PLEASE ALSO READ

A COMMENTARY FROM THE BANK OF CANTRADE MANAGING DIRECTOR
J G Bärlocher (received via e-mail on  11th April 2002)

   http://www.escapeartist.com/jersey-bank/jersey-bank.htm
   http://www.rpifs.com/offshore/osscams06.html

CORRUPTION IN JERSEY

(contributed by Adrian Rand)

THIS PAPER LOOKS AT THE UGLY FACE OF CORRUPTION BY AN ELITE BAND OF GOVERNMENT OFFICIALS IN JERSEY IN THE ENGLISH CHANNEL.

  THE JERSEY AUTHORITIES HAVE A HISTORY OF CLOSING RANKS AGAINST DEFRAUDED INVESTORS TO COVER UP BIG BANK CRIME.  THE ON-GOING UBS-CANTRADE FRAUD SCANDAL IS ONLY ONE EXAMPLE.  THEY WILL STOP AT NOTHING TO TRY TO PRESERVE THE MYTH OF JERSEY AS A  SECURE, WELL-REGULATED FINANCIAL CENTER.
 

Not everyone in the government and judiciary in the island of Jersey is dishonest.  There are those who have watched the deterioration of democracy for many years, helpless to do anything about an old-boy network whose power structure had become endemic.  Some bystanders knew, but lacked the spirit to challenge the incestuous regime for fear of swift retaliation.
 

It's like the story of a lynching in a small town, where everyone knows who did it, but no one is talking.  In Jersey's case, the officials have shrouded themselves in cloaks of secrecy, defiant in their belief that they are invincible as long as they close ranks in time of crisis, as long as they plot and lie in unison.

However, as often occurs where such injustices have been rampant for so long, one man stands up and cries "foul".  That man is a brave lawyer called Philip Sinel.  His audacity in challenging the ageing, incompetent quacks in charge has signalled that the witch hunt is on.

As the Wall Street Journal reported on September 17th 1996: "...Jersey is an island that until two decades ago lived off boat-building, cod-fishing, agriculture and tourism.  It is run by a group who, although they form a social and political elite, are mostly small business owners and farmers who now find themselves overseeing an industry of global scope involving billions of dollars.  'By and large' says the senior civil servant, 'they are totally out of their depth'."

This article is divided into three parts:

(i)  JERSEY - CORRUPT & COMPLACENT

 Why justice in Jersey is a farce: incestual conflicts of interest are endemic

(ii)  JERSEY'S BANK REGULATORS - EXPERTS AT COVERING UP FRAUD

 The UBS-Cantrade bank fraud case continues, as the Jersey government continues its 5-  year effort to sweep it under the carpet

(iii)   THE UK GOVT INVESTIGATION OF FRAUD IN JERSEY - INADEQUATE

 The UK govt "Edwards' Report" - a victory for Jersey's elite guard of petty dictators like the  island's Chief Justice (The Bailiff), the Deputy Bailiff, the Attorney General, the Solicitor  General, and the bank regulating authority.

(i) JERSEY - CORRUPT & COMPLACENT

Advocate Sinel submitted an affidavit in a New York action on behalf of his international clients who were defrauded in Jersey in a case generally referred to as "The UBS-Cantrade Bank Fraud".  The affidavit is publicly available and worth reading by anyone interested in facts which show how utterly unscrupulous certain members of the Jersey government, politicians, lawyers and the judiciary have become.  The 58-page March 18, 1998 affidavit, filed in the Southern District court of New York, criticises Jersey's justice and financial regulatory systems, names names, and demands change, and is briefly summarised below.  It has become the focal point for the short-sighted Jersey lynch-mob elite who call him a traitor.

Sinel is used to representing the cheated underdog against a greedy, all-powerful institution, and winning: but his task in this instance is daunting indeed.  He has exposed an apple, painted clean on the outside, that has been found to contain not just one worm, but to be infested with them.  And the powerful worms have closed ranks.

