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Seed NewsvineIdentifying Red Flags in Offshore Companies
SOURCE: OffshoreAlert
MIAMI, FL February 14, 2008
Less than three weeks away from the start of the trial of five defendants accused of committing one of the biggest offshore frauds in modern times, the journalist who exposed the scam still marvels at how investors, bankers, and financial advisers missed so many warning signs.
"Enough information was publicly available by the summer of 2000 that clearly indicated the Imperial Consolidated Group was a crime in progress," said David Marchant, Publisher of OffshoreAlert. "Yet the group continued in business for two more years, during which time financial advisers continued to recommend it, banks continued to provide accounts for it, brokers continued to promote it and, most unfortunately, investors continued to pour in money into it.
"I still find it remarkable that so many warning signs were missed. That the group operated from the extremely corrupt Caribbean island of Grenada was a jurisdictional red flag, that most investors' money went into unaudited shell companies in the British Virgin Islands was a transparency red flag, the lack of qualifications of its senior people was a background red flag and, of course, offering high rates of return was an investment red flag."
Marchant added: "This fraud was so obvious from the beginning that, to the trained eye, the group's motto might just as well have been 'Give us Your Money So We Can Steal it From You'."
Imperial Consolidated began operations in the late 1990s and, at one time or another, had offices in the Bahamas, Barbados, the British Virgin Islands, the Cayman Islands, Australia, New Zealand, Spain, and the United Kingdom. The group raised money through its offshore arm, which included a bank and several mutual funds, purportedly to finance its businesses in the UK. However, instead of investors' money being spent as promised, most of it was stripped out by group insiders.
OffshoreAlert first started exposing Imperial in November, 1999 and, thereafter, began publishing stories on a monthly basis documenting new aspects of the group's criminal activity. The articles continued even after Imperial Consolidated filed an unsuccessful libel action against the newsletter on February 20, 2001.
Despite this, Imperial Consolidated continued in business until June, 2002 and, even then, it was not closed down by an angry creditor or diligent regulator but, instead, went into voluntary administration. At the time of its collapse, the group's net insolvency was estimated to be in the region of $400 million, most of which was owed to more than 3,000 investors around the world.
"Incredibly, the dust had not even settled on Imperial's failure when its principals began setting up in business all over again and, for reasons that I cannot fathom, banks again began providing accounts for them, brokers again started promoting their products, investors again began to give them substantial amounts of money and, in one case, a very large law firm even began helping them to commit an asset recovery scam against their original victims," said Marchant. "It almost defies belief."
On March 3, 2008, a trial is scheduled to start in England to determine who was responsible. Five defendants, Jared Bentley Brook, Lincoln Julian Fraser, his brother, Nicholas Grant Fraser, William Godley, and Robert Statham Raven, have each been charged with conspiracy to commit fraud.
A month after that, however, is a more important date for anyone seeking to learn how to avoid the pitfalls that cost so many individuals and businesses so dearly in the Imperial Consolidated scandal. On April 13-15, 2008, the 6th OffshoreAlert Financial Due Diligence Conference will take place in Fort Lauderdale, Florida, at which financial institutions, financial advisers, brokers, investors, and others will be taught how to minimize their risks when conducting business internationally, including spotting red flags in business transactions involving offshore financial centers.
Sign-up on or before February 22, 2008 to receive the best price, i.e. $995 for OffshoreAlert Subscribers and $1,095 for Non-Subscribers, rising to $1,195 and $1,495, respectively, after this date.
For more information about OffshoreAlert's Annual Financial Due Diligence Conference, visit www.OffshoreAlertConference.com or contact Conference Director Naomi Comerford by telephone in Miami, Florida on +1 (305)372-6296 or by email at ncomerford@OffshoreAlert.com
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