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A law banning Internet gaming moved a step closer to reality this month when the US Senate voted overwhelmingly in favour of it. The Senate voted by 90 votes to ten to approve a Bill presented by Senator Jon Kyl (Republican-Arizona) that would make it a crime to place a bet over the Internet and to offer Internet gaming services.

Annual statements filed with regulators by Clarendon National Insurance Company are becoming increasingly confusing, not to mention inaccurate in places. Take, for example, its 1996 filing with the New Jersey State Insurance Department, the home regulator for this operating arm of a group that has subsidiaries in Bermuda and the US.

The fiscal exemption clause in the Cayman Island's Proceeds of Criminal Conduct Law may be legally invalid, according to a leading local lawyer and trust services provider. Attorney WS Walker said that legal advice obtained by his firm in London was that the exemption would not stand up if legally tested.

Defendants in a fraud lawsuit involving Bermuda Fire & Marine Insurance Company made an offer last year of between $10 million and $15 million to settle the case, OffshoreAlert can reveal. However, Bermuda Fire's liquidators, Ernst & Young, rejected the offer on the grounds that it fell substantially short of what was acceptable, said a source whose company is owed money by Bermuda Fire.

The unfolding saga of moves by the UK to force its Overseas Territories to recognize fiscal offences in its mutual legal assistance laws is extraordinary in that it reveals the lengths that politicians, civil servants and businessmen will apparently go to lie or mislead the public when they think it is in their best interests to do so.It also underscores the importance of newsletters like Offshore Alert, which was launched in February, 1997 to provide clients with an independent and accurate source of information in a sometimes overly secretive offshore world where the truth is often difficult to find.

A battle for legal jurisdiction between the US government and four offshore financial institutions in a $7 million forfeiture case contains a number of important issues that will affect all companies and individuals who operate offshore but have US clients.Among arguments being put forward by the US government for jurisdiction over banking entities located in Antigua, Switzerland and Panama is the fact that the offshore companies sell their services over the Internet, which can be accessed in the US; that Swiss American Bank has advertised in the in-flight magazine of American Airlines; and that SAB has correspondent banking relationships with banks in the States.

Major legislation has been introduced to US Congress that would extend the power of the US authorities to apply its money laundering laws and penalties in other countries.The proposed laws, which were tabled in April, has the support of both Democrats and Republicans, according to a report in Miami-based newsletter Money Laundering Alert.

A lawsuit filed three years ago in New York is revealing in that it includes details of another business deal involving Martin Hoffman that ended in tears amid allegations of fraud and dishonesty and shows a link between Hoffman, the Bermuda/US-based Clarendon insurance group and Bermuda insurance consultant Robin Spencer-Arscott.

Cayman governor John Owen appears to have secretly promised the UK government that Cayman will change its law to allow foreign investigations of tax evasion.That is the startling revelation disclosed in the minutes of a meeting of the Public Accounts Committee of the UK government held in London on December 15, 1997.

Offshore financial centres that are also UK Overseas Territories have been told that it is not enough for them simply to introduce legislation outlawing ‘all-crimes' but that they must also enforce the new laws.That was one of the messages delivered to the House of Commons Select Committee on Public Accounts by Sir John Kerr, Permanent Under-Secretary of State for the UK government.

The Cayman Islands government is facing its second scandal within seven months following an announcement that Minister of Land John McLean has been cleared of illegally obtaining Crown Land worth tens of millions of dollars - despite evidence to the contrary. The circumstances of the official whitewash of McLean are such that it calls into question the ability of the current government to administer its affairs in a competent or moral manner, including regulating its offshore financial services sector.

One wrote a book describing Albania as a "fairy tale land" and promised he could show investors "how to double your capital at no risk", another sells seemingly dodgy insurance brokerage licences to the gullible, promising they are available within 72 hours to people with no qualifications or even a formal education who will be able to access the Lloyd's of London market; and another has written a book on prostitution showing where "balding, fat guys like your author" can find "Thai virgins".

The liquidators of First Cayman Bank have opened negotiations with the bank's directors and officers with a view to holding them financially accountable for their responsibilities. A lawsuit for negligence is also being considered against the bank's auditors. This and the fact that professional fees and disbursements totalling $1.16 million were incurred in the first 23 weeks of provisional or official liquidation were the highlights of the second report of FCB's liquidators, Ian Wight and Michael Pilling, of Deloitte & Touche, dated May 14.

Further details obtained by Offshore Alert about the UK government's new proposals for regulations in its Overseas Territories confirm that what is being planned represents an offshore financial centre's worst nightmare. And there is growing evidence that independent offshore centres like the Bahamas and Antigua are also facing international pressure to conform to new standards.

