The offshore world is again under scrutiny after a series of financial services businesses registered or operating in Grenada have been connected to a bank which has been subject to considerable public criticism for over a year was finally subject to intervention by the authorities.

First International Bank of Grenada (FIB) was formed in 1998 and claims to have taken some USD26 milliard in deposits in its first full year of trading. Industry watchers say that this would put it on a par with Bank One, the fifth biggest bank in the USA. However, this figure has never been independently verified as First International has never filed the reports required by the Regulator.

FIB, also known as First Bank of Grenada, has been the subject of much speculation since it launched what it claimed were innovative financial services. The services included a scheme to guarantee the return of investments traded on the World Investments and Security Exchange, known as WISE and deposit interest rates of 250% per annum. First International was rated AAA by International Deposit Indemnity Corporation.

The bank was formed by one Van A Brink, who has been revealed as former Oregon bankrupt Allen Zeigler who obtained a Grenada passport and changed his name. It is not clear on what basis the passport was granted but Grenada offers “economic citizenship” to those who satisfy certain criteria including availability of liquid or readily liquifiable assets. At present, economic citizenship requires a payment of USD22,000 to the treasury, USD17,000 into a government approved project and an approved agent’s fee of approximately USD11,000. All applications for economic citizenship are now personally vetted by Michael Creft who has the additional function of being Registrar of Offshore Services but it is not clear if Mr Creft dealt with the Zeigler/Brink application.

It has been said by several people claiming to have been involved with FIB that Zeigler/Brink was CEO of the bank but had no proprietorial interest in the bank and someone claiming to be him has made similar claims. However, there are contrary claims that he held interests in the bank or associated businesses through various vehicles such as International Business Corporations, a.k.a. IBCs.

In the capacity of Registrar of Offshore Services, Mr Creft has been quoted as saying that FIB has been meeting its liabilities under the 250% interest agreements but “I don’t know how they do it.” Some commentators have been forthright, alleging that the bank obtained the funds to make such payments by money laundering or even a pyramid / Ponzi scheme. Whatever happened in the past, the fact is that now the money has dried up and FIB cannot make its payments.

One account holder told WMLR that a request to transfer a sum of less than USD40,000 has remained unactioned for almost four months. Others are increasingly vitriolic about the Grenadian government, those who formed the bank, those who have been in the succession of bank bosses and those who made sales on behalf of the bank.

Brink/Zeigler was chairman of the bank but recently handed over the job to Richard Downes who, in mid August wrote to customers expressing regret that the bank could not meet its commitments – and inviting those customers to swap their lost deposits for stock in the bank. The bank offers to buy back the stock as soon as some of its assets become viable.

That may take some time: in his letter, Downes admits

“Some of the bank's investments have failed to produce the anticipated returns. Some of the bank's special project ventures have failed to yield returns. Then there was an extended period of adverse publicity - producing the result of even higher demands on the bank's cash supply as people were goaded into stampeding the bank for withdrawals and altogether stopped making new deposits, worsening the constriction on cash flow.”

The extended period of adverse publicity includes the period from April 2000 when Creft began an investigation and ordered an audit. Downes says that the value of the bank is not known as there is an audit in progress. And in June internet discussion boards on the “due diligence” sites were alive with angry postings by those who were trying to get money out but receiving none. There were, of course, some spirited defences but they were, at best, nonsensical rantings that the bank would be unlikely to want to be associated with.

Indeed, the moderator of one such message board (goldhaven.com) wrote “Mr. Anthony Joseph of the Grenada International Financial Authority is denying any knowledge of action taken against FIBG or that any directors are being prevented from leaving the island. Publicly, this agency has steadfastly denied that there are any problems with the bank and have stated that as far as they knew, the bank was operating as normal. They have refused to provide any information regarding the ongoing audit.

"We have been speaking with investors who called on the government to take action due to non-payment by FIBG. We believe that any action taken against FIBG was prompted, at least in part, by this development."

In order to obtain a banking licence in Grenada, there must be liquid assets in a ratio to deposits and the Regulators were seemingly satisfied FIB’s ratios – even though it is commonly believed that the only asset declared for FIB was a jeweller’s appraisal of a single precious stone – a ruby. The whereabouts of the ruby are subject to considerable speculation. WMLR left with First International a question as to whether anyone in the Grenada government has seen the stone. That question left with others for a reply from Garvey Louison, the government’s appointee has, like other questions, received no response.

