Bank fraud reaches far and wide
Claiming ownership of a 10,000-carat ruby worth $20 million, a group of friends, including a newcomer to Lake Oswego, started a phony bank 10 years ago, then duped depositors out of $170 million in off-shore investments.
Tailed by an eight-year federal investigation that seized assets in four countries and farmed evidence from three others, the group amassed a multi-million-dollar fortune that included luxury cars and homes, gambling binges and a hydroponic tomato farm in Boring.
It's a story that starts in Oregon and also ends here, with the guilty plea of Lake Oswego's Laurent Barnabe, 68, who recently became the last of four defendants found guilty of crimes related to the scheme. A fifth died awaiting trial.
The tale spans two oceans on chartered jets, exploits a collapsed banana economy in Grenada and taps more than 4,000 investors worldwide.
Though the massive scheme was based in the Caribbean, it cracked in Oregon when bank officials in Forest Grove raised the first red flags about $50 million laundered there.
The plot begins with a rare and privately owned ruby and a man in California.
The sparkling jewel
That it's the stuff of movies is not a detail lost on Claire Fay, Assistant United States Attorney, who laughs a little when she talks about the ruby.
'There is a picture of this ruby, not a good one, it looks like a blob, but it is purportedly a ruby carved in the shape of a boy sitting on a water buffalo,' she said.
The California man who owns it has no involvement in the scheme, Fay said, or with the five people charged in the case - Barnabe, Douglas Ferguson, Gilbert Ziegler, Rita Regale and Robert Skirving.
'He doesn't know how it ever got to be used as the capitalization for this bank,' Fay said.
But in 1997, founders of the First International Bank of Grenada produced a photo and an appraisal of the ruby to start the bank. One year prior, they had paid $50,000 to acquire a legitimate bank, Fidelity International Bank of Canada.
After merging the two, what they built was a Ponzi scheme. Their enterprise paid high returns to investors out of new money from fresh deposits. They never earned revenue through high-yield trading or acquired a professed $26 billion in assets, as claimed.
Instead, the group guaranteed high dividends to those that bought in and paid a two-percent commission to an army of promoters who solicited them.
'As in any Ponzi scheme, the key is to keep getting more and more investors because that's the only way you survive is to keep bringing in more money,' Fay said.
But a story in the Wall Street Journal and reports in a Florida newsletter called Offshore Alert made investors uneasy, calling attention to FIBG's lack of financial backing.
The bank collapsed in 2000 after the news reports and accusations about bribes to a Grenadian official caused deposits to drop off, according to Fay.
She said the bank could never verify its assets, though its founders tried to leverage fictitious ones for loans.
Among the declarations made to potential lenders and investors, Fay said FIBG added leased assets to its holdings, claimed $3.8 billion in gold certificates, pointed to $47 million in phony bank notes and also laid claim to gold mines.
The marketing man
Barnabe, a Canadian and a newcomer to Lake Oswego, allegedly operated the marketing, educational and registration branches of the FIBG.
According to Fay, he came here from Las Vegas to prepare for trial in a federal court in Portland about a year ago. On March 27, he pleaded guilty to two counts of money laundering and is free pending sentencing, set for June 11.
Through his attorneys, Barnabe declined to comment for this story.
According to the plea agreement, he has agreed to a six-year prison term, of which Fay said he already served eight months after his arrest in 2004.
According to court papers, Barnabe's role in the FIGB scheme involved forming three companies through a partnership with Ziegler, allegedly acting as a 'firewall' for the bank. His activities allegedly masked its phony operations with official-looking seminars, training for salesmen and document preparations for investors.
Court documents show Barnabe's seminars attracted speakers from the Grenadian government and from the bank, including attorneys and promoters of the bank products.
Fay said investors and promoters were told deposits to the bank were insured by the IDIC - the International Deposit Insurance Corporation - a fictitious play on the FDIC. Through a partnership with a Milwaukie man, FIBG's founders created an IDIC Web site to bolster the scheme.
Property seized by federal prosecutors includes Barnabe's $800,000 bank account in Austria and a Las Vegas home.
By the time the bank collapsed in 2000, its founders and network of promoters had defrauded more than 4,000 people out of their money, some of pensions and IRA accounts numbering in the hundreds of thousands of dollars.