A BRIEF SUMMARY

Sinel begins by explaining how his own income and future depends upon the island's general prosperity, and how reluctant he was to have to spell out the failures of a system he had once  held in high regard. Then he addresses the bias and conflicts of interests resulting in gross deficiencies of justice that he has personally experienced as a litigation lawyer.

THE LOCAL MEDIA - CONTROLLED & MISLEADING

First, he addresses the matter of "free speech" and the media.  He compliments the professionalism of the "external" media, but accuses Jersey's only daily paper, the Jersey Evening Post, of not being objective and points out that it is controlled by Senator Frank Walker, Chairman of the bank regulatory committee (the FEC/FSC) which, not surprisingly in Jersey, is also responsible for the promotion of the island's finance industry.

UBS-CANTRADE BANK FRAUD

Second, he discusses the background of the "UBS-Cantrade Bank Fraud", the scandal which the hostile and defensive island's authorities have tried to cover up at the highest levels, but which has caused tidal waves of unfavourable international publicity as the true facts gradually emerged.

The "Cantrade Fraud" took place between 1988 and 1993, involving the UBS-owned Cantrade Bank, auditors Touche Ross & Co., and a crooked currency trader called Young.  The bank sponsored the trader into Jersey and bought him a luxurious house while the 6-year fraud, involving shared secret commission charges, fictitious trades and churning, continued unabated.  The Jersey authorities (in the form of the "Chief Adviser" G. Colin Powell) welcomed the fraudster with open arms, granted him exceptional trading and residential facilities, and suspiciously never bothered to check his credentials; after the fraud came to light in December 1993, the Jersey bank regulators (the FEC) inexplicably refused to investigate the Cantrade Bank or its relationship with the trader, in spite of substantial evidence of the bank's and the trader's conspiracy.

This UBS-Cantrade fraud has been told in more detail in another paper dated November 25, 1998 headed "Financial Fraud - the UBS-Cantrade Bank Jersey Scandal", now posted on at least three web sites (This article is well worth reading):

http://visar.csustan.edu/aaba/aaba.htm
http://www.escapeartist.com/jersey-bank/jersey-bank.htm http://www.rpifs.com/offshore/osscams06.html

DISHONEST POLITICIANS BY THE BARREL-LOAD

Advocate Sinel then discusses "The sale of political influence in Jersey", explains how the electoral system works, and exposes the common practice of lay politicians sitting on the boards of the very banks they are supposed to be regulating.  He named some of the worst offenders as Senator Reg Jeune (former senior partner of Cantrade's law firm), a member of the FEC; Senator F. Walker, controller of the island's only newspaper, and a director of Barclays Bank while being President of the FEC; Senator R.J. Shenton, a stevedor, whose influence helped the currency fraudster Young to enter Jersey; and Senator Pierre Horsfall, an hotelier, who was head of the FEC in 1994 when it refused to investigate Cantrade Bank; Horsfall never disclosed that he had been a director of Cantrade Bank during the first 3 years of the Cantrade Fraud, or that he was granted a substantial mortgage by the bank.

DON'T ROCK THE BOAT

Sinel points out that the establishment's one supreme objective has been, and is, not to "rock the boat" i.e. to preserve its status quo and project a mirage of Jersey as a clean, well-regulated financial centre, at any cost.  Sinel says "... any rational being, truly interested in the island's welfare would have seen the Cantrade affair as being an area where the island's best interests were served by a rapid and fearless investigation and if appropriate prosecution of all concerned.  This has not happened and ... the more successful the Plaintiffs are at trial the more corrupt/biased/inappropriate and/or incompetent will appear the actions of Senators Walker, Horsfall, Shenton and Maltwood, the Attorney General and the Solicitor General."

