MIAMI, Jan. 7 (UPI) -- A U.S. firm has been forming international banking corporations in Panama and selling them to North Americans at a huge mark-up on the basis that they are "financial institutions."
At least five of the IBCs are currently offering investment products and services from Web sites hosted in Montana or the Bahamas even though none holds a license. Products include certificates of deposit and other instruments purporting to yield up to 108 percent per year, on-line banking, on-line stock broking and credit cards.
All of the sites encourage people to borrow against their homes and put their money into a high-yielding CD under an "Idle Equity Maximization" plan.
One of the sites is operated by the Institute of Global Prosperity, which organizes offshore seminars at which businessmen promote get-rich-quick schemes.
The firm behind the program is The Bank Exchange LLC, of Montana, which describes itself in promotional material as "wholesalers" of licenses for international financial institutions.
Its scheme involves incorporating Panamanian IBCs with the words "credit union" in their name for hundreds of dollars each and selling them for up to $55,000.
All of the "credit unions" are owned by Nevis-registered Limited Liability Companies with similar names and many appear to be physically operated from North America and Nevis.
Apart from providing the offshore structures, the Bank Exchange also hosts Web sites for the "credit unions" and provides marketing and other services.
Within two weeks of being questioned by United Press International about the legitimacy of its operations, the Bank Exchange shut down its Web site at thebankexchange.com.
Several pages of information about the firm have been replaced with a 1-page notice stating: "Closing U.S. operations. This site is currently under construction."
When it was operational, the site claimed that: "At the Bank Exchange, we carry an extensive inventory of these 'seasoned' charters and licenses to institutions in many international jurisdictions."
The firm stated that "We pay cash for pre-owned licenses", adding that it could provide offshore banks, thrifts, credit unions and insurance companies.
The Bank Exchange did not answer questions that were sent to it by UPI, one of which asked for the name of the law in Panama that authorized its "credit unions" to offer financial services.
A legal opinion obtained by UPI from Panama-based law firm Mossack Fonseca & Co. indicated that the companies have no legal authority to operate as credit unions.
"The registration of such a corporation with 'Credit Union' in its corporate name should have been denied by the Panamanian Public Registry," said the law firm.
"We will inform the Panamanian Superintendency of Banks, the Panamanian Public Registry and the Panamanian Autonomic Co-operative Institute of this situation."
The Panamanian Superintendency of Banks told UPI that all credit unions in Panama must be reviewed and approved by the Instituto Panameño de Cooperativas, known as Ipaccop.
However, Ipaccop told a UPI researcher that it had not approved any of the six Bank Exchange-formed "credit unions" whose names we gave it.
They were Prosperitas Internationale Credit Union, Inc., Fountain Avenue Credit Union Inc., Next Vision Holdings Credit Union Inc., Universal Consultants Services Credit Union Inc., Cyber Vision Financial Credit Union Inc. and Worldwide Financial Services Credit Union Inc. All but Next Vision are currently offering investment products and services over the Internet.
In statutory corporate filings, Nevis-based offshore provider Eugene Herbert is listed as president/director of all but Prosperitas Internationale, whose president/director is identified as Javier Adan Rivera.
Herbert acknowledged to UPI that he had a relationship with the Bank Exchange but he stated that his role had been misrepresented. "I have never been asked for, nor given my consent, nor received any compensation for the use of my name as president/director on any 'credit unions' located in Panama," he said.
"I wish to point out that I have started an investigation of the unauthorized use of my name in these Panamanian entities. I will take appropriate action upon completion of the investigation."
When asked whether he believed that forming a Panama company with the words "credit union" in its title automatically gave it special powers, he said: "I am not familiar with Panamanian law, so I do not know what is legal or not legal there."
The principals of the Bank Exchange are Dale A. Erickson, of Missoula, Montana, and Darryl K. Willis, of Helena, Mont., according to corporate filings.
There are two people called Dale A. Erickson who help run the company: Dale Erickson Sr., 53, and his son, Dale Erickson II, 31, who is also known as "BD."
How many unlicensed "credit unions" the Bank Exchange has formed and sold as financial institutions is not known. On Aug. 21, BD Erickson sent an email entitled "ICU Seminar" to "ICU Owners and Board Members", who were identified as Charles Rhines, Carlton Branch, Blake Anderson, Dave Mackenzie, Eldon Sorensen, Garry Bolyard, Larry Sommers, Michael Jared, Larry Carroll, Louie Moss, Robb Cannon and Victor Strange.
