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.
Too Good To Be True: The Lure of Offshore Investing
A self-employed nutritionist was trying to pay for her elderly mother's nursing care. An executive was looking for capital to start his own business. A business consultant wanted to increase an inheritance to pay for her own retirement. A wealthy charity worker was seeking seed money for a new foundation. A software engineer and web site architect simply was investing for a better return on his money.
Those people all trusted a long-haired man in flowing robes who refused to tell them much about himself, even his real name, but persuaded them that he could help them earn huge returns, up to 200% a year, in offshore investments.
The five investors put hundreds of thousands of dollars into those offshore investments. They were told, among other things, that their money would be used to buy and sell super-secret bank notes that are traded among the world's largest financial institutions.
They were warned that lawyers, accountants, bankers and law enforcement officials would deny that such investments even exist.
In the end, all five lost every penny they invested. When they protested, they were warned that if they complained to the authorities, the investors themselves could be targeted by the FBI and the IRS.
This is just one of many offshore scams and frauds going on every day, according to authorities. They ensnare a broad range of people. Some are crooks, and some are model citizens.
Some are sophisticated investors, and some are novices who have never owned a stock or bond. Some are government-hating, privacy-loving conspiracy theorists trying to snatch a share of the riches they think the wealthy and powerful get from manipulating world financial markets. And some simply want to hit the big time.
Take the case of software engineer and Web site designer Bob Giuli. Based in Carson City, Nevada, he has helped design Internet sites for the Los Angeles Times, Sun Microsystems, Siemens, Oracle, Motorola, Lucent and other Fortune 500 companies.
He runs his own business, has interests in other companies and has been involved in many different types of investments.
He regarded himself as a sophisticated investor, and most other people would regard him as one, too -- at least until he went offshore.
For years, Giuli had heard vague things about the advantages of investing offshore. Last year, he decided it was time to learn more. He got in touch with a firm that sponsors informational seminars on offshore investing.
In April 1999, Giuli went on a weeklong Caribbean cruise that featured a program of lectures and discussions on offshore investing.
One of the speakers was Taansen Fairmont Sumeru, who described his book Sovereignty Consciousness and his theory that new technology is making the traditional concept of government outdated.
His message was that every person could be a world citizen -- in effect, his or her own sovereign, with no allegiance or obligations, including the requirement to pay taxes to governments formed under the old notion of nationhood.
Giuli, a high-tech entrepreneur and self-made man who believes governments can and do impose on people's natural rights, was intrigued with Sumeru, beginning with his appearance -- a slender, balding, middle-aged white American who wore silky pajamas and robes, with his hair flowing down his back and mustaches that reached down his chest. Amid the other more buttoned-down speakers who talked earnestly and urgently about investing and tax avoidance, Sumeru generated an aura of calm and peace.
After Sumeru's lecture, he and Bob Giuli talked. They went to dinner with Shirsha, the woman Sumeru calls his consort. Sumeru told Giuli about some of his own offshore investments, particularly Quantum Gold, a commodities fund based in the Bahamas that was offering 10% to 14% interest -- per month. Investors pooled their funds, Giuli was told, and an expert commodities trader managed it.
They talked about meditating, and Giuli learned that Sumeru was a longtime transcendental meditation instructor who had been living in Santa Barbara, California, for several years.
Taansen Sumeru was a name he had taken for "spiritual reasons" years before, but he did not volunteer his original name or other details about his past.
"He seemed responsible, spiritual," Giuli said. "He was very charismatic." Giuli was particularly struck with the way that Sumeru (pronounced soo-MARE-oo) talked about abundance, and how accumulating wealth was part of the "natural way of the universe."
Giuli, like other investors, was impressed that Sumeru did not seem particularly concerned about making money. He told them about investments and told them how they could get in on those investments, but he never seemed pushy.
He wanted to get to know Giuli personally and was keen to share ideas on how people can "evolve" to do good in the world. Even when Sumeru could not or would not answer specific questions about the investments, Giuli and others did not feel like they were about to be cheated. They figured that Sumeru did not know or care about the gritty details of how the money was made. Sumeru seemed above all that.
Back home, Giuli read Sovereignty Consciousness and began meditating. He also moved quickly to invest in Quantum Gold. He returned forms that Sumeru asked him to sign, including a non-disclosure agreement prohibiting investors from divulging details of the investment.
Another form was a non-solicitation agreement requiring investors to assert that they came to Sumeru asking for information and that he had not solicited investments from them or offered investment advice.
