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BULLETIN-ANTIGUA: Fraud, Scandal and Money Laundering

Patrick Smikle

HOLLYWOOD, Florida, United States, Jul 4 1998 (IPS) - The US Customs Service described it as the biggest non-narcotics money laundering racket it had investigated.

Between 1991 and 1997, eight confidence tricksters operating out of South Florida (including a paroled murder convict), had duped some 400 people from several countries out of more than 60 million dollars.

The con artists placed advertisements in prestigious newspapers such as the New York Times, the Wall Street Journal, and the International Herald Tribune offering loans to start businesses or finance projects.

The interest rates were attractive but the would-be borrowers had to pay up front fees. Business people, lawyers, doctors and entertainment figures signed complicated contracts and paid fees of between 40,000 and two million dollars.

They were later told that they had not met the terms of their contracts and had forfeited the fees.

It took a three-and-half-year investigation dubbed ‘Operation Risky Business’ to apprehend six of the eight accused. One has already pleaded guilty.

Commentators in Florida have lamented this “further tarnishing of South Florida’s image” coming in the midst of almost daily reports of politicians and other public figures being accused of, or indicted for corruption.

But it is not only South Florida which has had its reputation for corruption and fraud underlined by this scam. The tiny two- island Caribbean nation of Antigua and Barbuda, which already had a reputation as one of the easiest places to launder money because of relaxed offshore banking regulations, hs been similarly affected.

The US Customs Service says its investigations revealed that the eight accused deposited the ‘fees’ they conned from would-be investors in two offshore banks in Antigua; the Caribbean American Bank and the Caribbean International Bank. They then transferred the money back to the US where they divided it among themselves.

One of the tricksters, the murder convict, Lawrence Sangoree jnr. was part-owner of one of the banks The Lester Bird administration in St. John’s immediately announced that it would begin a probe of the Antigua connection and declared that no local government officials were involved in the swindle. It said in a news release that”the likelihood of recovering some of the money had been greatly enhanced by independent actions of the government of Antigua.”

But the incident has served as a reminder of charges made repeatedly over the last several years by the governments of the United States and the United Kingdom that Antigua’s offshore banking sector is a key centre of money laundering, especially for drug traffickers.

The administration has conducted a spirited defence of the sector.

Prime Minister Bird has declared that more money is laundered in Miami in one month than is laundered in the entire Caribbean in one year.

At the same time he has pointed to attempts to tighten regulations in the sector and especially to the creation of the Office of International Business Corporations (IBC) under Drug Czar, Wrenford Ferrance and the mandate given to the IBC to clean up the sector.

“The government realises we have problems and we are taking all the steps necessary to correct those problems immediately,” Ferrance himself has said. “We intend to weed out every undesirable offshore bank in the country and to develop an offshore industry that we can then advertise to the world as the best on earth, bar none.” At the same timethe administration has accused Washington and Whiehall of trying to dictate terms to St. Johs. In a campaign conducted largely through the pages of th weekly Antigua Sun, the government has charged that the United Kingdom is trying to pressure independent Antigua into adopting the same offshore banking regulations which Britain has imposed on its Caribbean colonies.

The Sun, which critics say increasingly reads like a “government mouthpiece” has carried a series of features claiming that the British government is fearful that investors worried about the new egulations in established offshore banking sectors such as Anguilla, Bermuda, the British Virgin Islands, and the Cayman Islands (all UK dependent territories), will turn to Antigua.

The articles have accused the UK of trying to cripple the Antiguan offshore banking sector, charged that the British High Commission in Barbados (which has responsibility for relations with Antigua) is “improperly and possibly illegally trying to influence h Antigua and Barbuda government in its regulation of offshore banking” and accused the UK government’s banking consultant, Rodney Gallagher, of being a spy with MI5 and CIA connections.

One article referred to “the machinations of a shadowy figure named Rodney Gallagher,” and quoted sources which claimed he had “made several attempts to get access to confidential information from the Office of International Business Corporations.”

Another article quoted an unnamed government official as disclosing that eight offshore-banks had been struck off the list of licensed institutions because of failure to comply with regulations.

It also quoted Ferrance as pointing to the collapse of BCCI, which he described as “the largest offshore-banking scandal the world has ever seen” and the more recent collapse of Barings, both British-licensed institutions, and declaring, “I would think Mr. Gallagher has enough cleanup work to do in his own country without meddling in ours.”

But there is sustained local and international criticism of the Lester Bird administration’s approach to managing its offshore banks.

The critics have questioned the qualifications and competence of Ferrance to police the more than 50 offshore bank operating in Antigua.

They have noted that one of the key persons assisting Ferrance in writing new offhore banking regulations is himself the principal in an offshore bank.

They point to the collapse of the European Union Bank last August and the disappearance of the principal owners, Vietalui Papsouev and Serbveo Ushakov, both Russian nationals, with depositors money.

They have expressed discomfiture that after the government placed the Caribbean American Bank in receivership, Ronald Allen Cohen, one of the defendants in the South Florida scam, retained Vere Bird Jnr, the Prime Minister’s brother, to recover some of the funds.

They say the government has adamantly refused to heed advice to place the offshore banks under the supervision of the Eastern Caribbean Central Bank which monitors other sections of the sub- regional banking industry.

And they speculate that the latest developments in a case which dates back to 1980, seems destined to again bring the Antiguan government into sharp conflict with Washington over offshore banking.

That case involves confessed money launderer John E. Fitzgerald, who died before he could make good on a promise to turn over 7 million dollars in drug money being held by Swiss American Bank Ltd. and its partner, Swiss American National Bank of Antigua.

The banks, with the support of the Antiguan government, have refused to turn over the money. The Justice Department has filed suit in a Boston court but both the bank and the Bird administration have responded that a US court has no jurisdiction over an Antiguan bank.

Sources in St. John’s say two million dollars has already disappeared and the balance is being held by the Antiguan government under asset forfeiture regulations. “The administration is caught between a rock and a hard place,” the IPS source said.

“If they turn over the money that could do major damage to the offshore sector. If they don’t, it brings them into direct confrontation with the US government.”

Antigua’s offshore banking sector pays more than 11 million dollars in fees to the government annually and provides more than 100 professional level jobs.

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