In his e-mail, Erickson described the format of an upcoming seminar designed to help them develop their "ICU," which stands for "international credit union."
He referred to a "membership drive," adding: "We want to help you get members and money under management!"
Among the proposed speakers were B.D. Erickson, his father, Dale Sr.; Gary Ferraro and others referred to only as "Lisa", "Sophie", "Bruce" and "Jim."
Among domain names registered to the Bank Exchange are Cybervisionfinancial.com, Fountainavenue.com, Universalconsultantsservices.com, Worldwidefinancialcu.com, Grovesfinancialcu.com, Westendconsultants.com, Oakvillecapital.com, Duplexcu.com, Questixmanagement.com, Riverviewmgmt.com and Internationalcredituniononline.com.
Another domain name relating to a Bank Exchange-formed "credit union" is Prosperitasinternationale.com, which is registered to Richard A. Sales, of GlassWing Media Inc., Portland, Ore.
Web sites relating to five of these domain names are currently operational and contain virtually identical promotional material, offering "members" an array of financial products and services.
Visitors are greeted with the words "Welcome to the world of high finance" and are offered a range of high returns, with the highest rate -- 108.16 percent per annum -- quoted by Cyber Vision Financial.
All sites show the same chart which purportedly "illustrates the capital growth recorded for the Managed Currency Account" for the 2000, which purports to relate to Forex trading. "In that year, the fund hit a low of 3.8 percent a month twice; the remaining months its performance was between 4 percent and 5 percent monthly," it is claimed.
"Above all, our Trading Team is focused on protection of investment principal and consistency of returns. Our Trading Team's Managed Account has lost no investor principal since its inception over two years ago, with a track record of paying approximately 3 percent to 5 percent per month."
UPI asked the Bank Exchange and others for proof of these purported returns and the names of the trading team but the information was not provided.
One of the longest-running "credit unions" established by the Bank Exchange is Prosperitas Internationale, which is operated by the Institute of Global Prosperity and whose Web site is hosted by Maxil Communications Ltd. in the Bahamas.
IGP has become notorious for holding offshore seminars in jurisdictions such as Bermuda, the Bahamas and Mexico at which high yield investment programs are promoted.
Speakers have included representatives of the First International Bank of Grenada group, which went into liquidation in January, 2001 with estimated liabilities of $473 million, and Yank Barry, who is currently awaiting sentencing in Texas following his second criminal conviction.
Additionally, IGP's offices in Issaquah, Wash., were raided by the IRS on March 3, 2001, although no charges have yet been brought.
An audio presentation for Prosperitas Internationale Credit Union can be heard at moneymakinideas.com/igp.htm.
During the presentation, the officers of the "credit union" were identified as Rick Alton, of Montana, president and membership director; Cameron Claridge, of Vancouver, British Columbia, vice president; John Morgan, of Florida, Treasurer; and Bruce Hawkins, of Washington state, Legal Counsel. Hawkins, whose full name is Bruce Edward Hawkins, operates the law firm of Hawkins and Associates in Seattle.
In response to our inquiry, Prosperitas Internationale sent a letter that was not signed by an individual but was on behalf of the "Board of Directors." The author stated that it had a license to conduct business from Nevis through its locally registered LLC.
"Although, Prosperitas Internationale was aware that no authorizing legislation to operate a credit union existed in Nevis, we were and are also aware that in common-law based countries, like Nevis, if something is not specifically illegal, then by default it is legal," stated the letter.
"Meanwhile, however, we are sensitive to this issue and are actively seeking Caribbean countries that are amenable to passing international credit union legislation. We are also very sensitive to the concerns that exist especially since Sept. 11th, and are therefore quite diligent in our KYC (know your client) policies.
"While awaiting the desired legislation we endeavor to operate in a manner that is within all appropriate guidelines."
The letter ended: "Prosperitas exists as a private, member-only financial services company. We do not advertise, nor are marketing activities conducted in G8 countries."
To become a member of Prosperitas Internationale, clients must first become a member of the International Free Enterprise Association at a cost of $75 for six months or $125 for 12 months.
The IFEA "is a private association comprised of individuals longing for the traditional American way of life", according to its Web site at joinifea.com.
(David Marchant is publisher of OffshoreAlert, offshorebusiness.com. Tel. 305-372-6267. Address: 123 S. E. 3rd Avenue, PMB #173, Miami, Fla. 33131.)