The printed materials Sumeru sent to Giuli said in part: "An old age is dying and a new age is being born. The new age is one of the decentralization of power, and the spread of power and freedom to individuals planetwide. Congratulations on being among those rising into these higher ways of living."
Sumeru also required potential investors to write a letter about their work, their "philosophical background" and what they would do with the money.
They were asked to tell him whether they practiced meditation, and if so what kind. And they were asked what they thought of his book, available online for $17. "If we feel you are okay, the Quantum packet will be sent to you," Sumeru's printed materials advised.
Giuli filled out the forms, received a Quantum Gold application from Sumeru, filled that out and then mailed it back to Sumeru's address -- Mail Boxes Etc. in Santa Barbara.
In June 1999, he deposited $150,000 in Quantum Gold, wiring the money to the coordinates, a Barclays Bank in New York, given him by Sumeru. He assumed Sumeru was getting a commission on his deposit, presumably at least $15,000, since materials from Quantum Gold offered 10% commissions to "intermediaries" for bringing in new deposits.
Giuli received a statement from Quantum Gold on August 10, 1999, showing that his account had risen to $166,113.93 -- an increase of more than 10%. He thought about taking some out, he said, but he consulted Sumeru, who convinced him to let it roll.
The next statement, on September 10, showed $182,723.32 -- up 10%. On September 28, Giuli faxed Quantum Gold asking for $50,000 out of his account.
He never got it. He never got back any of the money he invested in Quantum Gold, interest or principal.
At least, Giuli said, he was smart enough not to put any money into another offshore investment recommended by Sumeru. It was a bank founded by Sumeru himself in 1999, as he was telling Giuli and other investors about Quantum Gold. Sumeru urged them to put money into his new bank based in the island nation of Grenada -- supposedly a better, safer and more profitable investment than Quantum Gold.
The Sattva Investment Bank, the Bank of World Peace, would pay interest of up to 200% a year on certificates of deposit, Sumeru said.
Giuli said many Quantum Gold investors also put money into Sattva, but he fortunately decided to wait to see how Quantum Gold performed.
Sumeru explained that Sattva Bank would earn its remarkable returns not from commodities trading, like Quantum Gold, but from "high-yield investment programs" operating in complex, little-known areas of high finance typically available only to the top banks in the world.
According to Sumeru and others who promote them through small offshore banks, these prime bank instruments, also known as "prime bank debentures," "prime bank guarantees," "medium term notes," and "standby letters of credit," allow the World Bank, the Federal Reserve and the biggest banks in the world to move money back and forth by discounting large notes they trade among themselves.
A key selling point used by Sumeru and the many others who promote prime bank instruments around the world is that governments and large banks do not want investors to know that such notes even exist.
The con men's line goes something like this: "Banks will tell you these notes don't exist. Government agencies will tell you that you're being swindled. Don't listen to them.
They're just trying to keep these huge profits for themselves."
The sales pitch appeals to the many people who are suspicious of governments and banks anyway and who think that "the establishment" is conspiring to hoard wealth and keep common people from getting rich, too.
The con men warn them that no one will confirm the existence of prime bank notes and, sure enough, no one does.
Taansen Sumeru's Sattva Bank was supposed to have access to these high-yield bank trading programs through First International Bank of Grenada, a relatively new bank founded by Van Arthur Brink, who was known as Gilbert Ziegler when he grew up and worked in Oregon.
Ziegler, 49, arrived in Grenada in 1997 traveling on a passport from the Dominion of Melchizedek, an "ecclesiastical state" that apparently exists only on the Internet, the Los Angeles Times reported in a recent story about the bank.
Ziegler came to Grenada from Hawaii, where he moved after his Oregon mortgage-banking company went out of business and he was forced into personal bankruptcy in 1994.
A former church administrator and pastor who founded Christian fellowships, Ziegler also was named -- but never charged -- in an Oregon state investigation into securities fraud related to an offshore trust.
According to the Los Angeles Times, an affidavit filed in that case by a state investigator charged that Ziegler recruited investors to subscribe to an offshore newsletter for $150. Each subscriber was encouraged to recruit new subscribers. Part of the money from new subscriptions would be added to the original subscriber's offshore account. The original subscriber could never get his hands on the money, according to the affidavit, but it was supposed to grow and be passed along to the subscriber's heirs some day.
