?It was not the first time that Gilbert Ziegler had drawn attention from the justice department. In the early 1990s, Ziegler owned the Hillsboro-based Hometown Mortgage Corporation, where he proved to be less than capable of running a business. After the Oregon Department of Justice received numerous complaints from Ziegler’s clients, who accused him of overcharging, they investigated the company. Although Ziegler denied the allegations, he signed an Assurance of Voluntary Compliance, in which he agreed not to conduct business as a mortgage or loan broker in Oregon again. In debt for more than $1.1 million, he declared bankruptcy and then decamped for Hawaii, where, as he would later tell would-be investors, he was struck by a vision “inspired by God Himself” while walking on the beach in Maui: He should start an offshore bank.
The business climate in the Caribbean was perfect for realizing such a dream. Places like the Cayman Islands had hosted offshore banks since the 1960s—they had transformed a country that was little more than specks on a map into one of the world’s largest financial centers. Because the Cayman Islands doesn’t tax corporate income or earned interest, its offshore banks have flourished (today more than 275 banks are registered there). As a result, legions of wealthy investors flock to the islands, turning them into tropical playgrounds for the rich.
Eager to cash in on the boom, poorer Caribbean islands like Dominica, Nevis, and St. Vincent announced in the 1990s that they, too, would officially open their doors to offshore banking, but these governments were entirely ill-equipped to manage the complexities of the industry. They created banking rules on the fly; rarely enforced them; rarely tried to verify a bank’s legitimacy. Corruption was commonplace, bribery of officials endemic. As a result, the Caribbean also became the go-to place for con artists. David Marchant, the editor of OffshoreAlert, a watchdog newsletter about the offshore banking industry, likens Caribbean offshore banking in the 1990s to “the Wild West, with the same people setting up the same scams, watching them collapse, and setting up again.”
Ziegler wanted in on it. In August 1996, he bought the rights to Fidelity International Bank, which was an offshore bank in name only, for $50,000. He then began to perfect his investment pitches in Hawaii and later in Oregon, explaining to rapt vacationers that offshore banking was the only place to invest. Why would anyone put their money into a 401(k) with wimpy yields of 6 percent when they could be making triple and quadruple that—tax free—by investing in Fidelity International? In October 1996, he created a fraudulent loan application for $750,000 against the home of his colonic therapist so that she, too, could invest in Fidelity, promising her a 50 percent return. He then began making “interest payments” on her $300,000 investment in Fidelity with her own money.
Earlier in the year, Grenada, one of the poorer islands in the Caribbean (its economy depended primarily on the export of nutmeg, cocoa, and mace) had announced that it, too, would begin offering licenses for offshore banks. In the fall of 1997, Ziegler’s brother, James, claiming the investments of Fidelity International Bank as assets, flew to Grenada and secured a “certificate of incorporation.” The Zieglers called their new bank the First International Bank of Grenada, or FIBG; as its name suggests, it was the first bank on the island.
So ineffective was Grenada’s government that, according to OffshoreAlert, Gilbert Ziegler may have traveled to the country with a passport naming him the Ambassador at Large for the Dominion of Melchizedek, a fake country that existed only on the Internet and was created by con artists for other cons. (His own US passport was valid, but having a second one made him more difficult to trace.) Although Grenada required $2.25 million in capital to set up an offshore bank, Ziegler provided only about $110,000, promising to pay the rest later, terms Grenadian officials accepted.