Trouble in Paradise

It’s hardly the stuff of a lead story on the BBC Evening News, but there is rather more of interest to be found in the concerns recently raised by the Commons Foreign Affairs Committee in regards to allegations of government corruption in the Turks and Caicos Islands, one of Britain’s few remaining overseas territories.

What caught my eye on seeing this story for the first time was the location.

The Turks and Caicos Islands (TCI), which lie to the South-East of the Bahamas and North of the island of Hispaniola, which is divided between Haiti and the Dominican Republic, and seems, at first sight, a fairly non-descript Caribbean island territory whose economy used to be based mainly on agriculture and fishing but which has, in recent years, come to rely far more on income from tourism. Nice place for a holiday but otherwise all a bit humdrum…

…or maybe not, as while I was researching Flying Lion Ltd, Lord Ashcroft’s global air-taxi service for Tory bigwigs, I notice that TCI had found its way onto the touring itinerary of not just one, but two Tory Shadow Ministers in the space of a mere eight months in 2007.

In March 2007, TCI was one of the stops on Shadow Foreign Secretary William Hague’s flesh-pressing tour of governments of the Western Atlantic, which also took in Belize, Brazil, Iceland, Panama and the Falklands while, the following November, Andrew Mitchell, who shadows the overseas development portfolio, also shipped up in TCI, in addition to Bolivia and Guyana, to meet with ‘development experts and officials’. For both trips flights were provided by Ashcroft’s Flying Lion Ltd, which the true cost being, of course, woefully under-reported to the Electoral Commission.

(Hague was, of course, the leader of the Conservative Party during the period at the end of the 190s when it was most dependent on Ashcroft for money.)

Clearly, for a small island chain to attract the attention of two shadow ministers is such a short space of time, there must be something more to TCI than just crayfish and cruise ships… and it turns out their is.

In common with a number of other British territories in the Caribbean, TCI has developed a rather lucrative sideline in offshore banking and, not uncoincidentally one suspects, it turns out that Lord Ashcroft, in addition to holding Belizean citizenship is also a ‘belonger‘ of the Turks and Caicos Islands and therefore a quasi-citizens of TCI under a rather curious legal classification which appears to be unique to Britain’s remaining overseas territories.

And how does one become a belonger of TCI?

Well, in addition to all the usual stuff about being born in territory, marrying a belonger and having parents (real or adoptive) who are belongers, you can also gain this status if granted a certificate by TCI’s British Governor on the grounds of having ‘made a significant social or economic contribution to the development of the islands’. Ashcroft’s contribution, so far as I can see has been that of opening a branch of the Belize Bank, which is owned by BHI Corporation (in which Ashcroft is the major shareholder) and run by his son, although this was not without some difficulties as The Guardian reported in July 1999:

Mr Ashcroft, having made millions by helping set up a bank in Belize and an offshore tax system, had been trying to expand into the Turks and Caicos, a British dependency.

This was a cause for concern among British diplomats in the region. Leaked foreign office papers in recent weeks revealed that Charles Drace-Francis, a diplomat, writing two years later, suggested Mr Ashcroft was becoming increasingly frustrated over British restrictions on his plans for the Turks and Caicos. ‘He threatened to get the politicians in the TCI to stir up trouble for us,’ Mr Drace-Francis said.

The British government gave him permission to open an offshoot of his Bank of Belize on the islands but refused to let him set up a new bank.

This same Guardian article notes, in a mildly interesting parallel to more recent events, that Ashcroft picked up the tab for flying four backbench Tory MPs to TCI, Cuba and Panama in 1994 to meet with ‘development experts’, with three of these MPs going on to visit Belize. Having quoted the leaked foreign office papers in which Charles Drace-Francis suggests that Ashcroft threatened to stir up trouble for British diplomats by using local TCI politicians as proxies, the article goes on to note that one of the four MPs who visited TCI, Sir Tom Arnold, on returning to the UK…

‘…tabled 21 questions about the trip ranging from offshore financial regulatory arrangements to listing all overseas development administration projects in Belize. Four months before Mr Bourke finally gave up, Sir Tom asked the government what plans it ‘has to recall the governor of the Turks and Caicos Islands’.

Ashcroft’s activities in Central America and the Caribbean rarely make the headlines in the UK but when they do the impression created is invariably a negative one, particularly when his financial interest appear to collide with the politics of the region.

Having moved into Belize, along with a number of his financial interests, in the early 90’s, Ashcroft bought the Belize Bank and set about encouraging local politicians to pass laws which set up flags of convenience, and secretive offshore “international business companies” and trusts, in return for the payment of annual registration fees to the government.

In 1994, a report by a British foreign office adviser called for tighter regulation of financial services in Belize, noting with some alarm that “low standards of regulation and supervision” were attracting “those seeking to conceal proceeds of drug trafficking and other serious crime”. Ashcroft, allegedly, responded to this report by having it quashed and went on the solicit the assistance of Uk’s Conservative goverment of the time, asking them to intervene on his behalf.

