http://www.thecouriermail.news.com.au/common/story_page/0,5936,9641727%5E3122,00.html Life savings lost in scam Richard Owen, writing Queensland Ink 24may04 ALMOST 1000 Australians appear to have lost more than $40 million chasing bogus returns of 180 per cent a year from a Singapore group with links to an international network of swindlers. Life savings in many cases were squandered on secretive investments in the Drover-Horne web of companies run by former Gold Coast finance industry fringe players Errol John White and his partner Kathryn Jane Bell. Although years have passed, they continue to string along their victims in e-mails, but refused to comment when The Courier-Mail tracked them down by phone in Malaysia where they now live. Drover-Horne, like many other high yielding "investments", appears to have been a Ponzi scheme which was switched into a foreign currency trading program where the money and illusory profits were lost. Ponzi schemes, named after 1920s US promoter Charles Ponzi, rely on new investors to pay high returns owed to others, as in the case of Australia's failed Wattle Group. Funds "lost" by Drover-Horne suffered a similar fate to $4.4 million invested by unlisted Queensland public company Redemption Investments Ltd back in early 2000 and possibly another $12 million by its fund manager. In all cases, a rogue London-based currency futures trader was blamed for losing the money â leaving reputable businessmen and unscrupulous operators alike to face the wrath of hapless investors. White and Bell set up Drover-Horne Pty Ltd in Queensland in early 1998. But within a couple of months, White was jailed for eight weeks for contempt over an Australian Securities and Investments Commission investigation into another investment scam. White and Bell then opted to base a high-yield investment scheme in Singapore and entered a joint venture agreement with Brisbane business associate Ronald Sydney Ryton-Benson (aka Ron Benson) in November 1998 to access his network of international contacts. Under this deal, their British Virgin Islands company Drover-Horne Ltd would issue shares and move investor funds into the Hong Kong bank account of Benson's British Virgin Islands entity Indian Blue Investments Ltd for application in "approved transactions". Only a few months earlier ASIC had also hauled Ryton-Benson and his wife Lesley, both now of Birkdale, before the Federal Court for managing investments in a "bogus high-yield trading program" promoted by a US-based Ponzi scheme called Microfund LLC. One of Microfund's alleged masterminds was an American named William Scott Dohan who subsequently set up the ill-fated foreign currency scheme in London. Dohan has spent the past five months in a French jail fighting extradition to the US. Benson told The Courier-Mail he had then been approached by White "for opportunities" and that offshore companies had been used on the advice of Brisbane business associate and discharged bankrupt grazier George Muirhead because there would then be "no laws broken" in Australia. Drover-Horne targeted unsophisticated investors who were sucked in by the promise of returns of up to 15 per cent a month from an inter-bank lending program and placated by assurances that their money was insured against loss. It wasn't, but cash dividends early on and detailed personal accounts convinced most that the arrangements were legitimate and to reinvest "profits". But by November 2000, 85 per cent of Drover-Horne shareholders were in "panic mode" and wanted out, prompting White to demand they have patience or the fund would collapse. Correspondence obtained by The Courier-Mail shows that Benson advised White on January 30, 2001, that "unknown to the program principals, a trader in their employ in London had been running unauthorised positions". Legal opinions were being sought higher up the chain of command, Benson advised, with a view to suing the broking house involved, although no writ appears to have been filed. Drover-Horne, which continued to raise fresh funds, owed about 900 investors $US26.3 million ($37.6 million) by November 2001. E-mails show that White continued to press Benson for repayment to help satisfy a plethora of disgruntled clients until as late as August 2002 before giving up the chase. But Benson claims nowhere near that amount was handled by his offshore companies which had merely "acted as a conduit" for funds sent on to one of Muirhead's offshore companies for investment by Dohan. Dohan was one of 11 people indicted by US authorities in July 2000 on multiple counts of conspiracy to commit wire fraud, securities fraud and conspiracy to launder money in relation to Microfund LLC, Hammersmith Trust LLC and Luxor Capital Markets. Most received long jail terms. However, Muirhead claims to have done nothing wrong by his own impoverished clients and maintains to this day that his "friend" Bill Dohan was "an honest man" who would eventually "be exonerated of all charges". This was despite Dohan's close, court-documented business association with people subsequently jailed over the US Ponzi schemes which had defrauded investors of $US95 million globally. "The thing that concerns me is the (US) prosecutor did have all the information on the fact that Bill was doing some real currency trading (through Microfund) . ," Muirhead said. He said he was being kept abreast of developments in France by Dohan's "independently wealthy" wife and that his friend had not returned to the US