THE MANIPULATIVE, DISHONEST CHIEF JUSTICE (BAILIFF) & HIS DEPUTY -
BIG DESPOTS IN A LITTLE POND

Sinel goes on to criticise the bias of the Chief Judge (the Bailiff) for perverting the course of justice and the democratic process, for his overt political function in his conflicting roles as Chief Justice, Head of State, and Head of the Executive and Legislature, meaning there is no separation of function between judiciary and legislature.  The Judge can rule on the very laws he has designed or approved. Among the many judgements and remarks he has given against the interests of the defrauded investors in the Cantrade Fraud, he once dismissively referred to them as "a small band of protestors".

Sinel accuses the Bailiff (Sir Philip Bailhache) and the Deputy Bailiff (Francis Hamon) of blatantly controlling, directing and preventing debate with respect to the sale of political influence by their friends and to making judgements to suit their own private ends.  Deputy Hamon has committed inexcusable acts of injustice: he has held secret meetings with his favoured defendants, precluding the attendance of the plaintiffs; and, among other unlawful manoeuvres, he has forbidden criticism of the Attorney General.

After many unsuccessful attempts to have the Bailiff removed, Sinel was finally successful on one occasion, based on incontrovertible evidence, and the JEP headline of 21 January 1998 blared "Bailiff rules himself out of Bank Cantrade trial - Sir Philip rejects accusation of bias ...", but it was a short lived triumph, regrettably.    It would have been of immense help to the advancement of justice and democracy if the partisan Sir Philip Bailhache, and his equally partisan crony Francis Hamon (and their secretly hand-picked puppets, the Jurats), had resigned en bloc.

THE ATTORNEY GENERAL - CORRUPTION, COLLUSION OR JUST INCOMPETENCE?

Sinel goes on to criticise the Attorney General and Solicitor General for their bias, their hostility toward the defrauded plaintiffs, their attempts to exculpate the parties accused of fraud, their conflicts of interest (confusing their primary role of prosecuting criminals with advising supposedly independent and powerful government committees), and their unethical unprofessionalism, quoting several specific examples.

In particular, it is noteworthy that the Attorney General "has presided over the collapse of prosecution of Cantrade, the withdrawal of all charges against Stoneman (Cantrade's Manager), the non prosecution of P Morton and the withdrawal of the most important charges against Dr Young".  In fact, most of the serious charges made by the prosecution had to be dropped because, incredibly, they were "time-barred".  As the Royal Court Commissioner was quoted on 13th January 1998 (JEP): "... a number of the counts against Bank Cantrade, currency trader Robert Young, former senior Cantrade manager Peter Stoneman and accountant Alf Williams (partner of Touche Ross) are time-barred."

Was the Attorney General's dilatoriness by design, resulting from collusion with the accused bank and/or politicians, or was it through sheer incompetence?  There are no other choices and the evidence  strongly points to the former conclusion.  There can be no real excuse for the Attorney General's dilatoriness: his initial abject disinterest in 1994 in prosecuting a bank accused of fraud only became less lukewarm after Advocate Sinel had been eventually forced to take the unusual step of making a formal complaint to the UK Home Secretary (19 January 1996).

The end of the mismanaged criminal trial resulted in May 1998 in a secret plea-bargain deal between the bank and the Attorney General resulting in (i) the bank admitting guilt to only four minor charges (leaving 29 more serious ones unaccounted for) and was sentenced to a paltry fine of £3 million (the Wall Street Journal headline on January 16, 1998 read "UBS Subsidiary Pleads Guilty in Fraud Case"); (ii) all charges being dropped against the bank's Snr VP; (iii) no charges being made against the bank's former VP and Treasury Chief Morton; (iv) a meek 4.5 year jail sentence against Young; and (v) an even meeker 1.5 year jail sentence against the Touche Ross partner.

The Solicitor General's breach of professional conduct, unlawful public displays of bias, conflicts of interest, and passionate support for the corrupt members of the bank regulating committee against the interests of the defrauded plaintiffs (in her attempts to exculpate the fraudster bank) are frightening, and yet she, too, goes unpunished.

SENATOR HORSFALL A TAINTED LEADER?