After moving to Hawaii, Ziegler worked as an offshore researcher and business consultant and founded Fidelity International Bank, registered in Nauru, an island nation of 7.7 square miles and 8,000 people in the South Pacific.
In Grenada, Ziegler purchased Grenada citizenship and changed his name to Van Arthur Brink, a name that he later said came to him in a vision while meditating.
He transformed Fidelity International Bank into First International Bank of Grenada. The bank's financial stability was reportedly based on a ruby that bank documents said had an appraised value of $20 million.
Officials in Grenada and elsewhere now question whether there is such a gem, whether it was worth $20 million, and whether the bank ever owned it.
First International Bank of Grenada, which quickly became known in Grenada and among investors as simply First Bank, promised annual interest rates of 200% or more on certificates of deposit, based on high-yield earnings from prime bank instruments trading.
Within months, however, the bank had become a frequent target of David Marchant's investigative newsletter, Offshore Alert, based in Miami, that warns readers of offshore frauds around the world.
Marchant's newsletter alleged that First Bank was a fraud; there was no such thing as high-yield bank instruments, and there was no such thing as risk-free 200% annual returns.
Marchant accused Brink of running a Ponzi scheme, a pyramid under which money from new depositors was used to pay interest to old depositors -- and thereby draw in even more new deposits.
Marchant predicted that the pyramid would collapse. (For more on Ponzi schemes)
Marchant, who has been publishing Offshore Alert since early 1997, said in an interview that he and other journalists covering the First Bank story had been contacted by the Royal Canadian Mounted Police and the FBI.
He said there are "literally thousands" of similar offshore frauds going on around the world at any given time.
In response to Marchant, Brink issued a long written refutation and counterattack, and accused Marchant of being part of a conspiracy by banks and governments to discredit First Bank, silence Brink and keep their secrets of high-yield prime bank instruments.
Brink said he had proof -- although he did not provide it -- that Marchant was being paid, apparently by the FBI, to write articles criticizing First Bank.
In the autumn of 1999, Brink resigned as chairman of First Bank and moved to Uganda, where he said he was going to establish humanitarian aid programs and help build a new monetary system.
He has since been accused of taking tens of millions of dollars with him.
At about the same time that Brink was leaving Grenada, First Bank and its sub-banks, including Sattva Bank, stopped paying interest to depositors.
That was also about the same time that Quantum Gold stopped paying its investors.
Some investors who found both investments through Sumeru wondered if Quantum Gold was somehow linked to First Bank. But Sumeru said in an interview that there was no business connection between Quantum Gold and Sattva Bank; the only link was that he had told investors about both opportunities.
In the months since, many investors -- although not all -- asked Sumeru to help them get their money back from Quantum Gold, Sattva or both. Some blamed him for their losses.
In response, he insisted that he had not advised, encouraged or recommended anything, and said he had not guaranteed they would make money. He told some of them they should not have put all their eggs in one basket.
Gigi Carroll, a travel agent who arranged transportation and hotels for participants in some offshore information seminars where Sumeru spoke, laughed at Sumeru's assertions that he did not actively advise or encourage people to invest.
"He solicited people. People came to him, and he made recommendations," she said in a telephone interview. She speculated that the reason he required people to sign a nonsolicitation agreement was to protect himself from securities laws.
" I always wondered why he wanted those letters if he wasn't soliciting," she said.
Carroll said she invested $10,000 in Quantum Gold. She heard Sumeru and his clients talking about how much money they were earning. She didn't realize until it was too late that those profits were all on paper.
"I got beautiful invoices every month. On paper it was going up," she said. But that's all she ever got -- beautiful invoices. She never got any of her money back.
A number of people, including Bob Giuli, said they were suffering not only financial losses but also "spiritual abuse." He believed he had found in Sumeru a kindred soul, someone who was different than most financial advisers, someone who could be trusted and would never intentionally hurt others, much less steal their money.
One woman who invested in Quantum Gold said she trusted Sumeru because of his transcendental meditation connections. Carole Speight, who grew up in Dallas and moved to Hawaii several years ago to start a TM center, said a fellow meditator in Hawaii introduced her to Sumeru. The two of them told her about Quantum Gold.
Speight, who prefers to be called Lalita, admitted that she was and is an inexperienced, unsophisticated investor. But her 90-year-old mother needed extensive nursing and medical care, and Lalita was afraid her mother's $30,000 in life savings would quickly be eaten up.
On the other hand, Quantum Gold's promised 10% to 14% monthly returns would provide a steady cash flow for her mother's expenses.