voluntarily to clear his name solely on legal advice. He was also adamant that Dohan had nothing to do with the subsequent forex trading losses and pointed to the National Australia Bank's own $360 million currency trading disaster to support his claim that "about $20 million" (as estimated by Benson) had been "lost in the markets". The Courier-Mail sought comment from Dohan's US attorney. It is understood Dohan plans to defend the charges if extradited. According to a private investigator "hired" by Drover-Horne to try to track down Dohan and the "missing" money in Europe, a substantial proportion of the funds were retained by White and Bell in fees and commissions. Drover-Horne shareholders, who thought they had been investing in the original interbank program, were then given the same rogue trader story, although White offered this mea culpa in August 2002 after he and Benson parted ways. "In short, I Errol White have been played a fool and used as a pawn by my associates since February-March 2000 and the group has been further compromised by the recent actions of the 'principal'." Although convinced funds were lost by a rogue currency futures trader, Benson too claims to have been "as naive as the rest of them". "I was used. Whether intentionally or not, I don't know," he said. White and Bell continue to correspond with shareholders in Australia, New Zealand and the US via e-mail, the latest of which is dated April 26, advising: "Well again not much to report except that we have been assured that the (claim) documents are progressing through the relevant departments, but are not as yet finished. . . Kathryn & Errol." Singapore's Commercial Affairs Department investigated a complaint relating to Drover-Horne last year, but did not find "sufficient evidence" for a prosecution. Authorities here have similarly struggled to pursue Drover-Horne's promoters due to the transfer of funds offshore into accounts beyond Australian legal jurisdiction, although Queensland's major fraud squad retains an open and active file. In the case of Redemption Investments Ltd the Queensland Supreme Court found insufficient evidence in September 2002 to warrant granting shareholders leave on behalf of the company to sue the directors for negligence. In his judgment, Justice McKenzie also noted evidence that the forex investment was only made after "extensive due diligence". Related court files contain a convoluted and apologetic e-mail sent by Dohan to Redemption on June 9, 2000 â just a week after the trading "catastrophe" which allegedly wiped out the company's capital. In it, Dohan suggested a committee be estab- lished with two other Australian connections "George and Ron" whose clients' funds had been similarly wiped out. "Your frustration in this matter is only exceeded by my own," Dohan wrote. "I want you to know that I don't think I can ever forgive myself for the suffering this mistake has caused the many people who relied on my judgment." ASIC seems to have been satisfied after considering the circumstances of RIL's losses, while Drover-Horne's victims have largely remained silent in vain hope of getting some money back. According to a French newspaper report, Dohan was living amid luxury in a 19th Century castle set within 46ha of gardens, fountains and ponds near Angers in the south of France when arrested. If Dohan is extradited to the US and convicted, ASIC may see fit to interview him about his activities and connections Down Under. In the meantime, if a top secret investment deal sounds too good to be true then it probably is and should be avoided like the plague.
I think one of the things that is so insideous about Ponzi schemes is that they actually work (or appear to) for the few who are lucky enough to get their money out early. Nothing dupes people better than actually seeing ordinary people making easy money. Therein likes the trap of a bubble. If you buy into a bubble and are lucky enough to get out before it pops, you can make a lot of money. I suspect many Ponzi artists actually back into their scheme at least partly believing their own lies. How else can you explain that so many are caught while living a life of extravagant luxury? Very few simply vanish and are never heard from again.
That's nothing. The entire nation of Albania fell for pyramid schemes in 1997. http://www.imf.org/external/pubs/ft/fandd/2000/03/jarvis.htm The pyramid scheme phenomenon in Albania is important because its scale relative to the size of the economy was unprecedented, and because the political and social consequences of the collapse of the pyramid schemes were profound. At their peak, the nominal value of the pyramid schemes' liabilities amounted to almost half of the country's GDP. Many Albaniansâabout two-thirds of the populationâinvested in them. When the schemes collapsed, there was uncontained rioting, the government fell, and the country descended into anarchy and a near civil war in which some 2,000 people were killed. LOL. I guess then you wouldn't be too surprised if I told you that in Albania, a country bordering EU member Greece and some 100 miles away from EU member Italy, revenge killings are still a part of the common law; where the male members of entire households are not permitted to leave their homes on threat of being killed.
I heard about the Albania mess -- no laughing matter. Albania was/is the most backward country in Europe due to it's long term alignment with Maoism and China, very hardline. [Richard]