'One person invested his mom's pension fund, I think he said it was $15,000,' Fay said.
Federal officials estimate the scheme attracted $170 million in deposits. Several Oregonians are said to have lost significant sums.
Over three years, FIBG kept the scheme afloat by moving a massive amount of cash from new investors to banks in the United States from the Caribbean, then paying dividends to primary investors to attract new ones.
'Because this was not a real bank, they had no ability to function as a real bank,' Fay said.
Instead, she said the group had to rely on legitimate banks in the United States to help them do business.
'(Investors) would send their checks down to Antigua, as they were instructed, and then the defendants had the folks down in Antigua literally take the investment checks, stick them in a FedEx envelope and mail them to a business in Forest Grove, Ore., called Automated Payment Processing.
'The people at APP they had their own legitimate bank account at U.S. Bank in Forest Grove so they would, every day, open up the envelopes with all of these investment checks in them from all over the world and go on down to their U.S. Bank branch, deposit the checks into their account and wait for instructions from the defendants on where to send the money,' Fay said.
In addition to laundering cash in Forest Grove, court documents show the FIBG funneled money through the Safeway Northwest Credit Union and a Bank of America in Portland, a Wells Fargo Bank and a Washington Mutual in Clackamas and a Washington Mutual in Wilsonville.
Money from the deposits was siphoned off to pay the salaries of Grenadian employees, considered favorable wages in the island hit hard by the collapse of the banana trade.
Founders and contractors of the bank were also paid. Barnabe, for example, was given $18,000 a month to operate the bank's marketing plan and train promotors to sell the phony deposits, according to Fay.
Others siphoned cash to purchase land and other assets, including a Clackamas home.
The five people indicted in the scheme - including three native Oregonians - are either serving prison terms, awaiting sentencing or deceased.
The plan's alleged mastermind, Gilbert Ziegler, died awaiting trial in 2005 after changing his name to Van Brink and moving to Uganda.
According to court records, the FIBG's hub group of founders was, at its core, fast-living friends who enjoyed the high life.
Ziegler was a native Oregonian who went bankrupt here in a previous business venture.
He moved to Hawaii in the mid-1990s and allegedly began FIBG with Rita Regale, a Hawaii resident. Regale pleaded guilty on charges last summer and is now awaiting sentencing.
Douglas Ferguson, also an Oregonian and a lifelong friend of Ziegler, allegedly moved to Hawaii to help his friend in the bank's operations early on. He pleaded guilty last month and will serve 52 months in prison.
Robert Skirving, also an Oregonian, once ran Private Legacy Trust in Tigard and allegedly joined the group to solicit investments for FIBG. After it collapsed, Skirving was charged with defrauding Oregonians out of $6 million in a Bank of the Nation scheme. He is currently awaiting sentencing.
Barnabe became involved with the group in 1998, according to court documents. Guy Rencher, a West Linn attorney, pleaded guilty to the sale of unregistered securities in the Bank of the Nations case.
Those same documents describe a luxurious lifestyle led by the bank's founders during the life of the fraud. According to the papers, their way of life was defined by high fashion, chartered planes, gambling and the island life of the Caribbean.
They allegedly rented private jets to travel and were routinely ferried between their Grenadian base to other locations in Uganda, Hawaii, Las Vegas and Oregon.
By the time they were indicted on 146 counts of conspiracy, they had purchased millions of dollars in luxury homes in three nations.
They also owned furniture, high-end cars, a tanning bed and designer clothing. They had funneled much of their money into traveling, gambling and even college tuitions.
Federal prosecutors, as they seize assets from the enterprise, are targeting numerous bank accounts worldwide.
They are also seizing properties that include an estate in Uganda and an Oregon farm.
The hydroponic tomato farm is in Boring, where Skirving and his brother-in-law purportedly invested millions in state-of-the-art greenhouses to grow tomatoes.
Fay said they called the farm Project 638, which Fay said was a Biblical reference, although she didn't know which passage was intended.
In Matthew, 6:38 urges followers to build the kingdom of God. In Luke 6:38, 'a good measure, pressed down, shaken together and running over, will be poured into your lap.'