Such a stone must be rare: jewellers contacted by WMLR said that it would not be impossible for there to be such a stone – but it would have to be large, exactly the right colour, evenly coloured and entirely lacking in flaws. Anything falling below these standards may be worth more broken up, we were told.

There are stories that the bank was also backed by other valuable assets – but the claims are met with argument that those assets were mostly "leased." In any normal lease, the lessor has the right to recover the assets if certain conditions are not met or on the occurrence of specified events. The most obvious is where the lease payments are not made. And as FIB has had no money to pay investors the interest on deposits, it is not unreasonable to assume that payments on the leasing of assets will not have been made.

For this reason, it would be an act of astonishing naivety for any regulator to accept that a significant proportion of any financial services organisation’s capital base is leased.

Indeed, one of the reasons for a company to become involved in taking assets on lease is that it creates an illusion as to the state of the company – it is termed “off balance sheet financing” because the value of the asset does not appear on the lessee’s balance sheet but nor does the outstanding balance of the payments to be made – even though if there is a breach, there may be penalties to pay.

Grenada is also home to World Investors’ Stock Exchange – WISE. Wise is a stock market with a difference: it promotes itself as

WISE is the world's only stock exchange that protects investors against the loss of their investment. This is done through the use of Stock Value Bank Guarantees. WISE provides investors with ground floor opportunities for potential venture capital-type returns that are usually available only to insiders or to institutional investment firms. WISE offers a simplified and affordable process for listing the stock of companies that are seeking capital for start-up or expansion.

First, investors can only buy via an approved stockbroker – and WISE appears to do its own approvals rather than approval by a regulator, as would be more common.
The second significant difference about WISE is that it is home to mostly emerging companies – companies that are at present in the research and development stage and require funding to capitalise upon that R&D – such as "Alexander’s World – formed to build a “mini Las Vegas” and a theme park based on the exploits of Alexander the Great and ancient Greece. According to its prospectus, there will be a 3000 room “luxurious five star hotel” and it will be “the first ever full scale theme park in the caribbean (sic)."

Another company, Anglo-American Photography of St Vincent has issued a prospectus seeking money to develop a photographic studio in Manila, Philippines. The prospectus emphasises the WISE/FIB/IDIC guarantee claiming that, if the project were to fail, the Stock Value Bank Guarantee will enable the investors to "redeem their stock no questions asked in five years for 1.35 what it cost them, with no service or other fees. It is a straight redemption from the bank."

An established company has been tempted to seek to raise capital this way: Global Village Market International Limited. GVMI is expressed to be an International Business Corporation in St Vincent, Grenada registered at “corner of James and Bay Street.” The Global Village domain (gvminternational.com) quoted on the WISE website is registered to an address in Montreal and the administrative contact is registered in Oregon USA. It may be coincidence that this is the same state that Zeigler was ordered bankrupt. The technical contact for the Global Village domain quoted on the WISE site is one Eduard Brezny of Birstfelden in Switzerland, and checks by WMLR indicate that the servers that host the WISE service are probably located in Switzerland. Global Village, according to the prospectus, wants to develop its existing a business, principally dealing in Soya bean products – and wants to raise USD50m to do so. There is no link on the WISE site to any other domain for Global Village.

Yet there is a company called Global Village International Limited registered in the Bahamas, from which Global Village runs its international business. And there are two further companies, operating out of Montreal, called Global Village Market of Canada Inc and one in the USA called Global Village Market USA, Inc. Their internet domain is gvmarket.com and this is registered to a Montreal address and although it is not the address at which the GVMI domain is registered, their own website gives the address as the one at which the GVMI domain is registered. These are established businesses and, contrary to most of the other businesses offered via WISE, they had a lot of reputation to lose if the whole venture turned out to be a scam.

WMLR’s investigations have turned up some amazing information about WISE: despite offering shared worth many millions of dollars, one of those waiting for capital said that so far as he is aware, only about USD1.5m has been raised and the great bulk of this has been for one company. Promises by WISE to access money from mutual funds, and which would a significant slice of the money to come into the companies has come to nothing. WISE has failed to create the promised secondary market in shares, or nearly so, and so the shares which it has sold cannot be traded. The shares are seen as sold by WISE and WISE puts any money it receives (after payment of any charges) into the company’s account FIB – but in at least one case, FIB has failed to make payment out of such an account for over four months. The First Bank Guarantees may or may not be worth anything, depending upon whether the bank is wound up – and whether IDIC stands behind the guarantees.

