Catch and Release
2015; SAGE Publishing; Volume: 32; Issue: 1 Linguagem: Inglês
10.1177/0740277515578628
ISSN1936-0924
Autores Tópico(s)Global Energy Security and Policy
ResumoLondon—James Carter, an investor who sank over $100,000 in several distressed ‘‘assets’’—carbon credits, land, palm oil—believes the companies had at least the appearance of legitimacy, or so the brokers of these deals assured him. Not far away from the pub in the well-heeled neighborhood of Mayfair where he’s sitting are the offices of several of these companies trading in lucrative investments, such as the Sierra Leone-based palm oil project. Well, so-called. Many are either virtual offices, or do not exist at all. These companies are shells, used merely as props, manned by nominee directors. Many have been dissolved or are inactive. Their websites are vague, providing no real detail. The companies have no bank accounts. The lease for the palm oil project is neither legally registered nor valid. Indeed, no palm oil plantation has ever existed at all.But it was a lucrative investment for the network that ran the scam, made up of over 30 entities trading in multiple commodities—gold, platinum, voiceover internet protocols (VOIP), land, agriculture, property, storage, carbon credits, palm oil, diamonds—all investment scams connected to a small group of people who used multiple shell entities, tax havens, and fictitious alternative investment projects. Each was peddled to clients on multiple “sucker lists,” largely retirees. The network is estimated to have generated over $180 million in turnover over a period of five years. “I assumed,” says Carter, “that I was protected, that it was regulated.”At the table behind Carter in this Mayfair pub is a taxi driver who has lost over $30,250—loans from friends, families, and the bank. Like Carter, he invested in a Ponzi scheme. The brokers, “who wore dapper suits, real professional looking folks in a top office,’’ have disappeared without a trace. He questions whether they even gave their real names. The phone service is now disconnected. The offices were short-term leases. His friend, silent save for sympathetic grunts and pats-on-the-back, buys him a beer. Like Carter, he despairs. He knows he will never get his money back. “What’s a man to do,” he says sorrowfully.Without a doubt, Ponzi schemes are as old as the creation of money itself—and greedy, gullible investors looking for a quick buck. But with the commodification of vast stretches of land in regions of the world like the interior of Africa, difficult to access yet holding promises of vast wealth, there are more vulnerable victims—the people of these nations eager for jobs and livelihoods promised by scammers more interested in prying tens or even hundreds of thousands out of the hands of innocents in the West than in satisfying the aspirations of remote African villagers.It is the role of regulators in the developed democracies to make sure that such projects are held in check and their authors prosecuted to the fullest extent of the law. But regulators can only run so fast. The use of tax havens, shell entities, and softly or utterly unregulated investments, enables fraudsters to continue preying on victims and the victimized in both developed and developing countries alike. Few of these individuals had the means, or even the greed, of the victims of a Bernard Madoff, for instance. But those who were wounded in this scheme that I will outline had little or nothing to fall back on, once good faith and trust were breached in the interest of illicit and unchecked profit.London, said George Orwell, is a deeply civilized and useless place. Orwell was speaking of Dickensian London, the center of the earth in the same sense that the belly is the center of the body—a city of consumers. He may just as well have been speaking of London—and the City of London, Britain’s Wall Street circa 2014—a global finance center that, for ten centuries at least, has prided itself on upholding the form and substance of a corporation renowned for legal and financial secrecy. In fact, according to the Serious Fraud Office (SFO), London also acts as head office or central core to a significant network of global tax havens, from the British Virgin Islands and the Cayman Islands, to Bermuda and Gibraltar, while also shaping tax havens that were former colonies, such as Hong Kong and Singapore. These days, over 40 percent of the world’s financial assets are divided among the territories of Britain’s second financial empire, still the one over which the sun never sets. More than 80 percent of international finance activities are conducted through these offshore financial markets, most of them linked directly or indirectly to U.K.