So Lalita put her mother's $30,000 savings, plus another $10,000 she borrowed against a credit card, into Quantum Gold. She believed her mother would receive at least $4,000 a month from that $40,000 investment.
Lalita, who works as an herbal nutritionist and no longer practices TM, never received any monthly payments. When she wrote to Sumeru asking what had happened, he wrote back that he was not at fault.
"The caveat emptor was very clear in the contract," he told her. "No guarantees. Period. Each investor was given the responsibility upon himself or herself to accept the risk.
The risk was clearly stated. By speaking in a poisonous way to me, you are only amusing and saddening me. You are biting the very hand that could be a blessing to you."
Sumeru blamed the Quantum Gold problems on "dark forces." When Lalita suggested hiring a private investigator, Sumeru told her that he already had arranged for an investigator to work on the case, but could not give her any details:
"All I know is that a recent acquaintance who is on a very, very high level in the trading and financial world was sympathetic to my description of what happened to the Q investors, and he called one of his very highly placed investigators.
He did this only on the condition that his name stay out of any mention to anyone else, because he has a powerful career and has no direct concern with our problem."
Finally, Sumeru scolded her: "Rather than contributing to the solution, you have simply consumed my time, and you have shown no respect for the blessings I have been trying to bring to the world."
Lalita said she talked with the FBI in Hawaii, but decided against pursuing criminal charges -- for now -- because it is still difficult for her to believe that she was intentionally cheated.
"I thought, these people can't be criminals, they're my friends. They're meditators," she said.
Besides Sumeru's laid-back, peace-and-love appeal, some investors were all too eager to disdain the normal returns available to the unadventurous and supposedly uninformed masses -- people who put their money into traditional banks, mutual funds and even a raging bull market.
A Santa Barbara business consultant who inherited $150,000 wanted to put it away for her retirement, but she decided traditional bank returns and mutual funds did not pay enough.
She talked to several stockbrokers, but didn't trust them.
Speaking on the condition of anonymity, she recalled, "I was drawn in by the spiritual aura of Taansen."
She also believed what he told her about prime bank notes. It made sense to her that the government would deny that prime bank notes exist.
She was convinced that government and bank conspiracies keep everyday people poor and ignorant, and the warnings about prime bank notes were mere scare tactics so that the banks would not have to share those profits with anyone else.
She said that after she invested in Sattva Bank, she began recruiting friends to invest. Sumeru told her she would be rewarded as a registered contractor (RC), and would receive commissions.
A few weeks later, after she reckoned that she would be owed at least $25,000 in commissions, she asked Sumeru when she would start getting the money.
He told her that he and other bank officials had decided she could not be an RC after all. "He told me I was not spiritually evolved enough," she said.
Incredibly, she said she is preparing to invest $50,000 in another offshore program promising returns of 100% or more a year from prime bank note trading.
Yes, she knows that the government says prime bank notes do not exist, but she said, "I do believe they exist." Her $150,000 loss the first time, she insisted, was merely bad luck, the result of investing with the wrong people. On the new investment, she said, she had found the right people, people she could trust.
Another California investor, speaking on the condition of anonymity, said the thing that attracted him to Sattva Bank was Sumeru's assurance that the bank's emphasis was going to be on attracting investors who wanted to use their high returns for good works.
" It was philanthropic. It was a way to make money and to do good," said the investor, who has done considerable volunteer work with charities and foundations.
"One person wanted to start a cancer clinic, and they thought the bank would help." Other investors were raising money for foundations and charitable programs to help children, the poor and deprived ethnic minorities, he said.
"A lot of people today are trying to reconcile spirituality and money. Here's a guy who comes along and says he's figured that out. They take your vision or your project you're involved with, and they describe how you can accomplish that.
It's a pretty compelling thing," he said.
The investor said he had hoped to make enough money to finance a new charitable foundation of his own. He admitted, however, that 200% annual returns also were attractive to him as a personal investor, and so was Sumeru's offer for each investor to become a "conduit" or agent who could get commissions for getting their friends and relatives to make deposits, too.
"The bank attracted a certain kind of people -- naïve, for sure, but they were interested in putting forward some kind of social project," the California investor said.
"They played upon the good intentions of the investors.
It was so insidious."
He said that when he complained to Sumeru and other officials of Sattva Bank, they claimed that they had lost their money, too, and warned him that asking questions could jeopardize the return of everybody's money.
