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
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.
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
"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
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."