Senator Pierre Horsfall, was found to have been given a substantial mortgage by Cantrade when he was a director of the bank; as usual, he happened not to reveal this on-going indebtedness at the time his bank regulatory FEC refused to investigate the fraudulent bank subsidiary of UBS in 1994.  In a display of righteousness, aimed primarily at his gagged electorate, Horsfall had the gall to institute defamation proceedings against Sinel for making public statements. Presumably, Horsfall thought offense was his only defence.  The biased Deputy Bailiff, needless to say, took his side, then proceeded to promulgate legal irregularites, effectively gagging Sinel during election time which resulted in the re-election of Horsfall.  "In short Horsfall received abnormal treatment from the Court for what were respectively errors of fact and law made by his counsel."

Sinel's affidavit proceeds to quote a number of cases involving conniving politicians, another crooked bank, and Judges and lawyers whose actions have been less than honest, legal or just.  They are stories of unjust, private, and vindictive campaigns of harassment and intimidation, and outright fraud, using political clout to influence government officials, the Attorney General, and some police officers. The stories unhappily weave a web of intrigue and outright injustice towards private citizens who have no recourse.  The courts themselves cannot offer impartial justice in view of the corruptive influences of the Bailiff, the Deputy Bailiff, the Attorney General, the Solicitor General, and their hand-picked old-school-tie friends.

(ii) JERSEY'S BANK REGULATORS - EXPERTS AT COVERING UP FRAUD

Up to July 1998, the bank regulatory authority was called the Finance & Economics Committee (FEC).  After that, it was called the Financial Services Commission (FSC).  Many of the same FEC names resurfaced in the FSC - R.Bignell, R.Syvret, G.C.Powell & F.Walker.  What could have been a refreshing, and honest, change of guard whose concerns might have been immediately to find and punish bank crimes past and present, turned out to be a re-hash of the same  old mentalities.

The "new" FSC, after trumpeting in July 1998 its intent to "investigate" Cantrade bank after the bank had plead guilty to fraud charges in May, triumphantly presented its "Conclusions" on October 10th, only 5 years' overdue.  The Conclusions were predictable. They were nothing more than an obvious attempt to exonerate the regulators' own cover-up of fraud, inaction (from 1994) in instituting an investigation, and collusion with the convicted fraudster Young and the UBS subsidiary bank.  They were a cover-up, too, of the gross mishandling by the Attorney General in the criminal case against the UBS-Cantrade bank.  But who dares to point fingers at the arrogant men who are supposedly responsible for upholding the law?

An Accountancy Age article of 22nd October 1998 hit the nail on the head: "Jersey's financial authorities this week ruled out investigating a major island banking scandal despite millions of dollars of losses to investors and severe criticism of their conduct by senior politicians and lawyers.  The Jersey Financial Services Commission said an investigation into £27m losses at Cantrade bank 'would not add to the impact of action already taken'. ... the commission's conduct was attacked for failing to investigate financial crimes and compensate investors."

THE FSC CONCLUSION IS AN OBVIOUS COVER-UP & A DISGRACE

The FSC Conclusion refers to "The ability of Cantrade to repay depositors in general has at no time been at risk" but there is no mention of actual compensation to investors.  The FSC claim they made an independent and secret investigation of Cantrade in 1996 (already 2 years' overdue), refer vaguely to changes to the structure of Cantrade as a result, but decline to provide evidence of why changes were needed or what they were, if any.

The FSC say that "members of staff of Cantrade who were directly involved in the matter no Longer work for the branch".  What has that got to do with anything or the bank's responsibility for crimes, or to do with why the investors have not been given proper compensation for losses of over $17 million, now compounded into some $90 million?  They say "Cantrade has already been fined £3 million ...".  What has this got to do with punishment of this deplorable bank or the staff responsible for stealing over $17 million, or with the fact that investors have not received proper compensation?