-connected tax haven economies.Part of this dominance is related to the specialization of London, prior to today’s modern technology, and its ties to former colonies from Latin American to Africa and across Asia and the Middle East. London’s commercial entities became the vehicle through which investment in, or about, developing countries, would be realized. The combination of tax havens and technology, from faxes to smartphones, allowed capital to become both secretive and hyper-mobile, aided by the deregulation of financial markets.In defiance of conventional wisdom, this did not take place on Wall Street, manipulated by the brilliant young quants who flocked to investment banks and trading rooms there in the booming last decades of the 20th century, but rather by virtue of the City of London’s push to create the Eurodollar market—capturing dollar-denominated deposits escaping regulation of the U.S. Federal Reserve Board—in fact, escaping regulation in nearly every sense. In the push to create a pan-European economy and a currency, the Bank of England agreed that non-residents routing transactions through London would not be regulated by Britain, or indeed any other authority, provided the transaction was denominated in a currency other than the British pound sterling, such as the dollar or eventually that artificial construct, the euro, which the United Kingdom declined to adopt. Overseas territories, dependencies and former colonies, allowed Britain to shift the appearance of tax havenry to other locales, perceived as independent, while maintaining control of the process. The decades-old creation of the now clearly deeply flawed Euromarket incentivized the race to the bottom. Governments deregulated domestic economies, resigned to the reality that markets were deregulated anyway. London was subsequently ranked the world’s leading international finance center. Finance could move through a non-regulated parallel market that was perfectly legal. Lo and behold, the offshore was born, but in reality it was onshore—all around us.London’s role as parent to its legal and financial secrecy jurisdiction subsidiaries takes many shapes and forms. One is the Alternative Investment Market (AIM), a sub-market of the London Stock Exchange (LSE). Unlike big brother, the AIM—rightly characterized as highly risky—is almost wholly unregulated, designed to remove barriers so that small entities might flourish and grow. The issuers of securities in these companies are advised by “nominated private parties” (or NOMADs), paid for by the companies themselves to act as regulators. But the requirements are very light. In effect, this model removes regulation from the public to the same private sector it was intended to regulate. In practice, studies have shown that AIM firms, controlling for factors such as size, leverage, industry, and growth opportunities, perform poorly by almost every standard.But there exists a more opaque market, if only because it isn’t even on the listed radar—over the counter (OTC) type products like alternative investments that take place entirely outside of exchanges and markets, in the dark. The Britain’s Financial Conduct Authority (FCA) does not even regulate businesses backed by physical commodities or alternative investments, unless they are collective investments schemes (CIS). It’s as easy as creating some shell entities, a few fake websites, and glossy brochures. And finding a few suckers willing to bet their fortunes, or pennies, on an often utterly rigged wheel.Jason Thompson invested his $50,000 in Sierra Leone’s palm oil via a broker, London-based Capital Alternatives (CA), whose business is promoting a myriad of lucrative commodities based all over the world from a boiler room located in Sophia House in London.“I was approached by Capital Alternatives who sold me the palm oil production scheme at a value of over $50,470 for 15 acres,” Thompson stated in an e-mail. CA lured him with a positive African growth story. Communities would retain control of their land; a 12.5 percent fixed return ($430 in year one with an annual 5 percent increase); a minimum 120 percent return in five years; and guaranteed buy-back of the land in the fifth year, via the regulated fund, Global Agricultural Fund (GAF).Fast forward to December 2014, somewhere in Dubai. Able Alternatives, with offices in London, Hong Kong, and Australia, is pitching 77 acres of palm at $263,240 to another prospective client, Alan Johnson. By this time, the minimum $32,000 was increased to $65,000 for 20 acres. Around the world other companies had begun promoting the same palm oil project: Premier Alternatives, based in the British Virgin Islands (BVI), Australia-based Velvet Assets, and Sterling and Bond in Hong Kong—all seemingly different entities.“It was junk,” said Thompson referring to what brokers would later call a “distressed” asset. The distressing part was that neither the project nor the asset ever existed.These companies form part of a corporate network, the Capital Organization, a group of 30 or so known shell entities, headed by a U.K.