super-rich. Being a smart, experienced or sophisticated investor, he said, does not necessarily keep people from making stupid investments.

Pankau said there are several reasons people want to take their money offshore. Some want to hide or launder their profits from illegal endeavors, such as drugs, gambling or prostitution. They try to steer their ill-gotten gains through offshore dummy corporations so that the money comes back onshore looking like the proceeds of a legitimate business. Some people want to avoid paying taxes on unreported income.

"Say a guy who runs coin-operated laundries brings in $100,000 a year but declares only $50,000," Pankau explained. "He wants to put that unreported $50,000 somewhere the government can't find it. And a lot of people want to hide their assets from their wives when they're getting divorced, or from their creditors if they're going into bankruptcy."


Living in a Black and White World

Victims of fraudulent offshore investment schemes are rarely stupid. Indeed, they are often intelligent, well-read people with reasonable investment experience. They consider themselves careful and sophisticated and pride themselves on doing their research.

A doctor in the Midwest says he is a typical example of a normally cautious investor who lost big in an offshore scam. The doctor's losses came from a program that was not connected with either Taansen Sumeru or Van A. Brink.

Now in his 50s, the doctor had been practicing for 25 years and had built his clinic into a profitable, well-run business. He was wealthy by the standards of the small town where he lives. He told his story on the condition that his name not be used. His reputation in the town, he said, would be ruined.

In early 1998, he and a friend were discussing investments. The friend had been going to offshore investment seminars for years, and he finally had something good. He had just invested in a program that was supposed to pay him 80% interest every six months. The doctor was incredulous, but wanted to know more. For the next six months he kept in touch with his friend, who reported that he did indeed get his first payment as scheduled.

"It would make a difference as to when I could retire, and what kind of lifestyle I could have when I retired," he said. "Some people go offshore for tax evasion, or because they have dirty money, or for religious reasons. My play was, here's a good investment. I just wanted to have a nicer nest egg."

The friend's program was closed to new investors, but the friend put the doctor in touch with another man, an offshore investment specialist who told him about a high-yield program called Capital Builder. Capital Builder was offered through a company called International Trust Management Services, based on the Isle of Man, in the Channel Islands between England and France.

"When he spoke to me, I felt as if I had been living my entire life in a black and white box," the doctor recalled. "Suddenly he was opening a window, and it was Technicolor outside."

In the autumn of 1998, the doctor flew to the Isle of Man and met a man who introduced himself as the manager of the program. The fund manager told the doctor he could roll over his IRA into Capital Builder, and that it would pay 200% a year. The returns would more than pay the taxes and penalties on early withdrawal from his IRA.

The fund manager showed the doctor documents promising that the $1.5 million principal would be guaranteed by the Bank of Ireland. The fund manager also told the doctor that the Isle of Man protects its reputation as a clean offshore haven by promising to pay 95% of all fraud losses. The doctor believed his money would be safe. He sold his practice and sent $1.5 million to the Isle of Man for deposit in the Capital Builder program. At 200% a year, his monthly income from the fund would be nearly $250,000.

The first monthly payment was due December 14, 1998. When it didn't arrive, the doctor phoned the Isle of Man and was told there was no problem, but some paperwork from the Bank of Ireland had been slow coming through. His first payment would arrive January 3, 1999.

It didn't. Instead the doctor received another excuse. Then another, then another. Some of the excuses made sense to him but many were lame. "I just kept waiting and watching and trusting," he said. "The excuses just kept coming, for months. I wanted to believe it would work out because I had so much at stake."

The doctor now believes that the Capital Builder fund manager in the Isle of Man did not set out to steal his money. He believes that the fund manager was more like a wholesaler, a middle man, yet another sub-agent who honestly thought he was going to invest the doctor's money -- and the money of others who had invested in Capital Builder -- in somebody else's high-yield offshore program.

"The common thread among victims is that we believe what we want to believe," the doctor said. "And we find we can choose to believe an awful lot. We commit to it. We defend it, even if it doesn't make sense."

The doctor believes his money kept passing up the chain to the ultimate person, the shrewd financier, the international "Mr. Big" who was supposed to actually do the deals and execute the trades that generate such incredibly high returns. Mr. Big, finally, stole the doctor's money. There was no guarantee from the Bank of Ireland. There was no guarantee that the Isle of Man would pay 95% of his losses.

"I don't know, but I think the money ended up in Grenada," the doctor said. "A lot of crooks dump their money into Grenada. They need a place to put their funds, so why not put it somewhere it's supposedly going to make a lot more money?"

The doctor's plan for the rest of his life has been shattered. On April 15, 1999, he was supposed to pay his taxes on his 1998 income, on the profits he made from selling his business, and on the money he had taken out of his IRA. He owed $700,000. He had nothing. Everything was offshore. "It was as if a ton of bricks had fallen on me," he said. "I realized my money might be gone, and I had these huge bills to pay."

He filed for an extension with the IRS, then another. He finally paid the IRS $30,000 in October 1999 and said that was all he had. With his practice gone, he took a job working for someone else, on salary, in a clinic. He has a meeting scheduled with an IRS agent to begin working out payment schedules to pay off his tax bill. He will not be retiring any time soon. He will have to work for many years to pay off his tax bill. And if and when he does retire, his lifestyle will not be as comfortable as if he had simply kept his money in his old IRA.

Perhaps worse, his confidence in himself, his self-esteem, has been destroyed. He's not the person he thought he was. "My faith in myself to pick out good people has really been shaken by this," he said.

He doubts he will ever get any of his money back. "I'm back in my black and white box," he said. "I just hope that someday a little part of me can see a little Technicolor come back."


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