Lake Oswego man pleads guilty in globe-spanning fraud case

A group with Oregon ties uses a massive ruby and a phony bank to take investors for $170 million

By Lee van der Voo

The Lake Oswego Review, Apr 4, 2007, Updated Oct 30, 2009 (1 Reader comment)

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Claiming ownership of a 10,000-carat ruby worth $20 million, a group of friends, including a newcomer to Lake Oswego, started a phony bank 10 years ago, then duped depositors out of $170 million in off-shore investments.

Tailed by an eight-year federal investigation that seized assets in four countries and farmed evidence from three others, the group amassed a multi-million-dollar fortune that included luxury cars and homes, gambling binges and a hydroponic tomato farm in Boring.

It’s a story that starts in Oregon and also ends here, with the guilty plea of Lake Oswego’s Laurent Barnabe, 68, who recently became the last of four defendants found guilty of crimes related to the scheme. A fifth died awaiting trial.

The tale spans two oceans on chartered jets, exploits a collapsed banana economy in Grenada and taps more than 4,000 investors worldwide.

Though the massive scheme was based in the Caribbean, it cracked in Oregon when bank officials in Forest Grove raised the first red flags about $50 million laundered there.

The plot begins with a rare and privately owned ruby and a man in California.

The sparkling jewel

That it’s the stuff of movies is not a detail lost on Claire Fay, Assistant United States Attorney, who laughs a little when she talks about the ruby.

“There is a picture of this ruby, not a good one, it looks like a blob, but it is purportedly a ruby carved in the shape of a boy sitting on a water buffalo,” she said.

The California man who owns it has no involvement in the scheme, Fay said, or with the five people charged in the case – Barnabe, Douglas Ferguson, Gilbert Ziegler, Rita Regale and Robert Skirving.

“He doesn’t know how it ever got to be used as the capitalization for this bank,” Fay said.

But in 1997, founders of the First International Bank of Grenada produced a photo and an appraisal of the ruby to start the bank. One year prior, they had paid $50,000 to acquire a legitimate bank, Fidelity International Bank of Canada.

After merging the two, what they built was a Ponzi scheme. Their enterprise paid high returns to investors out of new money from fresh deposits. They never earned revenue through high-yield trading or acquired a professed $26 billion in assets, as claimed.

Instead, the group guaranteed high dividends to those that bought in and paid a two-percent commission to an army of promoters who solicited them.

“As in any Ponzi scheme, the key is to keep getting more and more investors because that’s the only way you survive is to keep bringing in more money,” Fay said.

But a story in the Wall Street Journal and reports in a Florida newsletter called Offshore Alert made investors uneasy, calling attention to FIBG’s lack of financial backing.

The bank collapsed in 2000 after the news reports and accusations about bribes to a Grenadian official caused deposits to drop off, according to Fay.

She said the bank could never verify its assets, though its founders tried to leverage fictitious ones for loans.

Among the declarations made to potential lenders and investors, Fay said FIBG added leased assets to its holdings, claimed $3.8 billion in gold certificates, pointed to $47 million in phony bank notes and also laid claim to gold mines.

The marketing man

Barnabe, a Canadian and a newcomer to Lake Oswego, allegedly operated the marketing, educational and registration branches of the FIBG.

According to Fay, he came here from Las Vegas to prepare for trial in a federal court in Portland about a year ago. On March 27, he pleaded guilty to two counts of money laundering and is free pending sentencing, set for June 11.

Through his attorneys, Barnabe declined to comment for this story.

According to the plea agreement, he has agreed to a six-year prison term, of which Fay said he already served eight months after his arrest in 2004.

According to court papers, Barnabe’s role in the FIGB scheme involved forming three companies through a partnership with Ziegler, allegedly acting as a “firewall” for the bank. His activities allegedly masked its phony operations with official-looking seminars, training for salesmen and document preparations for investors.

Court documents show Barnabe’s seminars attracted speakers from the Grenadian government and from the bank, including attorneys and promoters of the bank products.

Fay said investors and promoters were told deposits to the bank were insured by the IDIC – the International Deposit Insurance Corporation – a fictitious play on the FDIC. Through a partnership with a Milwaukie man, FIBG’s founders created an IDIC Web site to bolster the scheme.

Property seized by federal prosecutors includes Barnabe’s $800,000 bank account in Austria and a Las Vegas home.