Some of the companies who made an offering via WISE dealt with Mark Kennedy but he left to join FIB leaving Robert Osborne in charge, assisted by Charles Webb. Charles Webb is named as the administrative contact for the WISE internet domain name, with Eduard Brezny named as technical contact.

A spokesman for one company which made an offering via WISE spoke to WMLR on the understanding of strict confidentiality. He told WMLR "The mutual funds were never there." He went on "The first Bank guarantee was in principle very useful but it’s really not worth anything." Told of the position adopted by IDIC, viz., that IDIC does not consider that did not provide a guarantee and that it claims its position was misrepresented by others, he said "so what about all of their marketing material?"

The International Deposit Indemnity Corporation is registered in Grenada, although press reports claim that it was formed in Nevis as "International Deposit Insurance Corporation" – and after being told to change its name to remove the word "insurance" was later told it was not welcome in Nevis. It then moves to Dominica and then onto Grenada. WMLR has not at the time of writing discovered whether there were a succession of companies and, if so, what happened to any guarantees issued by the companies left behind. IDIC promotes its services by saying: "IDIC is dedicated to a very simple idea – depositors can be really secure if banks simply were to back all deposits with hard assets …we are continually trying to find ways to improve the monitoring of bank activity and to fine tune the process by which we can convert assets into cash in the unlikely event of a bank failure. By having each bank pledge a three-to-one (or higher) ratio of assets to deposits in favor (sic) of depositors, IDIC is able to meet all of these goals. It’s real security for investors who want to know their money is safe."

But making a claim may be difficult: IDIC gives no address on its website. Its only contact details are via two web based e-mail servers – Microsoft’s Hotmail service and USA.net. Although web based e-mail services do ask for names and addresses, these are not checked and it is perfectly simple to set up a web based e-mail service with complete anonymity. IDIC’s Hotmail address returns mail with a message claiming that the account is inactive – this usually means it has not been accessed for at least three months. WMLR’s message to the USA.net address resulted in no reply.

Interestingly, IDIC’s internet domain name is registered to an address is Oregon, USA – but it’s a P.O. Box. The domain is hosted on a publicly quoted company which is headquartered just outside Washington DC.

The IDIC scheme is described in its marketing material as self-insurance. This term is most often heard in the phrase "self-insurance is no insurance." In fact, an analysis of the details given show only this: IDIC takes something akin to a charge over the assets of the member bank and if the bank defaults as against its customers, IDIC can liquidate under the charge and pay out of the assets so realised.

WMLR has a habit of asking basic questions, and this scheme encourages one of the most simple – why charge assets to provide for what it, in effect, a private liquidation?

Speculating, the answer may be that in this way those who create the scheme gain control over the liquidation and are able to take a fee for their work. Whilst this may not result in any lesser payout to investors, there is a lack of transparency that would give cause for concern.

The importance of the interlocking between the members of the WISE-First International-IDIC triumvirate is seen from the prominence it is given in the publicity for WISE: "First International Bank of Grenada (FirstBank) will issue SVBGs on all stock purchases. FirstBank holds the highest rating (AAA) issued by International Deposit Indemnity Corporation (IDIC)"

IDIC’s claims are startling: "This innovative plan utilizes a method called "hard asset blocking." Hard assets are blocked or pledged at a three-to-one (or higher) ratio in favor of depositors. Hard assets include gold, diamonds, real property, liquid financial instruments, etc. under management of a member bank. Blocking simply means that IDIC has all rights, title and interest of the pledged (blocked) assets conveyed to it via General Power of Attorney, and therefore has the right to liquidate these assets and pay off depositors in the event of a bank failure. In such an event, IDIC has the right to sell any or all of these assets immediately and use the proceeds to settle the claims of the depositors…IDIC does not publish a list of members, however IDIC will answer inquiries as to whether or not a specific bank is an IDIC member. Many member banks advertise that they are members of IDIC and therefore that their deposits are fully covered under the plan. "

The question as to whether deposits in FIB are covered is, however, now said to be unclear. On 17th August, IDIC said "No claims will be accepted at this time. There are a number of reasons that IDIC cannot and will not act at this time. None of these reasons are that IDIC is a "scam." IDIC was never intended to be a quick fix, but rather would/will have to liquidate bank assets in the event of failure. This is a process that takes time and one that for practical reasons can only be used as a last and final solution" – and, indeed, as indicated above, WMLR has been unsuccessful in making contact using the information provided in the IDIC website.

