Offshore Regulator Creft

The operators of the collapsed First International Bank of Grenada (FIBG) dished out huge bribery payments to officials of the ruling New National Party (NNP) government in Grenada to allow them to run their business on the small East Caribbean island.

This is the testimony which came from Michael Creft, the former Offshore Banking Regulator in the Spice Isle. Creft testified that fraudster, Larry Barnabe who was sentenced to jail for his part in the First Bank scheme "was the conduit for bribes that FIBG paid to the government of Grenada".

In part of his testimony, Creft said that he collected $100, 000.00 in campaign funds from First Bank for the 1999 general elections and gave Prime Minister Dr. Keith Mitchell $50, 000.00 in cash and $25, 000.00 in cash to NNP's former Treasurer, Anthony Joseph.

Prime Minister Mitchell has not issued any official statement on the issue but Joseph publicly denied accepting any such large payments from Creft.

As a public service, GRENADA TODAY focuses on the Sentencing Memorandum from the criminal trial in Oregon in the United States on two of the First Bank schemers, Robert Skirving and Larry Barnabe who were sentenced to jail for their part in the bank fraud that took place in Grenada under the NNP watch:


ROBERT J. SKIRVING

Defendant Robert Skirving was a Director of FIB and FIBG, and attended some of the Board of Directors Meetings. He was persuaded to join the Bank by Brink and (Douglas) Ferguson in 1997.

Prior to that, Skirving, a high school graduate, worked as an Amway salesman. Skirving's principle role in the scheme was to act as the "attorney in fact" for First Acceptance Corporation (FAC), a wholly owned subsidiary of FIBG that purportedly sought income-generating investment opportunities for the Bank.

Skirving literally treated FAC as his own piggy bank. Assets he purchased with FAC money that were supposed to be Bank assets were actually placed in his own name.

* In 1998, Skirving took a $183,000 check from an FIBG investor and used it as part of a down payment on a $1.3 million home in Clackamas, Oregon. Skirving titled the property in his own name, and used it as his family home.

* In July 1999, Skirving purchased a $2.8 million home in Las Vegas, Nevada, and with Regale's assistance, submitted documents to the lender claiming that FAC was his personal asset, worth in excess of $35 million.

Skirving and his wife spent more than $60,000 of FIBG money furnishing this home. Skirving used the home's garage to store his luxury Jaguar sports car.

After receiving the loan and taking title to the luxury home in his own name, Skirving defaulted on the payments and declared bankruptcy, placing the home on his schedule of assets.

Skirving's wife attempted to keep the expensive furniture in the home, falsely telling the bankruptcy court that she used her own money for the purchases, and submitting altered bank records in an effort to support this false claim.

* Skirving used FIBG funds to purchase four additional homes in Portland, Oregon. He titled three of the homes in his own name, rented them out, and kept the rental income. He listed these homes on his bankruptcy petition as personal assets. The fourth house was purchased for Skirving's ex-wife.

* Skirving used large amounts of FIBG funds to gamble, make college tuition payments, and to purchase luxury items like a tanning bed, expensive clothing, jewelry, and vacations.

* In 1999, FIBG began funding Robert Skirving's Project 638, an organic tomato farm in Mulino, Oregon. This was allegedly an investment for the Bank.

Documents indicate that Van Brink considered Project 638 a wholly owned subsidiary of FIBG, but Skirving took title to the property in his own name. Over the course of a little more than a year, Skirving received over $1.5 million in FIBG money to purchase land, construct state-of-the-art greenhouses, buy equipment, and pay employees.

The greenhouses sold approximately $1,000 worth of tomatoes in that time. None of this money went to FIBG. When Skirving declared bankruptcy in 2002, he claimed the Project 638 property as a personal asset.

* Skirving received millions of dollars from FIBG to invest in assets for the Bank. None of them earned money for the Bank. Skirving used much of the Bank's money either to fund worthless projects, such as a gold reclamation venture, or to purchase expensive homes that he put in his own name and lived in.

Skirving was also involved in soliciting investments in the Bank, traveling to Minnesota in 1998 and giving a presentation to a group of approximately 25 potential depositors. At least two of those individuals later invested with FIBG.