The Nevis government has thrown its support behind the First Nevisian stockbroking and corporate services group after Offshore Alert revealed last month that there is a current arrest warrant in South Africa for its main principal, Keith Leslie King, in relation to fraud and forgery charges and that he was kicked out of the Isle of Man by regulators. We have not heard from King or the Nevis government since we ran our article last month.

Offshore Alert's exposé on The Harris Organization last month has caused quite a stir, with journalists from several international media organizations showing an interest in following up the story.

An accountant who participated in one of the world's best-known insurance frauds is currently working for Bermuda-based insurance group Stirling Cooke Brown Holdings as a financial accountant, we can disclose. Brian J. Hynes, former managing director of Carlos Miro-owned Anglo-American International Reinsurance Co., is employed by Stirling Cooke at its London office.

In what is being seen as a test case, the U. S. Government has charged 14 owners and managers of six sports betting companies headquartered in the Caribbean and Central America with conspiracy to transmit bets and wagers on sporting events via the Internet and telephones. The cases are the first federal prosecutions of sports betting over the Internet and they will be watched closely by offshore centers that have embraced gambling as a way of earning much-needed foreign currency.

Readers who are considering doing business with the First Nevisian stock-broking and corporate services group in Nevis might like to know there is a warrant out in South Africa for the arrest of its key principal, Keith Leslie King. They may also be interested to learn that he set up a firm in Nevis after being kicked out of the Isle of Man, where his company, City & International Securities, also recently lost a £45,000 ($72,000) lawsuit brought by a former client. A second lawsuit against City & International Securities and King personally is due to be tried soon in the Isle of Man.

Offshore Alert has obtained confidential documents that are presented to clients of The Harris Organization advising them how to hide their assets from their creditors, be it the IRS or their wives if they are going through a divorce. The documents are so sensitive that the cover sheet states: "Under no circumstances may this document be utilized outside the offices of The Harris Organization. Misuse or disclosure of this document is subject to civil and criminal sanctions under Panamanian law."

Offshore Alert can today disclose that Panama's most-hyped financial services group, known as The Harris Organization, is being run as a massive Ponzi scheme in which clients are being defrauded out of millions of dollars. The situation is so serious that The Harris Organization, which employs 150 people in Panama, is hopelessly insolvent, with net liabilities of at least $25 million, according to sources knowledgeable of the group's financial affairs.

Investors apparently acting on inside knowledge made a killing in the derivatives market on the last day of trading before it was announced that EXEL was buying Mid Ocean, we can reveal. The volume of contracts traded in Mid Ocean call options on the American Stock Exchange increased from an average daily volume of 30 contracts to 950 contracts on Friday, March 13 - two days before the deal was signed and three days before it was announced.

Anyone doing business with the Clarendon Insurance Group should take a close look at further evidence we have obtained which clearly shows that either a senior officer of the group is lying about its relationship with a dubious business producer or the producer is submitting fraudulent documents to the London insurance market. Either way, the Clarendon officer who may have lied to us, Thomas Corteville, vice president/financial operations of Clarendon National Insurance Company, seemed more concerned with attacking this newsletter than analyzing the facts.

Following pressure from Offshore Alert, the Cayman government has done a U-turn and launched a fresh investigation into the suspicious circumstances in which Minister of Land John McLean came into possession of Crown Land worth tens of millions of dollars. In a letter dated March 17, Attorney General Richard Coles, acting on behalf of the Governor, John Owen, wrote to us stating that McLean "is concerned that the matter should be clarified as soon as possible".

Pressure was mounting this month on Cayman Minister of Land John McLean to publicly explain how he came into possession of 200 acres of Crown Land with a potential quarrying value of tens of millions of dollars.Cayman Governor John Owen has been asked to investigate the matter and it was raised yesterday on the floor of the Legislative Assembly by Frank McField, who was ruled out of order by the Speaker. McLean, who has not attended recent Legislative Assembly hearings, was not in attendance.

The Privy Council in London has rejected an appeal by Detective Inspector Brian Gibbs, the Commissioner of the Royal Cayman Islands Police and the Attorney General against a damages award of US$770,000 made in favour of former bank manager John Rea for an illegal search of his home and his office in 1991.The ruling on January 29, 1998 brings to an end a long, embarrassing and costly saga for the Cayman authorities in which they were found to have maliciously obtained and executed two search warrants against Rea in October, 1991.