WMLR would have liked to discuss the issues with IDIC but in the absence of e-mail responses and no telephone number to call, this has proved impractical. Of course, there are those who would consider this to be reason enough to question the usefulness of the services IDIC claims to provide.

 The entire connection seems to revolve around FIB. On 5th August, Zeigler/Brink wrote an open letter which contained the following:

"1. Several of the large assets the bank possesses have been independently confirmed to be authentic.
2. Several different, credible financial groups are independently working on providing some liquidity against those assets and an enduring income stream to the bank from the use of those assets.
3. Simultaneously, a sale of the bank is in negotiation. The sale being negotiated is not connected to the G-77 Bank. The identity/identities of the prospective purchaser(s) is/are being shielded. Based on how the adversarial press goes after even an accountant who agrees to prepare financial statements on the bank (and further discredits an accountant based on who the accountant's friends might be, however unrelated they might be to the bank's management), prospective purchasers of the bank are not eager to line themselves up in the cross-hairs of the adversarial press' gun sites."

And, of course, it may be that one of the reasons for the serious cash flow crisis is as claimed in a number of press reports. One report in the St Kitts Mirror alleges that Bring/Zeigler (Or First Bank, the difference is not clear) is active in Congo – where deals are being done with locals. One deal with a group of tribal leaders led by Prince Willie Mashika allegedly provides for the payment of USD80m in return for control over the mineral deposits in the areas that the tribal leaders claim to control. And another alleged deal has First International or someone connected with it paying USD16m to Wamba dia Wamba, a rebel leader – the payback is the right to set up a central bank in Congo should Wamba gain control. Zeigler/Brink would indeed have a licence to print money.

Advisers to Wamba have said that the signed deal is a protocol not a contract but it is not clear what the difference is. The agreement is, according to Belgian newspaper La libre Belgique, to create something called "African Reserve Bank Foundation" and is signed by two South African citizens who own a company called "Atlantic pacific Enterprises" in the Bahamas.

Yet, it appears that Zeigler/Brink may have been trying to play both ends against the middle – reports in the newspaper ZA Business quote another rebel leader, Jean-Pierre Bemba of the Uganda backed Congo Liberation Movement as saying that FIB offered him (or his party – it is not clear) "several million dollars in return for a pledge that the MLC give FIB sweeping control of the former Zaire’s central banking system should Bemba succeed current president Kabila." Bemba says he was dismissive of the approach: "a proposal concerning the question of a central bank is a question regarding the sovereignty of a country, so you can’t discuss it based on a fax received in your living room." The fax, apparently, was from Zeigler/Brink described as the "administrator of FIB partner Union Reserve System and former FIB chairman."

The ZA Business report also claimed to have confirmed the details of the Wamba deal – and discovered that a similar deal had been offered to a third rebel group and even to Kabila.

Regular readers might like to cross refer to WMLR Vol. 2, No. 5 where, in the article about Sealand we disclosed the investigations of Spanish police into a relationship between a number of people arrested in Spain and documents claiming to set up various schemes in Congo.

Links with Congo are not the only connection to scarce resources – Viking Gold Corporation, another company seeking funds via WISE, in this case seeking USD50m to buy a gold field in Nevada, USA. Like Global Village Market International, Viking Gold Corporation is registered to the corner of James and Bay Street, St Vincent. The prospectus for that company is, in places, unintelligible – until one realises that in the passage "This Offering consists of no 3 year Stock Value Bank Guarantee Shares, no 5 year SVBG Shares, and 50,000,000 10 Year SVBG Shares purchased in blocks of not less than 1,000 shares," the word “no” should have been replaced by a number of shares of that class that will be issued. And, of course, Viking Gold, like all WISE companies offers: "The offering also says that all shared listed on WISE will "carry a SVBG from an institution rated by the International Deposit Indemnity Corporation." The offering states "Viking Gold Corporation recognizes that there are inherent risks when investing in any stock. To remove the risk of loss to investors, the Company has obtained a Stock Value Bank Guarantee from First International Bank of Grenada based on a ten-year stock issue."

The power of the internet to create an endorsement of a product or service, entirely innocently, is shown by the website hosted by the University of Gottingen in Germany. It lists all stock exchanges and says the following about WISE:

   Located in Grenada, this is the world's only stock exchange that guarantees investors against loss of their investment. It also provides a simple, affordable process for listing a company's stock."