"That enabled them to say they were in the same boat we were in. There was a lot of blaming the victims. They said, ‘Because you're asking questions, you're creating fear.' Their response was, ‘That hurts what we're trying to do.'"
He concluded: "I can't tell you how many people I've heard from who have been devastated, common people -- people all over the world, people living on farms, people trying to send their kids to college."
Unhappy investors set up e-mailing lists and newsgroups to share information and try to lay the groundwork for an effort to recover their money. Many of the postings railed against Brink and Sumeru, and there was considerable discussion about Quantum Gold's assertions that the money apparently had been taken by the fund's commodities trader, identified by Quantum Gold as Peter Dennis, who supposedly was handling the Quantum Gold money.
A number of e-mail updates from Quantum Gold, signed only by the "administration," reported on efforts to track down Peter Dennis, urged investors to be patient, cautioned against asking too many questions for fear of slowing down the investigation, and ultimately asked investors to send in more money to help pay for the recovery.
One investor warned fellow victims not to be lulled by assurances that Sumeru or anyone else involved in Quantum Gold really was doing anything to get the money back: "If you think those who lost your money are doing anything on your behalf no matter what it looks like, consider this.
Only if they appear to be doing something can they blame the problem on others. Deferring responsibility, accountability and authority has been the name of the game."
One newsgroup posting that created a buzz was from a non-investor who identified himself as Philippe Carrier, 23, a Canadian who had worked for First International Bank of Grenada in 1997 and 1998.
He said he had been managing a Mail Boxes Etc. in Montreal when he was recruited by a friend working at First Bank to come down and help set up a comparable in-house business services operation for the bank: Mailing, faxing, copying and record-keeping.
Carrier's posting described how Van Brink had come to Grenada with his bank, but without a real administrative structure. Brink teamed up with Larry Barnabe, a Canadian who had moved to Grenada.
Carrier said Barnabe and Brink set up a network of companies that brought more than $100 million into First International Bank of Grenada.
These companies included the International Deposit Insurance Corporation (IDIC), whose name, Carrier said, was chosen because it sounded like the United States' Federal Deposit Insurance Corporation.
In marketing materials for First Bank and its sub-banks, including Sattva Bank, IDIC is portrayed as an insurer that would protect investors from losing their money.
"Each account at the bank is unequivocally insured through IDIC," promotional documents claimed. "IDIC guarantees the safety of all principal and interest, while requiring larger cash reserves and enforcing more conservative policies than its U.S. sound-alike."
Carrier, however, maintained -- and many investors have come to agree -- that IDIC was a shell and a sham that was set up by Brink solely to lure in cautious investors and was never intended to insure anyone's deposits.
Other new companies established by Brink and Barnabe included one that set up offshore investment seminars. Sumeru began appearing at those seminars, talking about Sovereignty Consciousness and Sattva Bank.
Another company was established to pay commissions to investors who acted as independent contractors (ICs) and brought in new deposits: If an IC brought in a friend who deposited $100,000 and left it in First Bank for a year, for example, the IC could end up with $24,000 in commissions.
Another company collected fees from investors to register them in Grenada as international business corporations (IBCs) before they made their offshore deposits. Yet another company, World Investors Stock Exchange (WISE), was supposed to be a stock exchange only for companies that contributed to improving the world. Carrier said WISE was created solely as another avenue to bring in money from investors.
Unlike a typical stock exchange where investors buy individual shares that are not guaranteed, investors in WISE could buy shares whose principal and interest were totally guaranteed by a Stock Value Bank Guarantee (SVBG), an instrument provided by First Bank.
"A percentage of every share sold on WISE is set aside in a deposit-insured bank to guarantee a return of principal and reasonable earnings," WISE documents said.
A three-year SVBG guaranteed that the investor would be returned 119% of the original investment, while the five-year SVBG guaranteed 135% and the 10-year SVBG guaranteed 211%.
After First Bank began getting bad publicity, Carrier said, Brink took new deposits into a new sub-bank named Crown Meridian so that investors would not necessarily know that their money was going into First Bank.
Later, Brink began collaborating with other people, such as Sumeru, to set up more sub-banks; eventually there were 15 to 20 sub-banks, including Sattva Bank, Carrier said.
Carrier's posting in the newsgroup created a flurry of responses. Some said it was a plausible look inside Brink's operation. Others made disparaging remarks about Carrier and said his claims could not be true.
Brink himself posted a 16,000-word response, concluding with ridicule for Carrier's suggestion that unhappy investors call the FBI.