-based disqualified director, Renwick Haddow. Formerly an accountant who played the AIM, Haddow was banned from acting as a director or in the capacity of a director from 2008 for the period of eight years, after he was found to have been misleading investors. A graduate of Thames Valley University with a degree in accounting studies, Haddow’s Catalyst Investment was responsible for redirecting $11.5 million in investors’ funds to brokers—a pattern that would be repeated at the Capital Organization. Though his involvement in companies is secretively guarded, Haddow was listed as a director for more than 75 corporations, most with a dire failure rate.The organization’s scheme siphoned a conservative estimate of $180 million using a number of fabricated alternative investments. These companies operated within, or via, tax havens such as Cyprus, the British Virgin Islands, Dubai, Hong Kong, Anguilla, and London. Haddow ran the show along with his right hand, Marcia Hargous, an Australian-born lawyer and Haddow’s former partner who handled finance and acted as a nominee director on various related companies following his disqualification. Also by his side was Kristan Gander, a wheeler-dealer who helped put various pieces of the puzzle in place, from hiring fixers to brokering products. Eventually, over 30 companies were actively involved in the scheme.The organization prefers a certain type of character to help recruit, lead, and shape young scammers: James Brown, who headed Able Alternatives, recently sentenced to prison for tricking investors out of $600,000 in fake land schemes; Keith Milhench, who arrived at Premier fresh from prison for a U.K. lottery fraud scheme; and Mark Ayres, a disqualified director working with Capital Carbon Credits, who under the name Heavers was convicted for arranging the murder of a boxer. A host of “minute men” manned the organization. Small, passive partners included Geoff Woodcock, formerly a sales agent at Capital Alternatives turned director of Velvet Assets, and Weihahn Gerber, another broker used to set up Lakewood Asset Management. Significant chunks of investor funds would be split 50-50 with key partners like Robert McKendrick. Nominees like David Waygood—who Emma Glanfield of The Daily Mail alleges committed suicide after jumping in front of a train during the FCA proceedings—and Richard Henstock would be used as straw men directors placed in key positions controlled by Haddow. Based in a run-down boiler room-type scene at London’s Sophia House, a building filled with short-term temporary office space, recruits could earn anywhere from $7,500 to $38,000 per month off a set of client, or sucker, lists.“All the projects were fabricated,” says Robert Conroy, a former senior high-level manager based at Capital Alternatives, the primary sales agent. “Between all the companies, about $3 million per month was easily generated in turnover. No monies were actually invested in projects. That’s why senior sales agents could earn such high commissions.”Investment schemes were conceived as close replicas of other legitimate investment companies, sometimes down to the very logo and company names. So Agri Capital (U.S.) became Agri Capital (U.K.), Carbon Capital Credit turned into Capital Carbon Credit. Each company was presented as distinct and separate. Funds from myriad investments—diamonds, gold, land, carbon credit, palm oil—were all pooled into two financial entities, Capital Secretarial and MH Trustees, both based at Sophia House, via the primary sales agent, Capital Alternatives. When investors were paid, the funds came not from actual returns on investments, but from new investors’ funds. In short, a classical Ponzi scheme—on a global basis.“The managers were called into the office to discuss the client returns depending on the initial investment,” Conroy said. “Big clients paid more for obvious reasons.”Conroy, who was able to earn as much as $91,000 per month after joining the company in 2011, finally left after it became clear that the projects were fraudulent. But the process would continue, and the primary culprits continued to show no remorse. “Staff turnover was very high because nobody wanted to work for these kinds of schemes,” Conroy says. “This suited the main crew just fine. I wanted to actually be part of a company that operated honestly and paid its investors from returns.”Throughout the process, Haddow, forbidden by law to control or direct a company, remained CEO of all companies within the organization. “Haddow had complete control at all times of all the subsidiaries within the Organization,” says Conroy. Capital Alternatives, the main broker, would receive between 25 percent and 40 percent of all investor funds. Fictitious projects would use Australia and the Middle East as investment landscapes. But Africa was the easiest sell.“They told me I was helping to save the planet and that they were ethical investments helping Africans,” says Grace White, a pensioner from Britain, who lost over $80,000. People speak anonymously on forums, she said, but are ashamed to come forward by name due to the stigma of having being duped. “I received cold calls, aggressive, out of the blue. We had invested before but always in legitimate schemes. They got our names from investor databases. The sheer pressure of being harassed by very slick agents is probably why myself and lots of others invested. You’re just sold before you know it.”