Marchant, the OffshoreAlert publisher (he’s been called “the offshore pit bull”), first heard about First Bank from a friend. “I took a look, and it was obvious it was a scam,” he says, speaking from his offices in Miami. “Anytime any bank offers a guaranteed high rate of return it’s a fraud, with no exceptions whatsoever.”
Of the thousands of offshore banking schemes that Marchant has tracked and covered in his newsletter, he calls First Bank the most audacious. “None of [the ringleaders] were bright,” he says, “but they had no sense of shame, no social conscience, they were not held back by any sense of ethics…. And why did it succeed? Because an entire jurisdiction welcomes them with open arms.”
The man charged with regulating Grenada’s offshore banking industry was Michael Creft, a Grenadian who had worked in Canada for two decades, most recently as a policy analyst with the Manitoba Department of Highways and Transportation, before returning to his home country in August 1997 to accept the newly minted job of Registrar of Offshore Services. Creft was the one charged with, for example, verifying that First Bank had the required $2.25 million in capital and collecting the bank’s quarterly audit reports. Every time Creft inquired about the reports, Ziegler and his staff delivered excuses: We are just so busy hauling in millions, we haven’t had time to compile them, and couldn’t Creft just wait a bit? First Bank was, after all, contributing to Grenada’s economy by buying office equipment, cars, and real estate, and by employing Grenadians. So yes, Creft could wait, and while he waited, he wondered whether First Bank might consider a $20,000 campaign contribution to Grenadian Prime Minister Keith Mitchell. First Bank agreed, as it did to other five-figure “donations” to various officials. When Creft’s car broke down, First Bank made a $1,000 payment to a local garage.
Panicked over losing their life savings, investors demanded to know what happened to their interest checks.
At one point, to prove that First Bank actually held the assets it claimed, the bank produced a faxed copy of an appraiser’s report “proving” the bank owned a 10,000-carat ruby carved in the shape of a boy riding a water buffalo, a gem worth $20 million. There was also a certificate from the Union Bank of Switzerland that was supposed to prove First Bank owned 870 kilograms of gold bullion, even though First Bank’s name appears nowhere in the paperwork. (On the document, “collectible” is spelled “collactable.”) Creft accepted these as proof the bank at least was solvent.
Others were not as credulous. In January 1999, Marchant exposed First Bank in his newsletter, calling it a “massive fraud” and writing, “the IDIC scam is a carbon copy of a fraud perpetrated by the European Union Bank of Antigua that collapsed in 1997.”
First Bank and the IDIC sued Marchant for libel in US District Court in Miami. “One of the most outrageous conclusions offered by OffshoreAlert is that First Bank … is a Ponzi scheme…. Does the simple offering of high yields to depositors constitute publishable proof that such a bank is operating a Ponzi scheme?” Ziegler wrote in an affidavit filed in Grenada. One of the documents produced in First Bank’s defense was a letter from Creft exonerating First Bank of any wrongdoing. (The letter concluded, “Reckless smear campaigns hurt not only offshore companies but also the Government and people of Grenada and casts aspersions on the integrity of our jurisdiction.”) Ultimately, the court dismissed the suit.
But the impact of the article was immediate. More and more investors, panicked over losing their life savings, started calling the Young Street offices demanding to know what happened to their interest checks.