The FSC say "Cantrade's parent - UBS AG - stood fully behind the bank and Cantrade has made an offer to repay all the investors" which is a blatant lie and cover-up.  The UBS has attempted for years to avoid its responsibilities towards its subsidiary and perfunctorily dismissed investors several times when they attempted to invite UBS or Cantrade to discuss settlement: the UBS did not stand fully behind its subsidiary at all and still has not.  Nor has the UBS or Cantrade made any offer to repay all the investors at time of writing.

THE DEPLORABLE SWISS-JERSEY AUTHORITIES' COLLUSION

To add to the whitewash of the FSC review, the FSC say their conclusions have the support of the Swiss Federal Banking Commission, "the home country supervisor for Cantrade", and the support of UK Chartered Accountants Robson Rhodes (who were previously employed by the prosecution in the botched criminal case against Cantrade).  The FSC have not provided a single shred of written evidence to support any of their claims, and have refused to do so, assuming it exists at all.  In view of the FSC's, and their predecessors the FEC's, past deceits and cover-ups, any reasonable person must ask for tangible proof.

Just what would one expect from the Swiss authorities with respect to one of its own?  They did nothing for 50 years after the Swiss banks' theft from Jewish survivors of the holocaust, and did nothing in the face of the very recent illegal shredding of holocaust documents by the UBS.  Are the Swiss authorities any less corrupt than those in Jersey?

"Any further regulatory or supervisory action in respect of Cantrade itself would not add to the effectiveness or impact of action already taken", the FSC haughtily pronounces.  What action?  What about punishment for the bank's crimes?  What about compensation for the defrauded investors?

The deplorable FSC quote various vague actions they "will" take to "enhance" their previously lamentable and inadequate "supervisory approach"; they are strong on what might happen, very, very weak on any tough measures to avoid Jersey banks from continuing the practice of racketeering, excessive charging, churning and the like.  The truth of the matter is that hoteliers like Horsfall, newspapermen like Walker, lawyers like Clyde-Smith, and civil servants like Powell, are incompetent and incapable of carrying out any bank supervisory work at all, assuming they ever wanted to bother whilst being busy promoting Jersey's finance industry.

In short, the "new" FSC is nothing more than a rubber-stamp of the old incompetent FEC. It has done nothing to try to correct banks from policies of continuing to defraud investors through excessive secret charges, fictitious trading, and massive churning.

SENATOR WALKER

To make matters worse, Senator Walker lied, on behalf of the FSC he Chairs, that "Perhaps the most important thing is that Cantrade have offered all investors full recompense" as he attempted to sweep the Cantrade fraud, and his own Committee's past  incompetencies under the carpet once and for all.  As usual, Walker under-estimated the anger of the several-score defrauded investors, mostly Americans, none of whom had or has been offered "full recompense" up to the time of this article.

The Edwards' report calls for Walker to step down from the FSC in view of conflicts of interest, and, of all people, G. Colin Powell (not to be confused with the honourable US General Colin Powell of Gulf War fame) is "tipped for chief regulator role as Walker quits for politics" (Portfolio International December 1998).  It's like replacing Tweedledee with Tweedledum.  Powell, as Chief Adviser and thus head civil servant, was "adviser" at every major government Committee  meeting for many years.  It was Powell and Senator Shenton (whose son worked at Cantrade) who engineered with such extraordinary energy the behind-the scenes entry of fraudster Young into Jersey in the first place, sponsored by his close ally the self-confessed criminal UBS bank.

CRONIES-IN-POWER

Senator Walker took over as Chairman from Senator Horsfall, and now, to complete the never-ending cycle of these cronies-in-power, it is now Powell who is to become Chairman.  The old-school-tie guard remains firmly in control and they continue to thumb their noses at Mr Edwards and the UK government.

As Sinel's article in the Jersey Evening Post (30 November 1998) was headlined: "However it is presented, the Cantrade saga is a sorry tale of ineptitude".  He went on to say: "... however it is dressed up, the botched prosecution of Cantrade and the failure of the Finance and Economics Committee to even investigate this major fraud have resulted in adverse publicity for the island ..."

