Failed $200 million fund Evergreen Security Ltd.

An offshore mutual fund that has collapsed amid debts of $200 million and allegations of massive fraud had close links with Bahamas-based Surety Bank & Trust, we can reveal.

SBT's relationship with British Virgin Islands-registered Evergreen Security Ltd. appears to be the reason why the bank chose voluntary liquidation late last year over being sold as a going concern. The bank went into liquidation after the Central Bank of the Bahamas suspended its banking license on November 23, 2000 due to concerns over its solvency.

Although SBT has declined to answer questions about its financial condition put to it by OffshoreAlert, it has almost certainly been rendered insolvent by the collapse of Evergreen, whose directors and/or managers have included three of the bank's shareholders.

Evergreen filed for bankruptcy protection on January 23, 2001 in the US Bankruptcy Court for the Middle District of Florida in Orlando, where it was managed. The bankruptcy is now under the control of creditors. The firm's Summary of Schedules filed with the court shows that SBT has an unsecured debt of $22.3 million to Evergreen, while the fund has a claim of $5.2 million against the bank. Other major creditors include Bahamas-based Private Trust Corp., which is owed $17.2 million in its own name, according to court filings, with more than $3.3 million more owed to IBCs under its control.

The Intrados group of Costa Rica, which managed many companies that invested in the fund, has a claim of $85.7 million, IBCs managed by Bahamas-registered Lions Gate Management are owed more than $11 million, while Meridian Trust in the Turks & Caicos Islands is owed $1.8 million on behalf of itself and/or clients.

Other creditors include the Florida Conference of the Free Methodist Church of North America Inc., Ansbacher (Bahamas), Royal Skandia Life Assurance Ltd., Eagle Star International Life Ltd. and controversial lawyer David Hampton Tedder, who has featured in previous articles in OffshoreAlert.

Creditors are located in many countries, including Antigua, Bahamas, Belize, the British Virgin Islands, Cayman, Costa Rica, England, the Isle of Man, St. Vincent and the Turks & Caicos Islands. Since Evergreen has over $203 million of liabilities and only $2.7 million of liquid assets, it is unlikely that creditors will receive anything more than a few cents on the dollar. On paper, Evergreen's assets are put at $427.2 million but virtually all of this amount comprises apparently worthless promissory notes and guarantees from insiders, including SBT shareholders, which was swapped for cash.

The fund offered investors a "guaranteed" annual return of 10 per cent and was supposed to have invested primarily in securities guaranteed by the US government.

Evergreen's collapse and its suspicious insider transactions have triggered an investigation by US regulators and creditors. It will almost certainly involve looking at the role in Evergreen of three SBT shareholders: Hernan Castro, who is the bank's chairman; Thomas Spencer and Robert Boyd, who are all based in Florida. Castro was one of three directors of Evergreen, while Spencer and Boyd were principals of the Florida-registered firm that managed the fund on a daily basis from 1991 to 1998. Together, the three men control 33 per cent of SBT's stock and are believed to be the group of shareholders who objected to SBT being sold last year when the bank was up for sale.

It remains to be seen whether depositors at the bank were told that their funds were to be invested in a fund so closely linked with the bank's shareholders and SBT declined to comment. Court documents show that Spencer and Boyd owe $992,391 and $596,671, respectively, to Evergreen in relation to loans they received from the fund. Serving alongside Castro on Evergreen's board of directors were Edgar Rohrmoser and Patrick Thomson, the latter of whom runs Lions Gate Management in the Bahamas. Thompson did not return a message left by OffshoreAlert.

Evergreen was managed on a daily basis from 1991 to 1998 by Florida-registered ABP International Services Ltd., whose principals were Thomas Spencer, Robert Boyd and Thomas Coyle. The management contract for the fund was transferred in June, 1998 to Florida-registered BJM International Services Inc. Statutory filings show that BJM's principals upon formation on June 5, 1998 were Martin W. Boelens Jr., President; William H. Blankenship, Secretary; and Jeffrey A. Staney, Chief Investment Officer.

