A Tale of Two Tax Havens from the Land of Oz
It has all the makings of a modern-day fairy tale; a remote South Seas island paradise with a beautiful tropical climate and surrounded by crystal blue waters. Known as the Switzerland of the Pacific, there are no taxes, minimal banking legislation and very little government bureaucratic red tape. It also has its very own university. Described in the pages of Tax Havens of the World, a well-respected three-volume encyclopedia about offshore financial centers around the world, there are 300 banks registered there.
The island declared war on France due to that nations nuclear testing. It later claimed a victory and has since declared war against Serbia to cause it to "retreat and renounce its sinful and violent ways." The campaigns are bloodless. "War is waged to bless yet never harm its enemies." But just what sort of paradise is it?
The island is a paradise of sorts, but to the wrong kind of folks. The Dominion of Melchizedek (pronounced mal-khay-tzed-ek) has long history with U.S. and U.K. insurance and securities regulators. Convicted scam artist Mark Logan Pedley, according to a number of press reports, founded the nation sometime after his 1990 release from prison. The DOM web site at http://www.melchizedek.com provides and interesting insight into a place conceived by a con artist that has become a paradise to the unscrupulous from around the world. Evan David Pedley is listed as a founder but he apparently died in 1987 before the nation was formed.
DOM is located on Karitane Island and now includes the Taongi Atoll in the Northern Atolls of the Marshall Islands in the South Pacific 1000 miles south of Tahiti. However, the Marshall Islands government has condemned the "fraudulent assertions" of two organizations, namely the DOM and sister nation, the Kingdom of EnenKio (the Marshallese name for Wake Island), claiming to represent the mid-Pacific nation amid an alleged investment scam according to an article in Agence France-Presse. The Marshall Islands foreign ministry has issued warnings to countries against acknowledging any fraudulent claims made by representatives of either nation.
A Honolulu-based attorney created the "Kingdom of EnenKio" in the early 1990s. It was based on a power of attorney agreement with Marshall Islands paramount chief Mursel Hermios, which granted the attorney broad powers to act on his behalf. The Marshall Islands High Court has ruled the agreement invalid and ordered it nullified, which the "kingdom" has disputed.
The DOM has been linked to a number of fraudulent schemes.
Houston businessman Leon Excalibur Hooten III, claimed to be president of the DOM in 1994. According to Business Insurance he was found guilty of fraud in 1996 in an insurance scam involving a total of $45 million; $15 million in fake DOM bank certificates of deposit, $10 million in DOM government bonds and $20 million "St. Charles University" bonds. He died of a heart attack in Scottsdale in October 1996.
Inner Sanctum, the bogus banking racket pyramid scheme in the U.K. that issued worthless cheques claiming to be registered in the DOM. Inner Sanctum sought to evade tough rules on illegal banking by claiming its depositors were making "donations" to an American church. Investors were offered the chance to turn £3,300 into £60,000, 25 per cent rebates on food and clothing, more than £50,000 off mortgages and cash towards a car, according to The Guardian. Victims, mostly middle class, were reluctant to come forward due the embarrassment of falling prey to such preposterous promises. As a result the con artists may avoid prosecution.
Jeffrey H. Reynolds III was sentenced in 1997 to more than four years in prison on federal fraud charges stemming from his operation of California Pacific Bankers & Insurance Ltd., supposedly based in Melchizedek, according to Business Insurance."Melchizedek may not be merely a ruse, but getting to the truth requires a walk down a labyrinth that includes a home-brew religion, officials' names that change with kaleidoscopic ease and a history of more legal proceedings than 'Melchizedek' has syllables," stated the Washington Post in a detailed report on the group in 1995. "It appears to exist mainly so that money can be whisked through shell banks."
In September 1998, the U.S. Federal Deposit Insurance Corporation (FDIC) issued a warning about two Washington D.C. banks apparently founded in Melchizedek that were operating without licenses. The Credit Bank International Co. and the Swiss Merchant Bank A.G. were listed under the same address but neither was listed in local phone directories, according to the Washington Times.
