St. Vincent takes over bank linked by US to fraud
By DUGGIE JOSEPH Associated Press Writer
Mar 27th, 2009 | KINGSTOWN, St. Vincent -- Regulators in St. Vincent and the Grenadines have taken control of an island bank that U.S. authorities linked to an alleged $68 million Ponzi scheme, the prime minister said Friday.
Ralph Gonsalves said in an interview with The Associated Press that Millennium Bank in the eastern Caribbean island chain has just $4 million in assets and equity.
It is this year's second prominent fraud allegation involving a Caribbean-based offshore bank. Last month, authorities accused Texas billionaire R. Allen Stanford of defrauding investors of some $8 billion through a bank in Antigua.
Gonsalves defended St. Vincent's regulatory system, saying he has "whittled down" the number of offshore banks in the country from more than 40 to six since taking office in 2001. He said he even tried to kick Millennium Bank out of the country for mismanaging assets.
"We have dealt with all the regulatory issues properly," he said. "The wrongdoing which has been alleged in the complaint has taken place in institutions based in the U.S."
In a complaint released Thursday, the U.S. Securities and Exchange Commission said two U.S. residents cheated more than 375 investors since 2004 by claiming to offer certificates of deposit from the bank at much-higher-than-average interest rates.
The complaint alleges that William Wise of Raleigh, North Carolina, and Kristi Hoegel of Napa, California, orchestrated the scheme through Millennium Bank and its Geneva, Switzerland-based parent United Trust of Switzerland SA, as well as U.S.-based affiliates of both organizations.
Millennium Bank began its operations in St. Vincent in 2000. Gonsalves said he revoked the bank's license in 2003 because of low capitalization and reckless management that left it unable to meet its obligations.
The bank appealed the decision and was reinstated because the government's auditor had not yet been formally qualified. The bank's license was restored in 2004 although it remained in controllership.
Gonsalves said a regulatory body in St. Vincent, the International Financial Services Authority, put the bank into the hands of a receiver, KPMG International, on Thursday.
The International Financial Services Authority said it appointed the receiver to take over bank operations and preserve records and assets after the U.S. Securities and Exchange Commission notified it of the allegations.
The authority said in a statement that it had sought last month to appoint an independent auditor to review Millennium's operations but was rebuffed by the bank. The statement gave no details about why it sought the independent auditor.
Associated Press writer Mike Melia contributed to this report from San Juan, Puerto Rico.
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