ST. GEORGE'S, Grenada — Just three years after he declared bankruptcy in Oregon, Gilbert A. Ziegler arrived in this eastern Caribbean island in 1997 on a passport from the Dominion of Melchizedek, an "ecclesiastical state" that apparently exists only on the Internet.
By his own account, Ziegler paid the government to become a Grenadian under its economic citizenship program, changed his name to Van A. Brink--"for private, spiritual reasons, not to hide"--and laid the foundation stone for what he would later claim was a $62-billion offshore banking empire.
That stone was a ruby. Brink used a photograph and appraisal of the gem to help capitalize First International Bank of Grenada Ltd., which offered interest rates of 100% or more.
Within a year, the bank reported assets of $14 billion.
But last month, First International Bank of Grenada came unglued, threatening thousands of depositors--mostly Americans--with the loss of tens of millions of dollars.
The Grenadian government, which was warned about the bank's practices as early as March 1999, took over what's left of it Aug. 1 and has been struggling ever since to untangle a web of sub-banks and affiliated companies. And in late August, local police charged two Canadian businessmen associated with the bank with fraud.
David Marchant, who as publisher of the Miami-based newsletter Offshore Alert has led an 18-month crusade against First Bank, asserts that the bank used new depositors' money to pay impossibly high interest rates to older depositors until all the money was gone.
Brink, who is now reported to be living in Uganda in one of former dictator Idi Amin's residences, has denied that allegation numerous times. He asserted in a series of recent e-mails to depositors and Grenada's special bank investigator that he is "a target of false allegations, character smears, insinuations and innuendo" that he blames on Marchant. He has not been charged with any wrongdoing.
But with First Bank now teetering, the case offers lessons not only to future offshore depositors but also to a Caribbean region increasingly dependent on the hefty license fees that it earns from its offshore sector.
Offshore institutions such as First Bank often offer higher-than-average yields to foreign depositors, along with the ability to shelter income and assets from taxation or liability in their home countries. Most of the region's established banks operate legitimately.
But policing the industry against fraud and money laundering has largely stymied U.S. and European law enforcement agencies, which have sharply criticized offshore secrecy laws that protect the depositors' and investors' confidentiality.
Millions of Dollars Transferred to Uganda
The blond and balding Brink resigned his positions at First Bank nearly a year ago and has served as a consultant to its board since June. He moved to Uganda earlier this year, announcing an ambitious plan to use $40 million from First Bank to help rebuild neighboring Congo.
Grenada's special examiner, Garvey Louison, stated in an Aug. 22 letter to First Bank's directors, consultants and former directors that "many millions of dollars have been transferred [from the bank] to Uganda and assets acquired there. I am also aware that other properties, including land, have been acquired with the use of monies belonging to the bank or its subsidiaries."
Millions more, Louison stated, were transferred from the bank either directly or indirectly to Brink and other directors. "This clearly is a breach of your fiduciary duties at best and at worst a fraudulent misrepresentation," Louison concluded.
Brink's e-mailed response, while pledging his "full cooperation" with Louison's probe, said the letter "seems to be a matter of skulduggery under color of law rather than a forthright attempt to examine anything as relates to the bank's finance." And he asserted that "ample value does exist to meet the obligations to depositors."
The tone and length of his most recent missive were consistent with the 49-year-old banker's earlier public statements. His paid advertisements and pronouncements since he left behind his failed mortgage brokerage in Oregon have been heavily laced with religion and advocacy for the common man, casting First Bank as a rare vehicle to help enrich America's middle class.
Grenadian Finance Minister Anthony Boatswain insisted in an interview late last month that his government, which was warned by a Grenadian auditor that First Bank was in "complete violation" of offshore laws here, had had no proof of wrongdoing by the bank. It was only after a long-delayed audit by a British accountant, he said, that he learned that "the bank was in serious difficulties. Based on that, we had to send someone in to protect whatever is left of the bank."
"It looks bad," added Keith Friday, senior counsel of the government's offshore regulatory agency. "First Bank is a learning experience for us, there's no doubt about that."