It is not clear whether anyone has lost money to the two banks. An FDIC official was quoted as saying that Melchizedek is fictitious and warned that "Any transaction with the banks could put you at risk, risk of the loss of your money, " emphasizing that the country did not exist.
The DOM web site has issued warnings of suspected scams. On June 23, 1998 a report was released about a lottery organization called BIG, affiliated with Swiss Investment Bankers ordering the bank to cease and desist operations in 1995 upon learning that it was promoting a pyramid scheme. According to the news release, Swiss Investment Bankers and BIG resurfaced in Australia in 1997.
A news release was also issued June 24, 1998 warning that individuals should avoid doing business with the London Chartered Bank or its owner, Mr. Robert Styer. According to the report, the DOM has permanently revoked the license of that bank for failing to provide proof of assets.
Washington D.C. regulators first encountered Melchizedek in 1991, according to the Times when two DOM businesses opened shop in the District. The D.C. Department of Consumer and Regulatory Affairs suspected the Banco de Asia Ltd. and Express Bank Ltd. of issuing fake securities. Other DOM business schemes have been reported in Dallas, Hong Kong, London, Arizona, Utah and California
Those claiming to be officials of the DOM have disputed charges that it does not exist. David Korem, head of the house of elders of Melchizedek, says it is real but in answering calls to the island's Washington embassy from his California home, admitted that no one actually lives on Melchizedek. Unfortunately for Mr. Korem and his cohorts, whether the Dominion of Melchizedek exists is not the question. The fact is that is has been linked to so many fraudulent schemes suggests that it is certainly real to con artists who delight in using the mythical domain to dupe unsuspecting victims with fairy-tale dreams and illusory promises.
Roy Bates has found himself in the middle of a similar swirl of illegal activity. Sealand, a principality he claims to have founded, consists of an anchored steel hulk, which is officially known as "Rough's Tower Gun Platform and is nothing more than a Second World War naval fortress. Mr. Bates now 75, a wealthy businessman, lives on the concrete platform with his wife Joan. He declared independence in 1966 and produces his own passports, stamps and coins.
Bates has stated that his claim of independence is valid because it was done 30 years ago when the structure stood outside British territorial waters. Britain has since expanded its influence to cover the territory and does not recognise the principality.
He is furious that fake passports from a self-proclaimed "principality" off the English coast are being used by criminals in multi-million dollar money-laundering and drug-smuggling operations. Bank and customs officials around the world have been accepting Sealand even though the principality, seven miles off the coast of Felixstowe, England.
According to The London Independent, law officers in Slovenia recently found that forged diplomatic papers from the Principality of Sealand were used to open bank accounts used to channel proceeds of illegal pyramid investment schemes in eastern Europe.
During the past few years, evidence has emerged that fake Sealand passports have been used by crooks all over the world. Passports seized in the Slovenian case had entry and exit stamps from at least 10 countries, including Bulgaria, Romania, Iraq, Iran and Libya. Police are examining evidence that forged Sealand passports were sold at around to Hong Kong citizens before the handover to China in July 1997. Drug smugglers have also been reportedly apprehended carrying the fake papers.
INTERPOL alerted Slovenian authorities in 1996, after two Austrians opened a bank account using a Principality of Sealand diplomatic passport. At first, the bank suspected nothing, but its manager called in the Slovenian Office for Money Laundering Prevention (OMLP) upon the arrival of 12 million deutschmarks in a one- month period from Germany, Luxembourg and the UK.
The couple posed as husband and wife, and the man described himself as minister of economic affairs for the Principality of Sealand, according to the director of the OMLP. The director summed up the problem facing customs and other officials when he said, "there are so many new states and young countries now that the bank official accepted the passport as identification to open the account."
The couple were arrested when they tried to cross the border into Italy without declaring money they had withdrawn from the account. However, they could be charged only with forgery (because they used fictitious names) and were granted bail by a judge. The couple fled to Austria and have yet to be convicted of a crime.
Officially Sealand is part of the UK so passports bearing its name are not real. INTERPOL has put out an alert for immigration authorities to watch out for Sealand passports.
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