“We never knew how much money palm oil made,” says Conroy, “but it was a lot. No returns were ever paid to existing clients or new clients. The investment pay-outs were designed to fall outside of this three-to-five year time period by which time all clients’ money would never be able to be found.”Outside of Haddow, with 58 dissolved entities and some 20 retired directorships to his credit and his partner Hargous, who acted as his nominee on several companies (over 25 dissolved or closed) following his disqualification, nobody knows just how much cash it accumulated. But Africa was easily presented as a place where money grows on trees for those imbued with the right kind of work ethic—as explained in a shiny brochure. It was good enough to let the millions roll. For palm oil, the millions did roll. But not to investors.If it sounds too good to be true, it is. The Anguilla Financial Services Commission (FSC) regulated fund would buy back the palm oil asset after five years, guaranteed. Investors could exit at any time. The project was supported by local leaders and communities in Sierra Leone’s Moyamba district. West African Palm Oil (WAPO), the tenant, had at least 18,000 acres under cultivation in West Africa. Plantation Asset Management (PAM) was ranked as a specialist in three continents. The brochure was littered with images of signed agreements.But the details didn’t add up. Able Alternatives details for Australia matched that of Velvet Assets; in London, it matched that of several virtual offices; in Hong Kong, it was shared by Curzon Commodities, Sterling and Bond, and others. In Dubai, Able Alternatives didn’t have a license to trade. Sterling and Bond wasn’t registered in Dubai, instead free-riding off Zest 2 Recruitment’s registration, though listed as an entity calling itself Nordico Properties. Zest was a company that appeared legitimate, despite sharing Sterling’s principal, Andrew Nash. But the company seemed to overwhelmingly recruit for the Capital network’s brokers in London, as well as in Dubai and Hong Kong.“No wonder I was never placed anywhere else,” says one former senior sales manager from Capital Alternatives, who was later delegated to several other entities. “We thought it was a legitimate recruitment company. I don’t think anyone knew otherwise.”None of the companies, save for Platinum Commodities, had a license to act as brokers of alternative investments. But Dubai did serve one obvious purpose.According to one sales broker, Sam Taylor, working for Platinum Commodities, “We had the offices in Dubai for tax reasons. The benefits far outweigh the U.K. Dubai is a shiny place, opportunistic. If you’ve got a wealth fund or investment fund, get up there and stick your name on the front door. You pretty much only need an empty office. The main operations come from here, in the U.K.”On July 14, when Lonnie Hobson, the deputy registrar for Anguilla’s corporate registry, is asked about the Global Agricultural Fund (GAF), he confirms the GAF is registered in Anguilla, active and, ‘‘in good standing, having paid all dues.’’ Hobson also claims, in the same email, that he knows nothing about the substance of the companies, because, by law, there isn’t a requirement for a registrar to know. He doesn’t mention that Anguilla is a tax haven, but he doesn’t need to. Its website says it all. “We do not know who a company carries on business with, just that it is properly guided by the Act and Laws of Anguilla,” he writes. Filing details of directors, shareholders, and the like, under the law, is “optional.”Two weeks later, Hobson is adamant that a company called Infinity Star Fund was never registered in Anguilla, nor its charter subsequently revoked, which is odd, because I’m staring at cached documents of country’s official listings, confirming that GAF had indeed operated as Infinity Star Fund, a revoked company, effectively meaning the company operated illegally. On August 5, a screen shot of the Infinity Star Fund’s existence is sent to Hobson. He acknowledges the company’s existence, but adds that he couldn’t find it earlier as it wasn’t listed in the public domain. Turns out, Hobson’s job is not to disclose records that are maintained, but to use scant public listings only that are designed to effectively maintain no records—pursuant to the law, of course.Anguilla may represent just 1 percent of the world’s offshore financial market and some part of its lobster market too, but for U.K. retirees who are its target, GAF and Anguilla—a small, poor island in the West Indies—matters a great deal. GAF, a virtual mailbox company with no known employees, directors, or shareholders, is pledged to “buy back” the full investment at no less than 50 percent of capital value. GAF’s agreement with PAM, which lists