Madoff Fraud Scheme Snared Regional Interests






Photo credit: Reuters

“There is bound  to be  a Caribbean link to the Madoff affair.”

That prediction by a Wall Street analyst a few days after the US$50 billion fraudulent Ponzi scheme masterminded by Bernard Madoff made headlines around the world has become a fact of life.

So far, two Caribbean countries, the Caymans and US Virgin Islands, are known to have suffered losses as a result of Madoff’s scheme which has hurt banks, families, educational institutions, investment funds and individuals around the world.

The largest known loser in the Caribbean is M-Invest Limited, an offshore company in the Cayman Islands that has been hit for hundreds of millions of dollars, maybe as much as US$700 million belonging to private investors who had originally placed their money in an elite private Swiss Bank, Union Bancaire Privée.

UBP, a 39-year-old financial institution founded by Edgar de Picciotto, has more than US$125 billion in assets. On its list of clients are some of the world’s wealthiest people and institutions scattered across Europe, North America, Latin America, the Middle East and elsewhere.

Shortly after the turn of the 21st century, UBP decided to set up an arm called M-Invest Limited and registered it in the Cayman Islands. The main purpose, according to people in Paris, Geneva, New York and London, was to channel hundreds of millions of dollars into various investment houses on Wall Street and in Europe. In the process it would earn hefty returns while keeping the transactions secret, away from the prying and covetous eyes of the United States Treasury, the Chancellor of the Exchequer in London, and their counterparts in Paris.

Privileged access

M-Invest, regulated by the Cayman Islands Monetary Authority, was used by UBP to do two things. First, it enabled the private Swiss bank to put at least US$500 million and as much as US$700 million into Madoff’s company in New York. Secondly, the Caribbean entity gave UBP a cozy financial arrangement with Madoff, so much so that M-Invest and UBP were able to get access to financial assessments and other insights into Madoff’s business that others were routinely denied.

The trouble is that M-Invest and UBP must now explain to their clients how come they didn’t spot the fraud long ago and why they seemingly gave Madoff a clean bill of financial health before the debacle despite the misgivings about the way the Jewish investment management was operating and why he was able to provide his clients with hefty returns at a time when others were losing money.

The British territory in the Caribbean is one of the world’s leading banking centres. Like Geneva, Zurich, Vermont, Ireland and Luxembourg, Cayman Islands allows wealthy corporations and families to park their money out of reach of the tax collectors of industrialised nations.

Now both M-Invest and UBP are trying to find out what happened to their funds.

But they aren’t the only ones in the Caribbean crying foul.

Endowment funds lost

The Roman Catholic Diocese of St Thomas may have to turn away students whose parents can’t afford to pay school fees because the church’s two private elementary schools in St Croix have lost nearly US$2 million it had invested with Madoff. The money was in endowment funds set aside to help finance the education of poor students.

“The schools continue to function,” said Monsignor Jerome Feudjio of the Roman Catholic Church. “However, people who knock on the door looking for financial aid, they may have to look elsewhere,”

According to a published report from Charlotte Amalie, the St Mary’s Elementary School lost US$800 000 while St Patrick’s lost almost US$500 000. US Virgin Islands Roman Catholic Bishop Herbert Bevard said an additional US$800 000 in “rainy day funds” went down the drain, washed away in the massive fraud scheme engineered by Madoff.

The losses suffered by the diocese are expected to affect priests as well. The Madoff fraud depleted some insurance and pension funds meant to provide for priests in their old age.

“Even though our priests are young, it means that in 20 years we will have to start finding way to help them,” said Monsignor Feudjio. But while disappointed, Bishop Bevard is being practical about the loss.

“We’re all taking a very philosophical approach to this,” Bevard said. “The reaction from parishioners has been very supportive. But, of course, everyone is very disappointed with Mr Madoff and the fraud.”

Although the Bahamas, Barbados, and Antigua for instance, are not in the Cayman Islands’ league as far as offshore banking is concerned, there is speculation on Wall Street that investment houses in some of those countries may have suffered some losses.

Source: Nationnews


3 Responses to Madoff Fraud Scheme Snared Regional Interests

  1. Pingback: Madoff Fraud Scheme Snared Regional Interests « Bajan Global Report | Ace Card's Caribbean Vacation

  2. Pingback: Madoff Money Trail Leads to Barbados? « Bajan Global Report

  3. Pingback: Madoff Little Helpers Charged « Bajan Global Report

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