A fierce battle has been taking place behind closed doors in the Bahamas over the last month to prevent the government from controlling the winding-up of Gulf Union Bank (Bahamas) Limited.Depositors are concerned that a government-controlled liquidation will lead to a whitewash of the regulatory role in the bank's collapse of the Central Bank of the Bahamas.

The clearest indication yet that the UK government will force its Overseas Territories to co-operate with foreign regulators investigating both fiscal and regulatory offences was given this week to Offshore Alert.Offshore centres like Bermuda, the Cayman Islands, the Turks & Caicos Islands and the British Virgin Islands are being told by the UK government to introduce within two years legislation that will be virtually identical to the UK Criminal Justice (International Co-operation) Act 1990.

The latest news from the liquidators of First Cayman Bank is that there were 3,606 depositors with total deposits of $27.3 million.Of the total deposits, US$24.9 million, or 91 per cent, was placed by only 343, or 9.5 per cent, of depositors, each of whom had a net deposit of over US$10,000.

The complicated legal battle over whether General Electric-subsidiary Electric Mutual Liability Insurance Company Limited should be liquidated in Massachusetts or Bermuda is scheduled to be heard by the Privy Council in London - the highest court in Bermuda's judicial system - next month.In an added twist to a drama whose circumstances change on a regular basis, Kemper Re brought, on February 20, its second lawsuit at Bermuda Supreme Court challenging the decision to allow EMLICO to redomicile to Bermuda.

Readers who followed last month's story about the US government's lawsuit accusing four banks and the Antiguan government of illegally divvying up $7 million in drug profits might be interested to know that Antigua recently appointed the banks' owner, Bruce Rappaport, as its Ambassador to Russia.The appointment of Rappaport to this official position on December 3, 1997, adds an interesting twist to the recent lawsuit brought by the US government against the Antigua-based Swiss American Bank group and Inter-Maritime Bank, of Geneva.

UK Dependent Territories that are also offshore financial centres have until 1999 to comply with a "check-list" of four key areas of financial regulations to improve standards, UK Foreign Minister Robin Cook announced in London today.

The US government has filed a landmark civil lawsuit against banks in Antigua, Panama and Switzerland in an attempt to recover $7 million that it claims are the proceeds of criminal activity.The lawsuit is considered to be of significance to other offshore tax havens because it will test the ability of the US government to enforce home-based judgements in foreign territories against offshore companies who collaborate with money launderers.The US government is suing Swiss American Bank Ltd. and Swiss American National Bank Ltd., which are both registered in Antigua; Swiss American Holding Company S. A. of Panama and Inter-Maritime Bank of Geneva.

Marsh & McLennan, the world's largest insurance broker, has raised eyebrows in Bermuda by setting up an offshore facility to circumvent laws in sixteen US states that discourage companies from buying insurance against punitive damages awards.The broker's actions have drawn attention to the controversial but increasingly popular practice of American insurance companies using offshore structures they ultimately own to write politically sensitive punitive damages coverage they are not allowed to provide in the US.

Businessman Mark Hardy, who ran the Bermuda-based Focus/Forum group of insurance companies that went bust in 1990, is seeking to be discharged as a bankrupt in his native United Kingdom.

Cayman's minister for land, John McLean, is facing possible legal action after he was awarded Crown land potentially worth millions of dollars that another local resident claims is legally his.Leroy Johnson has consulted attorneys about bringing a civil lawsuit against McLean and has even gone so far as to file a criminal complaint against the minister with the Cayman police, alleging theft.

Bank accounts in the Bahamas was used to bribe brokers who were paid to ramp up the share prices of small companies by promoting them to their unsuspecting clients.Details of the scheme emerged this month after two men pleaded guilty to various offences in the US, including conspiracy, wire fraud, commercial bribery and securities fraud.Leonard Ruge, a 40-year-old Canadian living in Florida, and Theodore Heitzman, 51, of California, each face up to five years in prison and a maximum fine of $250,000.

Western Union has cut off money transfer services to 40 offshore bookmakers in an attempt to curb unlawful sports gambling in Florida.The action was taken at the request of the attorney general to combat the proliferation of sports betting operations headquartered in the Caribbean and soliciting wagers from Florida residents.

Excerpts of a discussion at a meeting on December 3, 1997 of the Finance Committee of the Cayman Islands Legislative Assembly in which opposition members raised the delicate matter of whether the UK government had asked Cayman to begin recognizing fiscal offences in its mutual legal assistance laws. When Offshore Alert first confirmed the existence of a tax initiative in July, the Cayman government accused us of reporting lies. But, as you might be able to discern from the dialogue, there clearly were discussions on the subject, although it appears that the issue has temporarily gone away.