* Prior to these solicitations, Skirving received a warning from the Oregon Department of Insurance and Finance regarding the sale of unregistered securities in 1992, and was the subject of a Cease and Desist Order issued by the State of Minnesota Commissioner of Commerce, finding him in violation of Minnesota securities laws and ordering him to cease such violations.

* Skirving was also present for meetings from January 2000 through March 2000, in which he, Ferguson, Regale, Kennedy, and others discussed the Bank's financial status and the fact that the assets were worthless.

* Throughout the course of the scheme, Skirving received in excess of $4.5 million in investor funds. None of this money was reported on Skirving's tax returns.

As FIBG was declining, Skirving and an associate began another Ponzi scheme/offshore bank called Bank of the Nations. Skirving was indicted on wire fraud, money laundering conspiracy and bankruptcy fraud charges in relation to the Bank of the Nations fraud scheme.

His co-defendant in that case was convicted on all counts in a separate jury trial on February 15, 2006, and was sentenced to 120 months in prison. Unlike the present case, the Bank of the Nations scheme was not complex. There was no Bank of the Nations ever established or even any bank account in the name of the Bank of the Nations.

Approximately 26 victims lost in excess of $6 million. More than a million dollars in victim finds went to Skirving's benefit during that scheme. As part of his plea agreement in the present case, Skirving agreed that losses to the Bank of Nations victims should be included in relevant conduct.

LAURENT BARNABE, aka LARRY BARNABE

Defendant Laurent Barnabe, a Canadian citizen, was an important Bank insider. Barnabe had taken some courses in an MBA program, and started his career as an instructor for the Dale Carnegie Institute.

Barnabe worked in the financial and securities industry in Canada before moving to Grenada. He brought his business experience and acumen to the Bank, helping it grow.

* Barnabe authored or approved the Bank's promotional material which contained numerous misleading statements.

* Barnabe attended and participated in the FIBG Board of Directors meetings.

* He was acting Chief Operating Officer (COO) of the Bank from June 1998 to June 1999. During that time, he hired bank employees, established a training program for them, established a Bank security system, hired accountants to conduct an audit of the Bank, and assisted in upgrading the Bank's computer system.

* Barnabe participated in setting Bank interest rates. He advertised himself at seminars as an "advisor" to Brink and the Bank, and therefore knowledgeable about its inner workings.

* Barnabe also acted as the liaison between FIBG and the government of Grenada, setting up and attending meetings between the two entities. The former Grenadian Offshore Regulator, Michael Creft, testified that Barnabe was the conduit for bribes that FIBG paid to the government of Grenada.

Defendant Barnabe' s greatest contribution to the scheme, however, was devising and operating three entities that formed the marketing, educational, and registration branches of FIBG.

He oversaw Offshore Educational Institute (OEI), which trained the promoters who sold FIBG investments to unsuspecting victims. Asset Research and Development Association (ARDA) was the conduit through which FIBG paid commissions to the promoters.

Through ARDA, Barnabe also created at least a dozen subsidiary banks for FIBG that not only brought in more investor money, but also acted as "firewalls" to protect the principals of FIBG. Barnabe operated Granite Registry Services (GRS), which registered investors who formed international business corporations (IBC's), and offered office services to promoters and sub-bank owners.

Barnabe is fond of claiming he had an arms-length business deal with the Bank. However, his companies, OEI, ARDA, and GRS, were totally dependant on FIBG for all their funding.

These operations were vital to the broad success of First Bank. They provided a means of subcontracting the fraud through promoters across the United States. In addition, these mechanisms evaded United States securities laws.

* Barnabe pled guilty to selling unregistered securities in 1995 in Ontario, Canada, and was sentenced to a fine and probation. As a condition of his probation, he was barred from trading in securities or receiving investments from the public. As a consequence, he left Canada and set up operations in the Caribbean.

In December 1999, at the same time he was giving lectures to FIBG promoters and investors, Barnabe was convicted and sentenced on additional securities charges in Quebec, Canada. He failed to disclose both convictions to victims of the FIBG fraud scheme. Although defendant quibbles over the grade of these violations, there is no dispute that he was sanctioned and placed on notice of the wrongfulness of his actions.

