State's offshore banking a bust
|August 6, 2002||View for printing|
Sometimes easy money isn't so easy. Offshore banking was supposed to bring effortless millions to Montana. But in the six years after its creation, it has only produced brushes with scandal.
Associated Press Billings Gazette
The only application to open a "foreign capital depository" was allegedly funded by the kind of criminal element feared by offshore banking's opponents. The would-be depository's first investor is out $26 million and suing its representative to the state Banking Commission.
And the founder of the company the state hired to promote the entire program was convicted in February of money laundering. Those incidents, combined with new anti-terrorism money laundering laws, have some officials doubting if the super-rich will ever cache their billions in ultra-private, Swiss-style banks in the Treasure State. Though often called banks, foreign capital depositories are set up specifically to safeguard large sums of money from tax collectors and government regulations in the depositor's homeland. Depositors must be from countries foreign to where their money is placed. U.S. citizens could own and operate the depositories, however.
By now the state expected to be making millions of dollars through a 0.75 percent tax on every transaction made at Montana-based foreign capital depositories. "I'm very concerned with the applicants we've had," said Montana Bank Board Chairman Jim Drummond. "I wonder with the new concerns over terrorism if we can proceed." Drummond, who is also president of First Security Bank, said there's been tremendous political pressure to make the program work. And some board members believe their resistance to fast-tracking the state's first offshore banking proposal spared Montana the embarrassment of being snarled in scandal.
The state Department of Commerce appears to have been less cautious. The company it hired to promote Montana's Swiss-style banking and ferret out shady applicants has itself been linked to money laundering. "Mistakes were made. I'm not denying that, but certainly no one made them with any malfeasance," said former Commerce Director Peter Blouke. Rather, through friend-of-a-friend type assurances, Commerce's Division of Banking and Financial Institutions officials partnered with Globalink, an Oregon-based company supposedly respected and knowledgeable when it came to offshore banking.
Highlighted members of the company included Globalink President Doug Hamilton, of Whitefish, and Bruce Caputo, a former New York congressman and one-time member of the House Banking Committee. Neither a Montana native nor a noteworthy person, William Abraczinskas wasn't included in the announcement. Abraczinskas founded the company, Hamilton confirmed recently. Hamilton, who two years ago spoke publicly about offshore banking's promise, doesn't talk about Globalink anymore other than to say he never controlled it, despite his corporate title.
Sixteen months after the Commerce Department partnered with Globalink, in a unrelated incident, undercover FBI agents arrested Abraczinskas for agreeing to launder Mexican drug cartel money. According to the FBI agents, the money was to be laundered through Globalink. Abraczinskas' plan was to deposit the drug money in foreign depositories like the ones Globalink had agreed to market for Montana. From a depository, Abraczinskas would wire the amount to the undercover agent's place of choice, according to the FBI.
Montana's Banking Division, now under the Department of Administration, didn't terminate its contract with Globalink until this past March, after a federal court in Miami sentenced Abraczinskas to 10 years in prison. Deputy Banking Commissioner Chris Olson, a 27-year employee of the division, said he didn't think his office ever truly did business with Globalink. And he questioned Abraczinskas' level of involvement with the company. Other state officials quickly pointed out that Abraczinskas wasn't convicted of money laundering for nearly two years after the state's partnership.
However, Abraczinskas did have an extensive civil court record before the partnership, most cases stemming from business disputes in his home state, Oregon. Five lawsuits were filed against Abraczinskas in Bend, Ore., during the 1990s. And there was more information Montana could have found on Abraczinskas, said offshore banking watchdog David Marchant. Marchant, the owner of Offshore Business News & Research Inc., published an investigative report on Abraczinskas in February.
In it, Marchant follows Abraczinskas' business dealings from an alleged Oregon timber scam through the money laundering conviction. Earlier, Marchant exposed a Montana registered company, known as "The Bank Exchange" that is accused of helping operate and form bogus offshore credit unions. Abraczinskas was the previous owner of The Bank Exchange, Marchant reported, but wasn't an owner last December when the credit union scam was revealed. The Bank Exchange's principals last December were Darryl K. Willis and Dale A. Erickson, who were charged in June with bilking 100-year-old Una Anderson of Jens out of her $6 million life fortune.
Each man is currently being held on $2.5 million bail. More than $2 million of Anderson's money was allegedly used to establish Montana's first offshore banking account. The offshore banking investigator/reporter concluded Montana officials either didn't investigate Globalink with due diligence, or didn't mind what they found.
However Montana officials did mind when Willis presented vague financial information to the state's banking board in November 2000 during a hearing on his application to open a depository. Willis told the banking board his net worth was less than $200,000 at the hearing. But he also claimed he had personally spent $300,000 applying to be Montana's first offshore bank. The numbers didn't add up. Drummond said the banking board postponed its approval of the application until Willis provided more financial information. Eventually Willis stopped responding to board requests for more information. He and Erickson's application is now considered dead.
Sen. Mike Sprague, R-Billings, said there are many reasons to keep pursuing offshore banking. Sprague drafted the Foreign Capitol Depository Act that launched Montana's offshore banking program in 1997. He hopes the offshore program won't be discarded because of its record thus far. "A bad batter doesn't make the game bad," Sprague said. The senator faults the board for not moving faster and for not establishing application rules that were easier to follow. He faults the Banking Division for not doing more to market offshore banking. As a result of terrorism laws passed after last Sept. 11, offshore banking might have lost its luster. "We had the USA Patriot Act, which was signed late in October or early November, that really created a lot more reporting requirements for a variety of finance-oriented businesses," said Olson, and privacy was one of offshore bankings big draws. "There was a lot of interest initially and it was pretty steady I think for quite a while. But I don't know if we've gotten a single call since the 11th of September."
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WILLIAM ABRACZINSKAS SCREWED ALOT OF PEOPLE IN THE STATE OF OREGON. WE ARE ALL STICKING TOGETHER, AND AS GOD AS MY WITNESS, BILLY BOY WILL GET WHAT HE DESERVES......
Ditto on Darryl- pity poor Mrs. Anderson- hopefully she'll find some justice in recouping at least some of her losses.
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