(Bermuda) Bermuda banks used to launder millions.

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(Bermuda) Bermuda banks used to launder millions.

Unread post by bimjim » Sat Jul 22, 2006

(From the Bermuda Royal Gazette, 14 July, 2006)
(Bermuda) Bermuda banks used to launder millions.

Accounts at two Bermuda banks were used to launder millions of dollars accrued from the corruption of former Antigua Prime Minister Lester Bird and his associates, it has been claimed.

Banker and former Antigua Ambassador to Israel and Russia, Bruce Rappaport, controlled an account at Butterfield Bank, which was allegedly used, together with a Bank of Bermuda account controlled by Antigua Opposition MP Asot Michael, to launder and redistribute the money.

The current Government of Antigua has made the allegations in court proceedings and the story was this week highlighted by former Royal Gazette business reporter David Marchant on the KYC News web site.

In response to our questions on the matter yesterday, Butterfield Bank issued the following statement: "We are unable to comment on the specifics except that we are aware of the case and have fully complied with the law and anti-money laundering regulations."

Mr. Rappaport, an Israeli citizen, a resident of Switzerland and former part-time Bermuda resident, has been connected with financial scandal in Bermuda before. Five years ago, it was revealed that his Antigua-based bank Swiss American held $7 million of what was considered by US and Bermuda authorities to be proceeds of crime, associated with the Irish Republican Army and Boston-based drug runners. Account holder and convicted felon John Fitzgerald forfeited that $7 million as part of a plea agreement.

But instead of directing the money to the US Government, Mr. Rappaport's bank paid $5 million of the disputed funds to the Government of Antigua and another $880,000 into a Bank of Bermuda account.

It is understood that the $5 million was used by Antigua to pay back a loan owed to the Swiss- American.

Mr. Rappaport was at one time the Bank of Bermuda's biggest client and was also the biggest shareholder in the Bank of New York.

Mr. Bird served as Antigua's Deputy Prime Minister from 1976 to 1994 and then became Prime Minister, a role he held until March 2004.

In an action filed at the Antigua High Court on February 20 this year, the Antigua Government is seeking $41.4 million in damages from a long list of defendants including principal targets Mr. Bird, Mr. Rappaport, Mr. Michael and John E. St. Luce, a former Antigua Finance Minister.

KYC News stated: At the centre of the corruption allegations is a contract signed on October 1, 1984 between the Antigua Government, the Antigua Public Utilities Company, and Ishikawajima-Harima Heavy Industries Co. Ltd. (IHI), of Tokyo, Japan, for the construction of the Crabbs Desalination and Power Plant in Antigua pursuant to which 85% (US$29.75 million) of the total cost was to be financed by IHI and repaid by the government - at an annual interest rate of eight per cent - from November 1, 1986 to May 1, 1997 in 20 semi-annual payments for a total repayment of US$42,245,000.

In March, 1990, after falling behind with its repayments to IHI and other creditors, including Credit Suisse, in Zurich, which was owed US$16 million, and Foster Wheeler, in the United Kingdom, which was owed US$22 million, the Government of Antigua appointed Bruce Rappaport to renegotiate the debt, it was alleged. Rappaport was described in Antigua's complaint as a citizen and resident of Switzerland, a former Antigua Ambassador to Israel and Russia, and someone who has been 'linked to various financial controversies over the last 25 years, including a money laundering investigation into his relationship with Bank of New York and Swiss American Bank.

Media reports also link him to arms dealings and alleged business relations with the Bin Mahfouz and the Bin Laden families'.

The debts to Credit Suisse and Foster Wheeler were subsequently paid in full but the government continued to default on its IHI debt repayments and, in 1996, again appointed Rappaport to step in, according to court filings.

Rappaport subsequently represented to the Government that he had reached an agreement to settle the outstanding debt - which had ballooned to $56 million - by repaying it over a 25-year period starting in December 31, 1996 at an annual interest rate of eight per cent for a total payment of US$133,169,013, it was alleged.

"In order to effectuate the monthly payments to IHI, Rappaport created a company named 'IHI Debt Settlement Co.' to serve as the administering vehicle through which the GOAB was to make the payments to IHI," according to the complaint. "In addition, IHI Debt Settlement Co. agreed to assume the debt obligation of GOAB to IHI."

Under the arrangement, Lester Bird allegedly instructed Swiss American National Bank, which was controlled by Rappaport and where the Antigua Government had an account, to make monthly payments of US$403,334, starting on December 31, 1996, to an account in the name of "Bruce Rappaport in trust for the Government" at Butterfield Bank, in Bermuda.

However, investigations by Antigua's Financial Secretary, Keith Hurst, and, later, Pannell Kerr Forster, as auditor of the Antigua Public Utilities Company, discovered that "the settlement purportedly reached by Rappaport and approved by the GOAB to be paid to Rappaport's IHI Debt Settlement Company was for US$61,024,235 more than the settlement amount actually negotiated by Rappaport to be paid to IHI", according to court filings.

When Hurst requested information from Rappaport, the Swiss financier began stonewalling and was uncooperative, not even responding to a request for a copy of the "final signed agreement" between the government and IHI Debt Settlement Co., it was alleged. Rappaport later claimed he was owed the difference in fees, including a "monthly success fee"; costs, reimbursement of foreign exchange losses and other expenses, stated the Antigua Government.

Rappaport claimed that, out of the monthly payment of US$403,334, US$199,740 went to IHI for the debt repayment; US$133,837 was Rappaport's monthly fee for settling the debts of Credit Suisse and Foster Wheeler; US$56,333 was Rappaport's monthly fee for settling the IHI debt; and US$13,244 was Rappaport's "monthly success fee", it was alleged.

However, Antigua's Government does not believe him and alleges that the monthly payments into Rappaport's Butterfield Bank account were substantially a means of stripping funds from the Government and re-distributing them to parties who were part of a corruption scheme.

From the US$403,334 monthly payments made to the IHI Debt Settlement Co. account at Butterfield Bank, Rappaport allegedly transferred monthly amounts of US$33,333 to an account at the Bank of Bermuda in the name of Bellwood Services S. A., a Panama corporation whose directors are Asot Michael and Josette C. Michael, his mother; and US$30,000 to the Bank of Nova Scotia in St. John, Antigua, for the benefit of a Patrick A. Michael Ltd., a company also allegedly incorporated by Michael and his mother."
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Unread post by islandflyer » Sun Jul 23, 2006

Holey moley!

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