Offshore bank of the week...

Lisa & Ian Murray seamus at
Sat Aug 26 23:16:02 PDT 2000 0.shtml

'Ruby' bank collapses

By Paul Lashmar

27 August 2000

Grenada's government has taken over the controversial "$26bn" First International Bank of Grenada in a further twist to one of the most bizarre episodes in the history of Caribbean offshore banking.

"The Grenadian authorities have finally stepped in, too late, and are effectively liquidating the bank, after everybody's money has disapp- eared," says David Marchant, editor of the Miami-based Offshore Alert newsletter, which claimed in January last year that the bank was suspect.

Only three weeks ago the Grenadian government was still standing by the bank after a little-known chartered accountant from Yorkshire gave it a clean bill of health after an audit. He was called in by a British barrister acting for the bank. Mr Marchant says the accountant's report "triggered disbelief".

The First International Bank of Grenada was set up by an American, Van A Brink, in 1998. Before moving to Grenada he lived in Oregon under the name of Gilbert Allen Ziegler, until going bankrupt in 1994. He then bought a Grenadian passport and changed his name.

The bank was licensed solely on the capital asset of a red ruby, said to be valued at $20m (£13m). The bank offered early investors returns of up to 500 per cent, one of the highest rates ever offered by an offshore bank. The bank's first annual report claimed it had increased its capital from $110,000 to $14bn in the first year of operation. The bank's reported net income last year of $26bn would have made it the most profitable company in the world, overshadowing Microsoft's $4.5bn profit.

Mr Brink, in an interview with the Grenada Broadcasting Network at the time, said his bank was "doing legitimate business" and "acting lawfully". He has now left Grenada for Uganda, living in a house once owned by the dictator Idi Amin.

Mr Marchant says there is no evidence that the ruby even existed, and the claims of capital and profits of billions of dollars, "are now clearly fictitious".

Every month, First International Bank of Grenada paid for hundreds of Americans to fly to the island and wooed them at upmarket beach resorts with lectures on the evils of US taxation. Prospective customers were assured their money would be insured by the International Deposit Indemnity Corp, a small private operation which was closed down on the island of Nevis, and also in Dominica, but now operates in Grenada. Some $100m is said to have been deposited by gullible clients.

The Caribbean has recently come under political pressure from the US and Europe to clean up the offshore market. "Grenada is a recent entrant in the offshore banking market," says Mr Marchant. "There are believed to have been at least 14 banks, perhaps twice that, affiliated to the FIBG and if they are closed the number of banks based on the island will be at least halved."

Grenada's Ministry of Finance said in a statement that the government took over the operations last week, appointing former accountant general Garvey Louison, effectively to act as receiver. Finance minister Anthony Boatswain told the Grenada Broadcasting Network he knew the bank was experiencing a "shortage of funds", but he did not say how it would affect investors.

Government spokeswoman Nancy McGuire said recently that it was investigating the bank with the US Department of Justice and the FBI.

Grenada's offshore industry regulator Michael Creft – who has been repeatedly criticised for his lack of action over the bank – admitted that the new investigation included the possibility of money laundering.

Creft said he did not know if the bank's claim to have $26bn of assets was true. He said First International Bank of Grenada had made good on promises to pay up to 250 per cent interest, but he did not know how the bank had managed to do it.

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