only a virtual office’s physical address, is unsurprisingly light on detail, as is GAF’s agreement with Able Alternatives, providing only the nominee office of a P.O. Box in Spencer Valley, Anguilla, belonging to Centurion Financial Services Inc., a nominee entity.One month later, in September 2014, through a statement issued to the U.K.’s Financial Conduct Authority (FCA), Anguilla formally revoked GAF’s license, referring to its fraudulent activities and identifying the company as “formerly, Infinity Star Fund.” In Anguilla, a tax haven that counts on offshore banking to generate cash, the less you know, the better. Yet it turns out that GAF, also involved in the organization’s related scams such as the Football Fund, fronted by an ex-England and former Barcelona football manager, Terry Venables, was just the tip of the iceberg.Land in Sierra Leone, according to the country’s own agricultural investment agency, is often sold for $12 per acre—about 97 percent lower than PAM’s promotional rate. The country’s law requires, among other aspects, that a paramount chief sign and approve land lease agreements, before they are entered into the official land registry (OARG). The land lease agreement optioning 18,000 hectares (45,000 acres)—the same listed in the brochures as cultivated by WAPO—was signed by a company listed as head lessor, Green Energy and Las Lamin, Regent of the Kaiyamba chiefdom in the Moyamba district. Green Energy, leasing the Moyamba land, had a 25 year deal with “tenant” WAPO via Green Energy’s subleasor, PAM. The agreement did not receive a legal registration number nor was it entered into Sierra Leone’s land registry. The land identified was deforested and degraded. The agreement also did not allow for subleasing to third parties such as investors in the U.K.Signed in 2010, Lamin—wrongly referred to as the paramount chief in the agreement—was sickly and would soon pass away. The negotiation process was unclear and suspect. When the current paramount chief, Foday Gulama, learned of the agreement, he said, “I have never even seen the land lease agreement with this company Green Energy.” The chief had similarly never heard of WAPO, PAM, Capital Alternatives, or any other entity involved. Musa Yamba, one of the listed signatories of the agreement, stated there was no palm oil farm and that he had been trying to reach Green Energy executives Robert Minis and Ron Gols for a long time but had heard nothing from them. A check in federal records for the name of Gols, who did not respond to interview requests, saw businesses such as a garage and casino listed under his name in the nation’s capital, Freetown.In an interview, Minis claims he cut ties with PAM as soon as he realized it was fraudulent. Nor did he recognize any of the other corporate entities in the brochure, including WAPO, listed as the management and tenancy company. “The only name I recognize is Plantation Asset Management of London. We had been approached some years ago to sub-lease 5,000 hectares of suitable lands to the mentioned company in London and to implement a palm oil plantation and CPO refinery,” he says. “PAM made many promises but never performed or transformed any substantial payments direct to our accounts or entered into any investment. The contacts and correspondence came through a broker-company in Dubai.” Minis did not provide any proof that ties had been cut. He claimed not to know Haddow at all. But an email authored to GEC by an investor showed Minis referring the investor to ‘Renwick Haddow,’ PAM’s key liaison.The broker in Dubai, Fadal Rahman of Global Carbon Commerce, did not respond to interview requests. An official from the Dubai International Finance Center Registry Services confirms the company was not registered as a service provider. “PAM has never planted any palm tree or other renewable crop in Sierra Leone, has no offices or any business in Sierra Leone, as far as we are aware,” says Minis. He claims to have terminated the project once he understood that PAM was fraudulent.Green Energy’s own offices appeared to be closed during multiple visits. The logo was lifted from an American company. Green Energy’s company secretary, Umaru Koroma, claims he hadn’t heard from Gols or Minis for a long while, and that to his understanding, they were seeking funds in Dubai. Meanwhile, WAPO’s offices were also closed. Registered in 2010, WAPO did not appear to own any land nor was the company involved in any palm oil plantation. Incidentally, WAPO’s 70 percent shareholder, Fintan Roche, published images uploaded in September 2010 (two months before WAPO was incorporated) of himself and panners mining for gold in or near Kamakwie, a town in Sierra Leone. Like Capital Mining, another entity part of the Capital network, WAPO appeared to be a shell company comprised of gangsters. The Capital Organization also dealt heavily in fictive bullion commodities, via numerous brokers.The company’s website, registered in 2012, was created by the same company used for more than a few of the network’s websites—U.K.