According to court filings, Evergreen's liquid assets exceeded $80 million when BJM International took over its management in June, 1998. However, those assets had fallen to approximately $2.7 million by February 20, 2001, representing a loss of 97 per cent, according to court filings. Much of the cash had been replaced by $394.7 million of promissory notes and guarantees from the fund's ultimate owner, New Jersey-based businessman William J. Zylka, or entities under his control.

In addition to BJM's management services, Evergreen also employed Bahamas-registered Investment Services International Ltd. to act as paying agent, registrar and transfer agent and provide investor support. Evergreen Security Ltd. is a BVI-registered corporation that it wholly-owned by Bahamas-registered Evergreen Holding Investment Corp. EHIC is owned by True Investments Inc., which is owned by Zylka. Court filings list the following as auditors of Evergreen within the two years prior to the bankruptcy application: Averett Warmus et al, of Orlando; Deloitte & Touche; and Lou Hevy.

Book-keepers and accountants over the previous six years were Barbara Kerchner, Joel Freund, Lou Hevy CPA, Michelle Murray, Phyllis Schultz, Rebecca Rogers, Richard Tait and Robert Boyd.

Payments made within one year of bankruptcy were made to BJM International Services Inc., Coastal International Life Insurance Co., Investment Services International Ltd., of the Bahamas; Medallion Group International, True Investments Inc. and William J. Zylka.

Medallion Group International is based in Florida and its web-site at www.medallion-group.com is registered to Boelens. Visitors to the web-site are asked to contact Paul E. DeLauro, Vice President/Marketing, for further information about the company. Research by OffshoreAlert showed that Boelens was a speaker at a conference in Grenada held by the 21^st Century Banking Group on May 1-3, 2000 on behalf of BJM International Services Inc.

That bank has since ceased operating following a civil fraud lawsuit filed by the Securities & Exchange Commission and the bank's principals have also been criminally charged with money laundering. Our research also showed that Boelens is linked with Atlantic Portfolio & Analytics, of Florida; and Sentinel Bank & Trust and International Portfolio & Analytics, both of the Bahamas.

On March 12, 1999, Boelens, APAM, ABP International Services and others were defendants in a civil lawsuit filed under the Racketeering Influenced and Corrupt Organizations Act in California. Default judgments in the amount of $10 million for principal, interest and commissions plus $32.4 million in damages and fees were entered against defendants Gunter Matthews and Precision Planning Group, of Canada. The case against the other defendants was dismissed.

Boelens appeared for examination twice in February in relation to Evergreen’s bankruptcy but refused to answer any questions, invoking his right under the Fifth Amendment of the US Constitution not to be compelled to incriminate himself.

We can disclose that Zylka is also linked with Vancouver-based IMP Industrial Mineral Park Mining Corp, whose shares are listed on the Canadian Venture Exchange. Zylka's firm, KAK Investments Inc., was contracted to carry out a US$2.8 million private placement for IMP in May of last year.

The 20 largest unsecured creditors of Evergreen are: Intrados, of Escazu, Costa Rica, $52.74 million; Intrados TPA, of Escazu, Costa Rica, $32.98 million; International Wealth Management, of Bristol, England, $25.1 million; Surety Bank & Trust, Bahamas, $22.28 million; Private Trust Corp., Bahamas, $17.2 million; Perdido PCS Servicios Ltd., $4.74 million; Ansbacher (Bahamas), $3.31 million; Old Mutual International Nominees Ltd., of the Isle of Man, $2.17 million; Sage Investment Corp., of Bahamas, $1.15 million; KJL Ltd., domicile unknown, $1.14 million; Equistar Ltd. of the Bahamas, $1 million; Cloyd Angle Trust, $903,647; Tranmare Resources Ltd., of the BVI, $823,644; Overseas Adjusting Corp. Ltd., of the BVI, $800,000; Medallion Finance Group, of St. Vincent; $784,502; ABP International Services, of Orlando, Florida, $762,552; Teyning Investments, $713,800; Shearwater Executive Leasing, Isle of Man, $700,000; Kerr Markle Stable Yield Fund, of Calgary, $681,448; and Fields Nominees Ltd., domicile unknown, $650,000.