Ashcroft was also, reported, not a popular figure in either Belizean government or British diplomatic circles in the mid 90’s. In addition to the Drace-Francis letter, another document leaked to The Times in the late 90’s noted that a telegram written in 1997 by the British high commissioner in Belize, Gordon Barker, had cautioned against the appointment of Ashcroft to the chair of the Caribbean trade advisory group, warning that the Belize government viewed him with “deep suspicion”.Barker also remarked that rumors concerning Ashcroft’s business deals cast a “shadow over his reputation that ought not to be ignored.”

During this same period, Ashcroft bankrolled the right-wing opposition People’s United Party of Belize to the tune of an estimated $1 million, reaping the rewards of his politcal largesse in 1998 when the PUP defeated the ruling centre-left United Democratic Party and then wnet on to introduce several new pieces of financial legislation that were clearly beneficial to Ashcroft’s private interests, not least amongst which was the granting of a total tax exemption to his company BCI Holdings and the grant of an exclusive license to one of his companies for the purpose of setting up offshore companies for US and UK citizens.

However the earlier concerns over the side-effects of Belize’s offshore banking industry alluded to in the 1994 report (cited earlier) resurfaced in an altogether more public manner in 1999, when Ashcroft sued The Times for libel over its disclosure that Ashcroft’s name appeared in the files kept by the US Drug Enforcement Agency in relation to its investigations of drug trafficking and money-laundering in Belize. That case ended in what can only be described as a no-score draw, with neither party backing down and each meeting their own cost, although The Times did make one correction to its original report.

Two years later, documents obtained by the Guardian verified one of the core elements of The Times’ 1999 story, showing that although there was no evidence to implicate Ashcroft in any criminal activity and that he had never been investigated by the DEA or under any suspicion of involvement in criminal activity, what had seriously worried the Americans was that the Ashcroft-inspired tax haven in Belize was, as a side-effect, encouraging fraud, money laundering, drugs and bribery in what was, and still for the most part is, a small, poverty-stricken state with eminently corruptible officials.

In all 1999 was not a good year for Ashcroft. In addition to coming under serious fire from The Times over his DEA file, The Independent also reported that one of Ashcroft’s companies BHI Offshore financial services, had also developed a sideline in selling Belizean passports at £33,000 a pop. Ashcroft also claimed, rather hubristicly, in responding to The Times article over which he sued that:

“not the slightest bit of evidence has been found” to support the theory that the offshore centre he had set up in Belize had been used for money laundering. “This is because there is none.”

It turned out that was mistaken, as evidence emerged that his offshore centre in Belize had been used in at least two known cases of money laundering:

The Banner Fund. It was in 1992 that two US fraudsters, Eddie Blackwell and Lloyd Winburn decided to take advantage of the “offshore centre”, with its facilities for secret “IBC” companies, and inaccessible offshore trusts.

With the promise of enormous returns, they were busy collecting cash from 10,000 credulous US and British investors whom they referred to contemptuously as Joe lunchbags. The money was supposedly to invest in a unit trust, the Banner Fund International Offshore Arbitrage Leveraging Program, run by their company, Swiss Trade & Commerce Trust.

In the words of a subsequent federal court judgment: “They moved Swiss Trade to Belize City where they established it as a Belizean international business company.” The money from the “Joe Lunchbags” was lodged in irrevocable Belizean trusts, from which it was impossible for them to recover it.

And…

The Ricke case. A major American drug trafficker, Thomas Ricke, was believed by the DEA office in Phoenix, Arizona, who were investigating him, to have sent $700,000 of drug proceeds to buy property in Belize. They received intelligence that on one occasion, a man had been sent to put $25,000 in cash into a Ricke account in the Bank of Belize.

Ricke and others eventually pleaded guilty. But the US government could not recover money Ricke invested in Belize properties. It was found to be in the name of several anonymous IBCs, the ownership of which could not be established.

It was this last case that brought the laxity of the Belizean offshore system set up by Ashcroft to the attention of the DEA.

And Ashcroft’s response to these two cases…?

Alan Kilkenny, Mr Ashcroft’s PR man, to whom the Guardian put these points, said: “I’d ask you to demonstrate that money laundering is taking place on a wide scale. Money laundering is taking place elsewhere on a far wider scale. Why should Belize be singled out?” He questioned whether the Banner Trust fraud was truly a case of money laundering. Of the Ricke case, he said the $25,000 deposited in the Belize Bank was “peanuts”. More money had gone through other banks. Asked about the use of IBCs to launder the Ricke money, Mr Kilkenney said: “All this is de minimis”

Actually, Belize wasn’t really singled out, as in 2000 it was one of 35 countries identified by the OECD as having ‘harmful’ tax practices – as was the Turks and Caicos Islands, although both are cooperating with the OECD to clean up their financial practices and have been since 2003.