WISE is itself an international business corporation. International business corporations generally have one significant feature – apart from paying a fee to the local registry, and perhaps certifying certain matters, there are few if any reporting requirements. For example, there is rarely any need to disclose the legal or beneficial ownership of shares and nominee directors abound in a number of jurisdictions. According to Grenadian law firm J. A. Seales & Co, an IBC there is exempt from local taxation; there is no reporting requirement; the company can issue bearer shares; only one shareholder & Director is needed and Directors & officers are not liable for the debts of the company.
This means that it will prove extremely difficult for anyone who holds any share issued using WISE to seek any information to assist them in seeking redress as a result of the lack of secondary market dealings.

Interestingly, escapeartist.com, one of a host of sites providing information about offshore jurisdictions, talks about economic citizenship, tax free investments and other topics and offers the service of assisting on obtaining economic citizenship, local bank accounts and a Panamanian IBC as part of the service. Escapeartist.com does not include First International amongst the banks it shows for Grenada.

The Grenada government’s position is variously reported as “taken over” or “monitoring” First Bank. However, the person alleged to be the Grenadian Government’s representative, Garvey Louison, has not responded to questions left by WMLR for him with his staff. The questions were: are you in fact appointed by the government; what do you usually do; what is the precise position as to the bank; will IDIC operate the guarantee; has anyone in the government seen the ruby?

In his letter of 17th August, Richard Downes said

   "First Bank was started by someone who caught a vision - a vision of a banking institution that would do everything it could to be a blessing to its clients, that would treat each of them as if they were a best friend, that would reach out and try to bless those who seemingly had no friends at all."

   There may be a distant grasp on reality, however, evidenced by the following:

   "It's not what many consider to be prudent business practice, but we believe there must be a total shift in the energy - money so easily attracts negative energy, and money pressures create more negative energies. It is time to reverse the polarities and trust - trust that the flow of positive energy will return to the bank and to the lives of our treasured banking clients.

   "I know that this talk about "energy" will seem quite weird to some, maybe even be in and of itself a cause of criticism and ridicule for an already much-criticized bank.”

Of course, to others, this will not seem weird at all. To those who have invested money in First International, reliance on mystical properties may well be the only chance they have of seeing any return. Some may consider that the warning in this month’s editorial to beware of transaction with Grenadian financial services businesses may be designed to inflame. Far from it. Because it is not as if First Bank, IDIC and WISE are the only financial services organisations that have evidenced a lack of regulatory control in Grenada. Nor, incidentally, is First Bank the only bank in Grenada with the initials FIB: there is a connection between First International and Fidelity International Bank, Grenada. 
The main question will be “where is the money?” David Marchant of offshorebusiness.com alleges that there was not a lot kept in Grenada and that the deposits were mostly put into St Vincent – but thinks it will be long gone.

And, of course, people want to know what happened to the Ruby.

According to press reports, one Derek Fowler was in February of this year referred to in an asset forfeiture application brought in Arizona by federal agencies. Whether or not Fowler is in any way associated with WISE or FIB is not known – but reports have claimed that he owns a business in the same English town as one Adrian Ball – who was instructed by FIB to conduct an audit – but the audit is now generally discredited, hence the Grenadian Government’s own appointment.

There is an internet list maintained for depositors in FIB and its various associates. One has to take things published in it with a heavy dose of salt because it is difficult to see how several of those posting messages can continue to demonstrate unquestioning support for those who have received and failed to account for money. All the more interesting is that there are messages posted to the list purporting to come from Zeigler/Brink. However, one must be somewhat sceptical of this because however is sending them will not post directly to the list, even though he could do so from an account such as Hotmail, and only via the "owner" of the list.

In messages purporting to come from Zeigler/Brink, there are comments that the FIB was in fact capitalised not just on the ruby bit also on various securities in Bermuda companies. However, no one will say what those securities were – and the person claiming to be Zeigler/Brink claims not to be able to remember. However, there will be those who consider it unlikely that anyone creating a bank would not remember how its capital base was structured.

However, he does claim to know what happened to the ruby – it is now claimed that it may never have actually belonged to FIB and that it is now in the hands of an individual in Arizona. And that FIB has no claim on it. Depositors that ask how this can be are told by others in the list that it doesn’t matter what happened to the assets upon which the bank was originally capitalised, only what happened to the money that was put in and failed to come back out. Few seem to recognise that any asset of the bank can be subject to claim and any disposal subject to investigation with, depending on circumstances, a disposal being set aside.