* Barnabe was well aware of the registration requirements of the U.S. securities law. He went to some lengths to evade those requirements and detection by U.S. authorities in structuring FIBG's activities.

 Barnabe insisted that individuals should not be permitted to invest in FIBG certificates of deposit. All individuals were required to establish international business corporations known as IBCs. This procedure supposedly would protect the Bank from allegations of offering or selling unregistered securities in the United States, acts which Barnabe freely acknowledged were against the law.

Investors were required to purchase their IBCs at a cost of between $1200 and $1500 from Granite Registry Services (GRS). Barnabe received a percentage of the amounts individuals spent to purchase the IBCs.

* Barnabe conducted seminars in Grenada, instructing promoters on the techniques they should employ to sell FIBG certificates of deposit to investors in the United States.
 
* Barnabe required promoters to become independent contractors (ICs). He had them sign agreements with new investors which indicated that the investors had not been solicited to purchase FIBG or the subsidiary banks' certificates of deposit. In fact, the promoters were commission-earning salesmen.

Defendants promised promoters that in exchange for selling the Banks' investments, they would receive commissions of between 1% and 2% of the amount of funds the promoter brought into the Banks, payable every month for the life of the investment.

* Barnabe earned commissions on every investor dollar that came into the Bank. Under the terms of his agreement, Barnabe received 2% per month of the amount of every CD purchased, for the entire term of the investment. This was in addition to a monthly salary of $18,000.

* Barnabe was well aware that if his promoters were commission-earning salesmen, then they were selling securities in violation of United States' law. He went through semantic gyrations to call these payments finders fees.

But in fact, during his pitches at seminars, he frequently referred to the payments as commissions. After one such slip, he was corrected by a member of the audience. In response, Barnabe said: "I have already incriminated myself like fifty times! Next time you see me, I'll be in shackles and be taken off to the. . .

* Barnabe essentially wrote the script used by promoters in soliciting investors. He told them to focus on the high rates of interest and 100% guarantees they were receiving on their own investments, and characterize the sales pitch simply as a desire by the promoters to either share their financial "good fortune" with potential investors, or to pass along "educational material" to them.
In this way, Barnabe attempted to evade U.S. securities laws requiring that securities dealers be licensed and that securities they offer for sale be registered.

* The sub-banks that Barnabe helped set up were shams. In order to meet their capitalization requirements, they purported to have huge sums on deposit at First Bank when they did not. Among others, Rita Regale executed the false letters documenting those deposits.

The government of Grenada required the sub-banks to have an accountant. Barnabe paid Rupert Agostini $2,500 per sub-bank to use his name as an accountant, but Agostini never did any accounting work for any of the banks. Perhaps not surprisingly, Agostini was on the Board of the Grenada International Financial Services Agency, the regulatory body overseeing offshore banks.

None of the sub-banks ever got the audits required by Grenada law or promised to depositors in Barnabe's promotional material.
Barnabe was intimately involved in acquiring approximately $7 million in pension money through an entity known as PENSCO.

* In March 1998, one of the FIBG promoters engaged PENSCO, a third-party custodian of self-directed individual retirement account (IRA) finds, as a means of funneling this rich source of investment money toward FIBG.

PENSCO is a legitimate company based in San Francisco, and is one of the largest third-party administrators of self-directed IRAs in the United States. Typically, PENSCO clients establish an IRA and instruct PENSCO where to invest their funds. PENSCO neither evaluates the merits of an investment nor gives clients advice on where to invest IRA finds.

PENSCO only sells its services as a custodian of IRA accounts. Most clients know what they want to invest in prior to coming to PENSCO. Usually, these are non-traditional investments such as real estate or private placement offerings.

Indeed, there are very few investments that are prohibited under the laws governing individual retirement accounts. Taken at face value, the certificates of deposit offered by FIBG would most likely not have been prohibited investments under the IRA rules.

* Between May 1998 and April 2000, approximately 166 individuals invested $6.785 million of their retirement money into FIBG through PENSCO.