CLYDE-SMITH'S WITCH-HUNT AGAINST SINEL

One of the new members of the already-disgraced FSC, a lawyer Clyde-Smith, has taken it upon himself to spear-head a witch-hunt against Advocate Sinel with the aid of the law society's "Batonnier".  To no one's surprise (in Jersey), the Batonnier is none other than a Mr Mourant, a partner in UBS-Cantrade's law firm, Mourant du Feu & Jeune.

Clyde-Smith is clearly frightened of the honest exposures about Jersey's injustices in the Sinel Affidavit.  He perhaps sees his myopic world crumbling, and has called for an investigation of Sinel, no doubt in the hope that Sinel will be disbarred.  But, even in Jersey, can a lawyer be disbarred for being honest?  The honest answer is horrifying to contemplate.

(iii) THE UK GOVT INVESTIGATION OF FRAUD IN JERSEY - INADEQUATE

Advocate Sinel's demands for change and justice are having repercussions for Jersey on a worldwide basis.  They have resulted in an official "investigation" by the UK government, called the Edwards' Report, finally released on November 19, 1998. The next day several British newspapers headlined the Report's findings: "Island tax havens face crackdown" (The Guardian); "Tax haven isles urged to fight financial crime" (The Times); "Offshore havens should set up crime squads" (The Daily Telegraph).

But the Edwards' Report is sadly far from adequate.  It leaves in place the conflicts of interest which arise throughout Jersey as a result of there being no separation of powers between the legislature and judiciary.

In spite of overwhelming evidence to the contrary (and Mr Edwards has a copy of the Sinel Affidavit, details of the botched criminal prosecution of Cantrade, and a copy of the FSC's latest cover-up Conclusions of the Cantrade Fraud), Mr Andrew Edwards has made these mind-bogglingly inaccurate statements (which the Jersey authorities have wasted no time in trumpeting and rejoicing over in obvious relief - "The authorities in Jersey ... were jubilant about the Edwards report yesterday." - FT November 20, 1998):

"The Islands are clearly in the top division of offshore centres: ... Their legal frameworks, judicial and prosecution systems, regulation and co-operation with other jurisdictions are remarkably good for such small communities and conform in large measure to international standards.  Conflicts of interest are generally well handled.  Regulation of financial institutions is generally good ..." and "On policing of the finance centres, the Islands are firmly committed to combat crime of all kinds, including tax evasion and money laundering, and to the fullest co-operation with other jurisdictions.  In some respects the Islands' systems seem better than those of many larger jurisdictions."

Tell all that to the uncompensated, defrauded investors.  These comments are as inexplicable as the tainted actions of Jersey's Attorney General, Solicitor General, the members of the FEC/FSC, Bailiff and Deputy Bailiff.

The Economist put its finger on the one incredible omission by Edwards (November 28, 1998): "One common criticism of the Channel Islands is not addressed in any detail by the report.  These are the concerns expressed by lawyers and constitutional experts about the close relationship between the legislature and the judiciary.   On Jersey, for instance, the Bailiff is both Jersey's chief judge, the speaker of its parliament and, in effect, its head of state."

Either Edwards is naive or has a hidden political or personal agenda which is designed to maintain the endemic corruption and conflicts of interest of the elite authorities in Jersey.

Thanks to past efforts of investors defrauded in Jersey, the OECD is now looking into Jersey's status as a magnet for tax-dodgers.  The unsavoury aspects of money laundering, bank fraud, brass-plate "front" companies, trusts and accounts whose beneficial owners are secret, are all coming under the European Union's microscope in Brussels.  Perhaps they will not be so beholden to the unsavoury UK and Jersey secret government alliance.

Angry investors, still uncompensated, are now beginning to post the real facts on internet, and, in the case of American investors, to contact their Congressmen, Senators and major City Finance Officials about the appallingly corrupt conditions which continue to be allowed to exist in Jersey's government.  The UBS-Cantrade Fraud and Jersey's government corruption will not be swept so easily under the carpet: the news is only just beginning to spread world-wide.