"And by so doing, cooperate in making certain that everyone suffers a maximum amount of financial damage," Brink wrote.
In a subsequent telephone interview for this story, Carrier added details to his previous statement. "All the time I was there I never saw them do any actual banking.
There was no banking department in the bank," he said.
Carrier, now back in Canada working in an administrative job for a pharmaceutical research firm, said First Bank's handful of locally hired clerks did keep busy -- recording new deposits, paying commissions to ICs and, in the beginning at least, sending out interest payments to investors.
But he doesn't think there was any real interest. Instead, he said, he believes both IC commissions and interest payments came out of new deposits.
"I think it was a pyramid," he said. He said he never saw any evidence of any prime bank notes trading, or any other kind of trading, investments or business deals by the bank.
The sole focus was to bring in more deposits, he said, rather than trying to make money from those deposits.
Carrier left Grenada not because he was troubled by what was going on at First Bank, but because he was fired after complaining that he wasn't getting paid on time. Brink supporters in the newsgroups tried to discredit him by claiming he had been fired for theft and had a prison record, but Carrier denied all the accusations.
Looking back, he said he regrets some of the things he did in Grenada, such as helping investors do paperwork that would allow them to evade U.S. taxes, and helping train ICs to sell onshore -- a violation of U.S. law since they were unlicensed and were promoting unregistered securities. "In my heart I didn't do anything wrong. I didn't do anything illegal. But I was part of a system that was illegal," he said.
Carrier predicted that Brink would probably never go to prison for stealing money. "Nobody can ever prove he took any money. You won't get him on charges that he stole any money.
But you can get him for organizing systems that showed people how to defraud the government, and how to evade their taxes," Carrier said.
Carrier said he has not been in contact with the FBI or other authorities, but said he knows at least one person who worked at First Bank and is cooperating with the FBI.
If asked, he said, he would be willing to testify to everything he wrote in his newsgroup e-mail.
Last August, Grenada's government took over First Bank operations. The government announced that funds were missing, and that it was cooperating in an investigation with the U.S. Department of Justice and the FBI.
For the first time, Grenada government officials publicly expressed doubt about First Bank. They admitted to the Associated Press that they did not know if the bank's reported income for 1999 --$26 billion -- was accurate.
If true, that would have made it the most profitable company in the world. The government official put in charge of the bank's operations said it appeared that millions had been taken out of First Bank by Brink and various associates.
Bob Giuli and other investors hired a private investigator, Lyle Smith, president of Intercontinental Capital Management, Ltd., of Sacramento, California, who specializes in recovering foreign assets.
Giuli, who has prepared a 105-page declaration for use in any legal action, said he hopes that criminal charges can be brought against Sumeru.
He said he had not been in contact with the FBI, but other U.S. investors have told him they are cooperating with authorities.
"It is my testimony that the net effect of solicitations of Dr. Taansen Fairmont Sumeru, Ph.D., is in violation of United States Code in multiple instances, he did profit by these transactions, that he did collect money through the mails, and last that he has, individually or in concert with others, failed to honor written warranties, failing to return invested monies," Giuli said in his declaration.
However, the private investigator, Lyle Smith, said he will concentrate on recovering assets. He said he was uncertain about what charges could be brought against Sumeru. "He never touched any money directly.
He knew better than that," Smith said.
Giuli and other investors also hired a Grenada law firm and obtained an order from the Grenada Supreme Court that restrains Brink, Sumeru, Quantum Gold, First Bank, Sattva Bank and others from spending any of the up to $372 million that the investors say they invested.
In a telephone interview and in e-mail exchanges this fall, Sumeru seemed bewildered that the investments have gone sour, and that anyone would blame him. He said he does not feel that he has done anything wrong.
He emphasized that he has not fled, that he is still in Santa Barbara, and that he is still talking to investors. However, about a month later, Sumeru was making plans to leave the country in search of a "spiritual community" where he could settle.
Sumeru insisted that he had no idea where the missing money might be. He said he still believes that prime bank notes are real, and it is possible -- as Brink claims -- that the money was secretly seized by governments and big banks that want to keep the public from learning about prime bank notes.
However, Sumeru also said he reluctantly accepts the possibility that Brink absconded with money from First Bank. "Some people are firmly convinced he is a crook," Sumeru said in an e-mail.
"Others are firmly convinced he is a victim.
I really don't know. I wish I did. Time well tell."