Reports by a newspaper in The Bahamas that a Russian bank has been approved for a bank licence are inaccurate, said the governor of the Central Bank of the Bahamas, Julian Francis.The Punch newspaper had reported that the Alpha Bank had been given permission to set up in the Bahamas.But Francis said there had been no change in the Central Bank's position that Russian banks will not generally be allowed into the Bahamas because of difficulties in adequately regulating them.

First Cayman Bank could be insolvent by as much as $34.5 million and appears to have been stripped of up to $8.3 million in the seven weeks before its collapse through withdrawals by depositors acting on inside information, according to the bank's provisional liquidator, Michael Pilling, of Deloitte & Touche.In a report submitted to the Grand Court of the Cayman Islands this month, Pilling indicated there was evidence that a massive fraudulent preference took place as FCB was on the verge of collapse.

In a ruling that has implications for all schemes of arrangement in Bermuda, the liquidators of Mentor Insurance have won an important victory in the highest court of Bermuda's legal system - the Privy Council in London.The Privy Council ruled this month in Mentor's favour in a case against Ambassador Insurance Company by determining that the courts have no jurisdiction to extend the deadline for the submissions of appeals against claims previously rejected by the scheme administrator and also for the filing of the original claims.

Deloitte & Touche, as trustee of bankrupt Canadian mining firm Bre-X Minerals, has brought a lawsuit in the Cayman Islands against its former chief geologist, John Felderhof; his wife, Ingrid; and a Cayman company they control called Spartacus Corporation.The lawsuit was filed in the Grand Court of the Cayman Islands on December 19 and signals the beginning of what will probably be a long legal battle between Felderhof and those who claim he was largely responsible for the massive Bre-X stock fraud that netted him millions of dollars.

Was Buffalo-based businessman Steven Blumhagen really the source of $30 million that was to have been the start-up capital of Resource Underwriters, as the company's Bermudian front-man, Robin Spencer-Arscott, would have us believe? Highly unlikely, we can report. Unless, that is, 46-year-old Blumhagen has recently won the New York state lottery and checked the ‘no publicity' box.

Investors contemplating taking part in the $50 million IPO of Bermuda-based insurance broker/risk manager Stirling Cooke Brown Holdings Limited, which is 24 per cent owned by Goldman Sachs, may be interested in a few details they will not find in the company's share prospectus. Perhaps the most noteworthy is the involvement of its subsidiary Raydon Underwriting Management in one of the world's largest insurance frauds. Raydon, which shares offices with Stirling Cooke at Victoria Hall, Hamilton, had the dubious distinction of managing reinsurer North American Fidelity & Guarantee.

Investigators have uncovered strong evidence that First Cayman Bank was looted of millions of dollars before it was closed down, partly through the granting of fraudulent loans to related parties and its participation in a scheme to defraud investors in Sweden and the US.The minimum amount of the alleged fraud perpetrated at First Cayman Bank is estimated to be US$5 million and the bank itself is insolvent by at least $6.1 million, according to documents filed at the Grand Court of the Cayman Islands as part of the bank's proposed liquidation.

Regulators might want to take a close look at Bermuda-based insurance management firm Sussex International Ltd. following the collapse by fraud over the last six months of an Antigua-registered insurer and another company based in Nevada.All three were run by Charles Gordon-Seymour, a discredited British businessman and former Bermuda resident whose ventures frequently collapse in suspicious circumstances with debts of millions of dollars.

Regulators in the Bahamas acted this month to prevent two public offerings from going ahead due to regulatory breaches by the companies selling the shares.Perhaps the most embarrassing postponement involved Caribbean Health & Fitness Ltd., the major developers of Gold's Gym in the Caribbean.

If investors who pumped $2.6 million into Bermuda-based hi-tech firm NimsTec on the basis of misleading and inaccurate information are looking for someone to sue for negligence, they could do worse than to explore the role of law firm Conyers Dill & Pearman in helping NimsTec to raise capital. Before parting with their funds, investors in NimsTec who bought shares in two private placements were assured by NimsTec's officers and directors - who included CD&P partners - that no material facts were omitted from a share prospectus and that "all reasonable care" had been taken in its compilation. However, we can reveal that CD&P should have known about the appalling track record of NimsTec's 3-D camera and printing technology and its management that was not disclosed to investors because the law firm previously represented a similar company called Nimslo.

Concerns about the credibility of some of the people involved are holding up the formation in Bermuda of Resource Underwriters, a new $300 million reinsurer whose front-man is Robin Spencer-Arscott.