A gem of a rip-off
- Lee van der Voo
- Forest Grove News-Times - News
A massive fraud scheme, now unraveled, funneled millions through Forest Grove
It's a plot better suited to a Hollywood studio than a Forest Grove storefront, but a federal court case that wrapped up last month spelled it out as fact.
Claiming ownership of a 10,000-carat ruby worth $20 million, a group of friends started a phony bank 10 years ago and then duped depositors out of $170 million in offshore investments, funneling almost a third of the funds through western Washington County.
Tailed by federal investigators who seized assets in four countries and gleaned 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.
While the scam fell apart seven years ago, many details didn't come to light until last month, when a pair of defendants pleaded guilty to fraud charges in federal court.
It's a tale that spans two oceans on chartered jets, exploits a collapsed banana economy in Grenada and and taps more than 4,000 investors worldwide, lured by promises of double-digit returns on their money.
Though the massive scheme was based in the Caribbean, it cracked in Forest Grove, where agents of the phony bank had contracted with a local payment processing firm.
The sparkling jewel
The story begins with a rare ruby owned by a man in California.
That it's the stuff of movies is not lost on Claire Fay, an assistant U.S. Attorney, who laughs a little when she talks about the gem. '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 - Laurent 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. A year prior, they had paid $50,000 to acquire a legitimate bank with a similar acronym, the Fidelity International Bank of Canada.
After merging the two into the FIBG, they built a Ponzi scheme. The group guaranteed high dividends to those who bought in and paid a two-percent commission to an army of promoters who solicited them.
The group would pay high returns to investors, not from investments but out of new money from fresh deposits.
'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.
Federal officials estimate the scheme attracted $170 million in deposits. Several Oregonians, including a Forest Grove widow, lost significant sums in the Grenada or related scams.
Over three years, the group kept the scheme afloat by moving a massive amount of cash from their Caribbean bank to legitimate banks in the United States.
As Fay explains it, money from new investors would be sent to nearby Antigua or, later, directly to the Grenada bank which, on paper, had $26 million in assets.
Money from the deposits was siphoned off to pay the salaries of Grenadian employees, living on an island hit hard by the collapse of the banana trade.
Founders and contractors of the bank were also paid - and paid well. Barnabe, for example, was given $18,000 a month to operate the bank's marketing plan and train promoters to sell the phony deposits, according to Fay.
The rest of the cash would be sent to the United States and deposited in legitimate banks so the scammers could pay dividends to earlier investors as a means to attract new ones.
Much of the money, an estimated $50 million, ended up moving through Automated Payment Processing, a small storefront on Pacific Avenue in Forest Grove.
The Grove connection
Investors would 'send their checks down to Antigua, as they were instructed,' Fay said. 'And then the defendants had the folks in Antigua literally take the investment checks, stick them in a FedEx envelope and mail them to Automated Payment Processing.'
APP, as the company is known, was a relatively new business when it was approached by the Grenada bank in the late 1990s. The company had found a niche processing financial transactions for a variety of clients.
'The people at APP had their own legitimate bank account at U.S. Bank in Forest Grove,' Fay said. '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.
Though millions of dollars in scam money was literally moving through their hands, the folks at APP had no idea anything untoward was afoot.
'I was this close to putting money into it myself, but my wife told me no,' said an employee of APP at the time, who asked that his name not be used so as not to threaten his current business.
Even when APP's account at U.S. Bank was suspended during the federal probe, APP employees, felt like there must have been a mistake. 'I really believed that they were innocent, because I had met them,' the employee said.
Court documents show that Barnabe and other defendants organized seminars which featured speakers from the Grenadian government and from the bank.
Fay said investors were told deposits to the bank were insured by the IDIC - the International Deposit Insurance Corporation - a fictitious play on the FDIC. The group even created an IDIC web site to bolster the scheme.
Part of what made the group so persuasive, according to both Fay and the APP employee, was the group's use of church groups as a means of introducing the bank to possible investors.
'There was an underlying born-again Christian theme running through all of this and it was an aspect of this that they used many times,' Fay said.
In addition to laundering cash in Forest Grove, court documents show the group funneled money through the four other Portland area financial institutions.
Collapse comes quickly
By 2000, the scheme was in trouble. News reports and accusations about bribes to a Grenadian official caused deposits to drop off, according to Fay, and later that year, the bank collapsed.
Fay said the bank could never verify its assets, though its founders tried to obtain loans by leverage fictitious holdings, including $47 million in phony bank notes and a bogus claim to gold mines.
In the end, Federal investigators found that the group's founders and their network of promoters had defrauded more than 4,000 people out of their money - some of it from pensions and IRA accounts - in amounts totaling hundreds of thousands of dollars.
'One person invested his mom's pension fund, I think he said it was $15,000,' Fay said.
When the Grenada bank collapsed, it nearly took APP down with it. The small apartment office it formerly occupied is empty, and APP is a shell of what used to be.
As they seize the scammers' assets, federal prosecutors are targeting numerous bank accounts worldwide and properties that include an estate in Uganda and a hydroponic tomato farm in Boring, where Skirving and his brother-in-law purportedly invested millions in state-of-the-art greenhouses.
Fay said they called the farm Project 638, which Fay said was a Biblical reference, although she didn't know which passage was intended.
Matthew, 6:38 urges followers to build the kingdom of God. Luke 6:38 states that 'a good measure, pressed down, shaken together and running over, will be poured into your lap.'
News-Times reporter Christian Gaston contributed to this story. Lee van der Voo, a former News-Times reporter, now works for the Lake Oswego Review.