It was a call from one of the firm’s Caribbean practices that launched me on a totally unexpected but immensely engaging part of my career. There I was, fiddling with the affairs of yet another fish broker (well actually lobster) who was finding it hard to make ends meet in the squeeze between the fisherman and the end buyer, and 24 hours later there I was in a meeting with the minister of finance of Grenada discussing a troubled bank, First International Bank of Grenada, that local practitioners had found beyond their scope. In fairness, I had had some experience assisting the Antigua firm with an offshore bank, which was resolved by mediation under the direction of the late Johnny Cochrane as the U.S., Ukraine, estate creditors and the Antiguan Anti-Money Laundering office all fought over the assets.
This new case was a little different because, while there appeared in theory to be lots of assets, there was no cash, and the assets were cloaked with very strange agreements that made them difficult to verify – including the asset that had provided the start-up capital for the bank, a ruby carving of a boy on a water-buffalo valued at more than $10 million. This lack of cash was even stranger as the bank had been trading in bonds and had reported earnings of hundreds of millions above and beyond the $150 million of account-holder deposits.
This was my first real live Ponzi scheme, and still my favorite despite being subsequently involved in 35 or so offshore banks of little integrity. Its execution was excellent, its timing was perfect with the principal making an exit declaring that if his involvement was controversial he would depart to Uganda, where he was being consulted with respect to their international banking arrangements, and leave the bank in other hands. Two more CEOs were appointed in succession (including a British QC, who subsequently starred in a lurid tabloid expose) both being mystified at the lack of cash given all the assets, and muddying the evidence trail. In the meantime the perpetrator settled down in Uganda to marry a local to secure his Ugandan residency in a former Idi Amin palace.
It took about two minutes to declare the bank fraudulent. All the bond trading was between companies owned and controlled by the bank (all the incorporation documents were in the CEO’s office) located in multiple jurisdictions whose one common feature was secrecy. The principal “assets” were “prime bank securities,” pre-war U.S. bonds issued without the benefit of congressional approval and verifiable only by Mr. Greenspan for a $100 million fee, securities over land, and precious artifacts held under “deeds of assignment by way of loan for a fee,” which gave the bank an interest “as if they had title” so they could be pledged and the funds raised put into investments. Thus, large sums of money could be raised on a “lease fee” of a few hundred thousand, which would be dramatically less than interest on the same value of direct borrowing, which would be tens of millions hence, huge returns were possible. Two snags: the assets were in many cases fictional, and there is no way to raise cash on a “leased asset” that has to be returned at the end of the lease; nor they didn't, but it made a great tale for depositors.
Curiously I came across identical “bonds” in one of my next assignments, which were even the next numbers sequentially. These were traceable back to a scam artist in Canada, who was “consulted” for a fee by both banks and who was, I suspect, the architect for the whole scheme. There is no other explanation as to how a minor failed mortgage broker jumped to being a very successful Ponzi operator so swiftly. Of course, the change of name from Gilbert Zeigler to Van A. Brink might have helped.
The other aspect of the scam is that there were a number of real investments made with genuine third parties, mostly in the United States While some of these were long shots, and the bank frequently failed to fulfill its covenants on the total to be advanced – this created an aura of legitimacy and impressed the regulators. There was also the IDIC – Investors Deposit Insurance Company – to guarantee depositors' funds. Under the terms of the policy, they took a pledge of bank assets of not 3:1, not even 5:1 but on a 10:1 ratio (assets:deposits), so that if the bank went broke, the assets could be realized to cover investors. Again, the plan hit two snags: firstly the assets were never pledged, and second, they were valueless. The premiums did provide a nice living for one of Gilbert’s buddies who also took to spending time in Uganda.
They even had a clever scheme – their GIFT program (Given in Freedom Trust) – for targeting impressionable would-be depositors, which is worth a chapter on its own.
For even greater entertainment value, Gilbert set up his “I hate Marcus Wide” Web site, where he accused me of all sorts of crimes, including “converting billions in bank assets to pay off his personal mortgage.” He was also fond of writing to himself under various names to create a dialogue for a “recovery program” under which he raised funds for a legal action against me – never commenced, of course. Again this is a common tactic of a fraudster – pointing the finger of blame at those sent to clean up the mess.
In the end, Gilbert “dodged the bullet,” dying of a heart attack while awaiting trial in Oregon, having been extradited at gunpoint by the Ugandan authorities (his bodyguard was killed in the process) and arriving in the United States in his pajamas – or so I am told – complaining about violation of his civil rights. Not sure what civil rights he had in Uganda or what the extradition process is there, but given a dawn raid, guns and lethal force, I am not sure I would want to go back and argue the toss. I am still chasing money in Uganda.