Nowhere in any of this has evidence ever been found to demonstate that Ashcroft has been involved in any criminal activity, and yet, if one read through the Foreign Affairs Committee’s report on allegations of corruption in the Turks and Caicos Islands one cannot help but be struck by the marked similarities between the committee’s findings and the various incidents and allegations that surrounded Ashcroft’s business activities in Belize during the 1990s.

There is no evidence to indicate any direct involvement in corruption and criminal activity on Ashcroft’s part, for all that he threw this in as a blatant straw man when attacking The Times after his no-score draw libel action by announcing that there was nothing to support “allegations that I am a drug runner and money launderer”, even though no such allegations appear to have been made.

What does seem apparent, however, is that there is a widespread view amongst officials in the US and UK that Ashcroft’s ruthless pursuit of his own self-interest, in Belize, helped create the necessary conditions in which endemic corruption has been able to thrive to the detriment of large sections of the Belizean population, over 30% of whom are unemployed – and with that firmly in mind one cannot but look at Foreign Affairs Committee report and wonder whether, and to what extent, what is seemingly happening in TCI, today, might reasonably be thought mirror conditions in Belize in the 1990s… and beyond.

And beyond?

Yes, the story is far from over in Belize, as the Economist reported in May of this year.

Paradoxically, at the same time that the incoming Boris Johnson administration was deciding that Hugo Chavez’s discounted oil was not good enough for Londoners, a story emerged that showed that Ashcroft Belizean Bank had no such qualms about taking $10 million of Chavez’s money, even though it was intended for the government of Belize.

At issue—and now under dispute in assorted ongoing court cases—is a $10m transfer from Venezuela to the government of Belize that has, in effect, ended up in the coffers of Belize Bank. The bank argues that the money it received constitutes repayment of a government-guaranteed debt; the current government says Belize Bank had no right to hang on to it and is suing to get it.

What follows is a convoluted story about the development of a private hospital set up by a company called Universal Health Services under a corporate/financial scheme so complex that it makes even the most hair-brained of our own government’s PFI schemes look like a paragon of clarity, transparency and accountability; one which left the then government of Belize serious strapped for cash in the face of an impending general election. So in an effort to save his political skin, the unpopular serving Prime Minister of Belize, Said Musa, publicly tapped High Chavez’s government for a $10 million gift to be spent on housing and a new sports stadium as a pre-election bung, and for another $10 million gift which was delivered ‘under the counter’ via the Belize Bank.

It’s this second £10 million that Ashcroft’s Belize Bank has grabbed, in lieu of a loan guarantee relating to the UHS hospital project that was signed off, seemingly illegally, by Said Musa, even though it would appear that the transfer of this second £10 million was conditional on it being spent on improving housing conditions. This money, together with a gift of £6 million from Taiwan, found its way into the…

Turks and Caicos branch of the Belize Bank, where it sits today and, maybe, no one would be any the wiser were it not for the fact the Musa, who led the same People’s United Party of Belize that Ashcroft helped win power in 1998, lost the election to Dean Berrow of the United Democratic Party – and the UDP want the government’s money back.

Perhaps the least surprising thing in the whole story, which takes a bit of following, is the reaction of the Philip Johnson, the chairman of Belize Bank, who wrote in a letter to The Economist only that

“a further settlement was reached which allowed monies to be made available for the purchase of the assets of UHS.” He [Johnson] insists that the guarantees were legal, and claims that Belize Bank in fact received less than it was entitled to. As to the transfer instructions from Venezuela specifying that the funds be paid to the government of Belize for housing, his bank “was not privy to the arrangements between the Governments of Belize and Venezuela”

Although, as the Economist observes…

as the deposit was made into Belize Bank’s correspondent account in London, it seems odd that the bankers should have been unaware of Venezuela’s instructions.

All of which seems typical, on the evidence gleaned from reports from the 1990s, of the apparent modus operandi of Ashcroft’s banking and finance operations in the region, which seems to be patterned, more than anything else, on the actions of Nelson at the Battle of Copenhagen.

(BTW, Nelson didn’t respond to a signal ordering a recall by placing a telescope to his blind eye and announcing that ‘I see no ships”. He did, in fact, do the whole telescope/blind eye thing, but what he actually said was “I really do not see the signal, Damn the signal, Keep mine for close action flying.”)

In recent years, little or no attention has been paid by the British press to Ashcroft’s business activities in Central America and the Caribbean- the Economist story about Chavez’s millions failed to make any of the mainstream papers and only the BBC appears to have reported on the report of the Foreign Affairs Committee on the Turks and Caicos Islands…

…and yet, when you consider that the political tide has seemingly turned against him in Belize, after ten years under a government he helped (financially) to install and that a Commission of Enquiry into allegations of corruption in TCI has now been convened, and factor in Ashcroft’s history of funding political parties that, on gaining power, very quickly start passing legislation that is clearly to his own financial benefit, the right about now is the time that the press should, again, be subjetcing Ashcroft to the kind of scrutiny he faced back in 1999, if only to see if anything shakes loose.