No matter who took the money, Sumeru said he, too, was a victim who had lost money. Unlike investors in his bank, however, Sumeru refused to divulge any particulars: How much he had invested, how much he had withdrawn in commissions or interest, and how much he was owed in commissions and interest.
Brink, in an exchange of e-mails from Uganda for this article, said he did not have any of the money. He intimated that the money had been spirited away and that he had been defamed in the media as part of a conspiracy that included American intelligence agents and the Organization for Economic Cooperation and Development.
The Paris-based OECD, made up of 29 of the world's most industrialized countries, has been spearheading an international effort to clean up banking practices in tax havens known for secrecy, fraud and money-laundering.
In response to a question about whether investors would ever get their money back, Brink said, "Not if the forces (OECD-oriented operatives/sympathizers) that wish to crush private offshore banking have their way."
Brink said it is understandable for Sumeru to suspect him of taking the missing money: "Taansen is a genuinely sincere man and, I believe, an honest man.
Taansen now suggests that it now appears that I ran off with a lot of money?
My guess is that he's in the infancy of his awakening to how truth is mishandled in the press. But since he's a good man and an intelligent man, he'll figure it out on his own soon enough."
Brink also suggested that Sumeru might be distancing himself from Brink publicly because Sumeru would need credibility before offering any new investment opportunities to friends and acquaintances.
After being interviewed for this article, Sumeru put forth a number of friends and business associates to vouch for his character.
Even those who had invested with Quantum Gold or Sattva Bank and lost their money said they did not blame Sumeru. But everyone who spoke up for Sumeru had one thing in common with the unhappy investors: they had all lost money.
One man, Ed Spencer, who said he is an Alaska-based businessman and traveling Baptist evangelist, said he bought CDs in Sattva Bank.
He said he believes he may have been defrauded, but added, "Taansen had nothing to do with it."
"The problem apparently was with First Bank's management," Spencer said.
An Australian woman, a mother of two young children who said she manages money she inherited, said she had been friendly with Sumeru for several years.
Speaking on the condition of anonymity, she said Sumeru had "referred" her to Quantum Gold and received a commission from her deposit. But she emphasized that she did not blame him for what appears to be a lost investment.
She said other investors have made Sumeru out to be the bad guy because of his appearance and his beliefs.
"Taansen is being targeted irresponsibly, simply because he is different," she said. "I'm not happy with my investment choices, but I'm willing to accept the responsibility for my decisions." She said she is not convinced that Bob Giuli or anyone else can produce any evidence against Sumeru.
So where are the missing funds from Quantum Gold, First International Bank of Grenada and Sattva Bank? Where's the money? Who can answer the questions about what happened to the Quantum Gold and First Bank money?
Bob Giuli believes Taansen Sumeru can answer all the questions.
But Taansen Sumeru is not answering any more questions. In his last telephone interview for this story, he said he had been "bankrupted" by the Quantum Gold and Sattva Bank scandals and had been forced to give up his Santa Barbara home because he could no longer afford to live there. He said he was "going traveling," planning to visit a series of "spiritual communities" around the world in hopes of finding one where he would settle.
The Santa Barbara woman who lost $150,000 in Sattva Bank said she believes Sumeru is trying to avoid prosecution. "I think he is a scared little rabbit," she said.
"The problem is we trusted him," Bob Giuli said. "We had confidence in him. But the word ‘con' comes from confidence."
Giuli knows it will be difficult to find any of the missing money, let alone retrieve it, and it will be difficult to bring criminal charges against Sumeru or Brink or anyone else.
"The secrecy laws are rigid in these countries," he said. "The problem is that the laws not only protect the innocent, but they also protect the guilty."
The paper trail is convoluted, and parts of it are either missing or obscured by the offshore banking structures that allow fraud to hide behind secrecy laws.
A PricewaterhouseCoopers creditor's liquidation report contains the results of an analysis of the hard drive taken from Van Brink's laptop, which shows that about 80% of the settings on his browser pointed to porn sites.
They also discovered the bogus assets "assignment" to FIBG of the "carved red ruby" which was said to be known as "Boy on a Water Buffalo".
$470,403 of assets have been recovered so far and it is estimated that "net realizations before professional fees and other administrative costs will range from a high of $7.4 million to a low of $1.7 million".
They also estimate that $125 million of clients' principal was deposited at FIBG and its many sub-banks, which is down from the estimate of $206 million when the liquidation began.