An incomplete list of some of the unsecured creditors is below, by jurisdiction:

Antigua: Morning Trade Ltd., $100,000.

Bahamas: Surety Bank & Trust, $22.3 million; Private Trust Corp. (in its own name), $17.2 million; Ansbacher, $3.3 million; Templar Corporation, $500,000; the following entities registered to Private Trust Corp.: Cloyd Angle Trust, $1.46 million; and Pfif companies, $1.8 million; the following entities registered to Lions Gate Management: Galway Tech Inc, $147,837; Gladstone Investments, $57,883; Good Girl Ltd. $62,614; International Power Cables, $26,263; Jonkath Inc., $217,663; K&G Investment Adv., $630,000; Lami Ltd., $66,981; Lemons to Limes Inc., $680,000; Management Resources International Inc., $68,364; Mira Lago Securities Inc., $536,735; Paris Inc., $587,930; Perdido PCS Servicios Ltd., $4.74 million; Pijoco Inc., $100,000; Prime Global Ltd., 137,640; Sage Investment Corp., $1.1 million; Tanjerose Investments Ltd., $100,000;; Terramin Indemnity Co. Ltd., $255,897; Timepiece Inv. Ltd., $450,000; Timmus Ltd., $66,500; Tom Coyle, $10,000; Triple J Endowment Corp., $25,000; Tristar Steel Sales Ltd., $197,164; Zebra Ltd., $250,000; Axifet Ltd., $550,000; and the following entities registered to Cash Fountain & Co.: Equistar Ltd., $1 million; JND Ltd., $100,000; Zeb Tec Inc., $244,016.

Belize: Deam Ltd., $163,604; JBS Ltd., $163,811.

British Virgin Islands: Mary A. Adamson, $100,000; Cornel Franklyn Baptiste, $193,516; CSI Insurance Group (BVI) Ltd., $280,500; Millennium Insurance Co., $102,161; The Millennium Co. Ltd., $65,100; Overseas Adjusting Corp. Ltd., $920,000; Seaton Overseas Ltd., $293,333; Terrafirma Overseas Ltd., $229,166; Neale Terrance, $69,420; and the following entities that had BVI addresses and were listed under the management of the Intrados group: AMS Asset Management Ltd., $714,663; Courtlands Holding Ltd., $159,500; David Peter Dugdale, $49,750; Harwood Holdings Ltd., $649,250; Reginald Langtry, $50,895; Saanichton Inv. Ltd., $201,495; Teyning Investments Ltd., $1.5 million; and Tranmare Resources Ltd. $823,644.

Cayman Islands: Inrock Corporation, $150,000.

Costa Rica: Intrados, $85.7 million.

Guernsey: Credit Suisse Nominees Ltd., $31,258.

Isle of Man: Eagle Star International Life Ltd., $59,049; Old Mutual International Nominees Ltd., $2.2 million; Shearwater Executive Leasing Ltd., $840,204.

Jamaica: Veronica Campbell, $220,000.

St. Vincent: Medallion Finance Group, $784,502.

Turks & Caicos Islands: Meridian Trust Company, $290,115; and the following entities registered to Meridian Trust: Croft Flit Ltd., $60,000; Fraggle Consultants Ltd., $588,900; Island Systems Ltd., $569,325; Kohler International, $136,350; Sunspec Ltd., $52,000; and Tiger Bay Enterprises Ltd., $59,006.

United Kingdom: International Wealth Management, Bristol, England, $25.1 million.