FINANCE-PANAMA: Octopus Lands in the Net at Last

By Miren Gutierrez Reprint | | Print |

Miren Gutierrez*

ROME, Jun 11 2003 (IPS) - A suspected conman who laundered millions of dollars in Panama was arrested in Managua Tuesday. The arrest ends an investigation that lasted years, and gives an insight into money laundering operations in soft jurisdictions.

"[Marc] Harris’s arrest is significant for many reasons," David Marchant, publisher of the Miami-based financial bulletin Offshore Alert publisher told IPS. "He is one of the biggest financial crooks ever to operate offshore, and his operations affected many, many people and involved tens of millions of dollars."

But the arrest now "also shows crooks that no matter where you operate, it is possible that a major country will arrest you and bring you to justice," Marchant said.

Harris was the founder and chief executive of The Harris organisation (THO) financial services group, which operated e-banks, insurance companies and a trust company. It also offered stockbroking, in-house mutual funds and other money management services without holding a single licence.

Offshore Alert published a report in March 1998 that THO was insolvent, and was operating a ‘Ponzi’ scheme – known also as a pyramid scheme. These are schemes where illegal transactions are layered over to disguise the original fraud.

The firm sued for libel before a federal court in Miami, and lost in July 1999. An appeal against the judgment was turned down.

Judge Michael Moore said in his ruling that the company’s financial statements were "of questionable validity." He agreed with defence that there was evidence that the group provided "vehicles for tax evasion and fraudulent conveyance of funds out of the United States."

A report by the U.S. Senate Permanent Subcommittee of Investigations revealed in February 2001 that THO had laundered at least 100 million dollars for Forum, a corporation based in Antigua, over 1997 and 1998.

Testimonies from clients suggest that Harris’s firm not only laundered money for clients, but practically robbed them as well. Several of these testimonies say Harris would fly U.S. citizens to Panama, have them whisked through customs, and transport them in a chauffeur-driven Jaguar to downtown Panama City. There they would be smothered with attention and stripped of their money.

The company published enticing propaganda. "The Firm of Marc M. Harris, Inc. is run by Americans, for Americans, specializing in American needs," it said. "All work is done by the firm’s experienced in-house accountants, attorneys, investment advisors, investment bankers, brokers and administrators. Panama is a jurisdiction that imposes severe civil and criminal penalties for disclosure of confidential information; therefore your privacy is secured. In your own country, your advisor can often be your greatest liability."

The firm promised to hide assets from "attack" by way of "law suits, tax increases, currency crashes."

Its basic product was the "Octopus", according to internal documents of the company published by La Prensa newspaper in Panama. The "Octopus" was a foundation that comprised several companies, a bank and an insurance firm, without any apparent ties between them. The laws in Panama do not require the real owner’s name to be listed on company documents. This allowed Harris clandestine control of the money.

"Harris was allowed to operate for so long because the regulatory authorities in Panama, where he was physically based, and in the British Virgin Islands and Nevis, where his main companies were incorporated, refused to act," said Marchant.

La Prensa established that Harris was being protected by Panamanian Attorney-General Jose Antonio Sossa. He disregarded requests for help in investigating Harris from the FBI (Federal Bureau of Investigation), the German authorities, the Anti-narcotics Office of the Chilean Defence Council, and Interpol in Washington.

Instead of investigating Harris, Sossa sued La Prensa for libel. The charges did not go anywhere.

Investigations gathered pace after the Panamanian Exchange Commission revealed in 2002 that several of Harris’s clients filed complaints against Harris through local lawyers because he refused to honour redemption requests.

Some of THO’s clients were notorious.

The FBI wrote to authorities in Panama in 1997 that two U.S. drug dealers, Wallace Stull and James Somerville, had revealed to an undercover agent that they invested their proceeds with THO. The dealers were later arrested and imprisoned in California.

Following that, two clients of THO were captured in Panama and later convicted in the U.S. for financial crimes. Aurelio Anthony Vigna and his son Joseph were sentenced by a Florida Court to 24 and 18 months in prison respectively for tax evasion.

Former THO executive Brent Wagman also landed in the net. He was accused of masterminding a 30 million dollar investment scam whose victims were mostly U.S. pensioners.

Wagman was charged with selling shares in bogus oil and gas companies and pocketing the proceeds. THO provided fake insurance companies for the fraud. THO also gave him refuge after he fled the U.S. before he could be indicted. Wagman had earlier pleaded guilty to one count of securities fraud on May 12, 2000 in Texas.

Offshore Alert says Wagman and THO together set up suspect new companies called ‘The Samaritan’s International Investment Club’ and a fund called ‘The 21st Century Fund’.

Wagman was arrested and deported to the U.S. after being set up in a sting operation organized by the FBI and the Panamanian police. On December 20, 2000, Wagman was sentenced to five years in prison, and fined 19.7 million dollars.

The trail of Harris is strewn also with other names such as Valdimiro Montesinos, the Peruvian super-spy, today in prison on as many as 57 counts including drug trafficking, bribery, torture and assassination. In 2000, Montesinos fled his temporary refuge in Panama in Harris's private plane.

In June last year Harris was evicted from his premises in Panama for non- payment of 47,000 dollars in rent. He then moved to Managua in Nicaragua.

*Miren Gutierrez is IPS Editor-in-Chief. Between 1996 and 2001, she was La Prensa's Business Editor and a part of the team that investigated Harris.