-based MeshDigital, also used for PAM and other Capital network sites such as Premier Alternatives. The organization often uses the services of another tech company called Identity Protect Limited, which prevents any mining into the website data or e-mail addresses. Keith Mealing, based at New Loom House, where Haddow maintains an office, runs IT for all the Capital organizations. Mealing is also a listed director for Premier Alternatives, registered as Aqua Trading. Mealing did not respond to interview requests.Speaking of Green Energy, WAPO, PAM, and others, Paramount Chief Gulama asserts, “They have no palm oil business in Moyamba,” the fertile southern region of Sierra Leone. In any case, he explains, the lease would be automatically canceled after 16 months if government approval was not received. None of the promised projects, including sustainable development programs for villagers, would be pursued.Haddow eventually got himself into a fix as he was selling palm oil land he did not have, one source explains. The lease was a fake, and the photographs of the plantations were in fact in Malaysia. According to e-mails between Gander, Haddow’s right hand in the organization, and Nick Meade, director of PBV UK, another shell entity, in early February 2014, Haddow’s vehicle would hold the master lease with front companies managing it on his behalf.“PAM is virtually the only provider of direct investment in palm oil for the private investor,” claims the company. “It comes with a steady income stream, asset value underpinned by the operating lease-back option contract, direct ownership, ease of exit, and the assurance of a local welcome.” Yet a visit to the offices, listed on its website as 124 New Bond Street, revealed no such listing. Nor did any of the tenants buzzed on the intercom. The list included Bell 1: Alan Paine; Bell 3: Grove Group; Bell 4: New Bond House; Bell 5: Bob the Tailor; Bell 6: Russian London; and Bell 7: Liberty Tech. None that responded said they had ever heard of the PAM companies. One tenant mentioned they could be operating under a pseudonym to avoid detection. PAM’s website registration details, such as telephone number, matched that of Capital Alternatives, though the physical address was listed as the non-existent Bond Street office.To shift money offshore, complex corporate structures and registration in tax havens, such as Cyprus or the British Virgin Islands, are required. And these seem to have been established. There were several PAMs involved. PAM Property Limited, an active but dormant or unused company, under nominee director Martin Ashton, was connected to PAM Ltd, 50 percent owned by Troff, an entity based in Malta, belonging to Haddow. Troff Ltd Malta replaced Troff Ltd based in Cyprus in 2013, around the time the FCA began probing Capital Organization. Troff’s company documents listed “hair-dressing” as its primary form of business with an HSBC bank account. Another 50 percent shareholder was Paul Ellis, linked to investment scams such as ForEco. Ellis’s tie to the Capital network is revealed, outside of PAM, by SME Capital—the ultimate owner of Capital Alternatives, acting as 25 percent shareholder of the company that is now in liquidation for scamming investors. SME Capital appeared to share similar Capital-related nominee directors, such as Waygood, and links back to a company, VA Corporate Finance, that allegedly provided development funding for Capital Alternatives, which also shares the same names as SME Capital.A previous PAM Management Property Ltd, dissolved in 2013, and owned by Cyprus-based White Sun, had belonged to Haddow. White Sun’s shareholders and directors would be listed as subsidiary entities under the Cyprus-registered nominee firm Megaserve, ultimately owned by Megas Serve based in the British Virgin Islands. Investment entities registered in Britain would often have corresponding entities registered in tax havens, sometimes utilizing the same names. Megaserve Cyprus and BVI provided nominee, or front, directors, shareholders, and other fiscal and legal structures.White Sun Cyprus acted as the sole shareholder of the Capital Organization (U.K.), alongside such Capital-related entities as SME Capital Cyprus, Rooms to Invest Ltd Cyprus (an earlier Haddow scam that hit the British papers), and Capital Organization. Together with British Virgin Islands-based Meg Serve, all provided a lethal layer of opacity preventing courts from seizing assets not in the defendants’ names. While PAM Property Ltd was never mentioned in the brochures, certificates allocating fabricated plots to investors would routinely use this company. According to a source who previously helped manage sales for Capital Alternatives, money was being moved to tax haven entities in tranches of $7,500 to $75,000—small enough to look like high activity investment transactions. In an interview, Haddow neither confirmed nor
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