The liquidator says that finding out what happened to clients' funds and establishing accurate figures for FIBG's assets and liabilities has been difficult because of the chaos in which it was operated.
Many records have disappeared, along with the people who operated the bank.
Offshore Alert says that Van Brink is currently hiding out in Uganda.
Authorities say it is difficult to recover money lost in offshore scams and difficult to send the con men to prison. Frauds are often hard to prove, with convoluted paper trails stretching across many different jurisdictions.
Offshore scams have become so prevalent that authorities simply don't have the resources to prosecute them all.
In addition, many victims are reluctant to help authorities. Some refuse to believe they were conned. Some are too embarrassed to admit it. And many fear that they will get in trouble themselves -- for evading taxes, for example, or illegally hiding assets -- if they step forward.
A number of investors who lost money in Quantum Gold or Sattva Bank said they were considering going to law enforcement authorities, but they were afraid.
One investor went so far as to telephone a regional FBI office in hopes of asking some anonymous questions to see if he had violated any laws by investing offshore.
He got a special agent on the phone, but when the agent put him on hold the investor hung up in a panic, afraid that his call was being traced.
The investor had been told that because he had invested offshore, he would find himself in trouble, too. He was fearful that cooperating with authorities would lead the IRS to begin combing through his returns for recent years, and would lead the FBI to target him for money laundering.
The investor had been told that even if authorities recovered some of the money, they would first use it to defray the costs of their own investigation rather than return it to the people who had been bilked.
Nonsense, says the FBI.
Roy Handley, supervisor of the money-laundering unit at FBI headquarters in Washington, said someone who has been cheated in an offshore scam is not automatically viewed as a crook who is trying to hide assets or evade taxes. "We will treat that person as a victim," he said in an interview. "If a victim is upfront and open with me, I will do all I can to help."
He said victims have little to fear if they earn their money honestly, meet U.S. bank reporting requirements when moving money offshore and intend to pay their taxes on offshore returns. "It's the intent of the person involved in the situation that determines whether there is any illegality," Handley said.
He said investors moving money offshore in search of higher returns are not automatically suspected of money laundering.
The laws on money laundering, he said, cover attempts to hide money earned from specific unlawful activities, such as drugs, prostitution or embezzlement.
And money laundering, Handley said, does not necessarily mean that the money has gone offshore. It covers putting the proceeds of the illegal activities into any bank, whether in the United States or any other country.
At the same time, he said, even victims who have dirty hands should be advised to come forward. It's better to cooperate and make a deal, he said, than to try to hide and then accept stiffer consequences when caught. "If you were involved in something illegal, you need to talk to us about it now instead of later," he said. "The first one on the bus gets the best seat. The first victims to come to me are usually the clean victims."
Handley said con men who warn their victims that they will get into trouble themselves and won't get their money back anyway are playing into the prejudices of people who are wary of the power of the government to invade their privacy.
At the same time, he conceded that there are no guarantees that victims will recover any of their money. It is sometimes difficult to determine who the investors are or how much each invested. Offshore banking secrecy laws often hinder investigations, and the money frequently has simply disappeared with the fraudsters.
"We want to help people," Handley said, "and if that includes getting their money back, all the better. But there are no promises."
SEC Rules Against Offshore Scams
Investors who believe they have been the victims of an offshore securities fraud should remember that the Securities and Exchange Commission regulates only the issuers and sellers of securities -- not buyers.
" There are no provisions that prohibit people from buying illegal securities -- only against selling them," said John Heine, a spokesman for the SEC.
People selling securities or advising on investments -- offshore or onshore -- are subject to prosecution for a number of potential violations, including:
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Selling securities or acting as an investment adviser without the required licenses. |
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Selling securities that are not registered with the SEC, but are required to be registered under the Securities Act of 1933. |
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Misrepresenting or omitting material facts concerning securities offered for sale, whether or not registration is required. For example, it is unlawful in certain situations to sell securities while withholding important information that could affect the buyer's investment decision, such as recommending an investment while knowing that the investment will not pay off. |
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Manipulating or fabricating prices of securities. |
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Misappropriating or illegally pledging customers' funds or securities. |
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Conducting a securities business while insolvent. |
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Buying or selling securities from or to customers at prices not reasonably related to current market prices. |
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Violating their responsibilities to treat customers fairly. |
In addition to SEC violations, people promoting offshore investments may also face prosecution for mail fraud -- using mail to send promotional materials for investments that may be illegal or fraudulent.
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