* In seminars at OEI, Larry Barnabe advised promoters that while pension money was an excellent source of money for the Bank and commissions for them, they had to be careful in their pursuit of these funds, because pension money was well-regulated.

Barnabe proposed that promoters offer PENSCO clients a five-year Venture Capital CD with an interest rate of 8%.
Because FIBG did not want to raise the suspicions of PENSCO, the actual certificate of deposit would indicate that interest was payable at a rate of 8%.
However, according to Barnabe, the promoters were to tell PENSCO investors that the interest rates would actually be up to 34%. The additional interest would be earned when FIBG took half of the investors' funds and loaned that amount to "approved venture capital projects" at a rate of 4% for 30 years.

PENSCO was not to be told of this additional interest earned by the investor.

* Barnabe did not tell the promoters or the PENSCO investors that he planned to use the PENSCO money to fund his own personal projects. The "approved venture capital projects" were condo construction projects in Grenada in which Barnabe had a personal financial stake. Ultimately, these projects were never built.

He set up a group by the name of Destiny Group at Capital Bank in Grenada. Over the ensuing eight months, approximately $200,000 in FIBG finds were transferred into this account.

Barnabe controlled all disbursements from this account, including $60,000 to Rupert Agostini, the sub-banks' accountant and a member of GIFSA, and at least $17,000 to himself. According to Agostini's deposition testimony, the Destiny Group involved setting up a free trade zone in Grenada. That was not, of course, how investors were told money placed with FIBG would be used.

Barnabe was extraordinarily well-compensated for his activities. In total, more than $2.9 million of FIBG funds went to Barnabe's benefit.

* As noted above, Barnabe was paid $18,000 per month to operate ARDA, OEI, and GRS. In addition, he received a 2% commission on all deposits coming into the Bank.

* In 1999, Brink became concerned about FIBG's license in Grenada. He sent Barnabe on several trips to Palau to investigate moving the Bank there. Brink gave Barnabe $500,000 in certificates of deposit for his efforts.

* In January 2000, Barnabe and his "right-hand man," David Springer, formed an entity called Bridgford Solutions, Ltd., and purchased a 2000 Carver 350 Mariner yacht from a Miami, Florida dealership, using $350,000 of FIBG funds.

The yacht, which Barnabe and Springer named "Offshore Funs," was custom built and included upgrades such as a jet boat and trailer, a dinghy, a swim platform, radar, GPS equipment, air conditioning, central vacuum system, a VCR and stereo equipment, fishing equipment, a high-capacity ice-maker, and decorator sheets, pillows and towels.

The yacht was used only once by David Springer in June 2000, during a lesson he took to learn how to operate the vessel. "Offshore Funs" was sold by the yacht dealership in November 2000 for $200,000, and Barnabe and Springer received $170,000 from the proceeds of that sale.

* In February 2000, Barnabe traveled to Las Vegas, Nevada, and started International Learning Center (ILC). This business gave seminars to potential investors about offshore investments. Barnabe took at least $85,000 from FIBG to fund ILC. He placed this business in the name of his daughter, Chantal Seeley.

* At the same time he operated the marketing and educational branch of FIBG, Barnabe acquired his own subsidiary bank called Oxford Bank from one of FIBG's top promoters.

Barnabe provided no capitalization for this bank. He spent between $50,000 and $100,000 of OEI profits to build a new location for Oxford Bank. Barnabe instructed his subordinates to issue "gold-backed" certificates of deposit to Oxford Bank investors, even though Barnabe knew that Oxford Bank had no gold or any other assets.

* Between December 1999 and March 2000, with the assistance of Rita Regale, Barnabe transferred approximately $100,000 per week from FIBG to his Austrian bank, for a total exceeding $1.1 million.
In order to gain Regale's cooperation in this effort, Barnabe made her a Director of ARDA, OEI, and GRS, and paid her $20,000 per month.

* In early 2000, Barnabe transferred from FIBG, over $67,000 as a down payment on the purchase of a luxury Las Vegas condo. Barnabe planned to place the condo in the name of a shell corporation headed by his daughter.

Barnabe transferred over $32,000 of FIBG funds for renovation in the condo. FIBG failed before Barnabe took possession of the condo, and he lost the deposit and the renovation money.