Dunedin firm goes legal in the Balkans
The drab old-fashioned office building on Dunedin's Moray Place seems an unlikely base for legal action against a Balkan republic and a US$400 million ($480m) claim against a Greek-owned bank.
It also seems an unlikely address to be linked to overseas court proceedings involving convicted money launderers, fraudsters and an American right-wing extremist, now apparently deceased.
The Dunedin address is the registered home of Guardian Fiduciary Trust, formerly known as Capital Conservators Savings & Loan.
The current sole director of Guardian Fiduciary is one Nikola Stanojevic, of Novi Sad in Serbia, but it is the company's previous directors who drive the action.
One, Raymond David Finzer, is, or was, the head of an outfit called the Capital Conservator Group whose website says its entire business is "meticulously engineered to guard your financial privacy".
Services offered by Capital Conservator include private trust banking, involving helping clients deposit cash in secret bank accounts in various countries in return for fees.
According to his Twitter feed and Facebook page, Finzer, an American who lived variously in Uruguay and Serbia, died in November, apparently from cancer. In the months before his death he continued to broadcast an internet radio programme, Truth & Lies Radio, apparently from his apartment in Novi Sad.
Finzer seems to have been a larger-than-life character, whose exploits included a brush with the law a dozen years ago when he was accused of using his overseas trust business in the West Indies jurisdiction of Nevis to launder money as part of a fraudulent investment scheme. The charges were dismissed in 2004.
Another former Guardian Fiduciary director is Borko Markovic, now aged 32, from the tiny Adriatic country of Montenegro.
Markovic served as a director for only one year, resigning in September 2009 on the same day
a media report noted the arrest on the Macedonia-Kosovo border of a 29-year-old businessman from Montenegro with the initials B M.
The allegations that were reported in Macedonian media involved money laundering and international bank transfers through accounts controlled by companies including Capital Conservator Savings & Loan.
In December 2009, the Basic Court of Skopje in Macedonia found Markovic guilty of money laundering and sentenced him to two years in prison, suspended provided he did not commit further crime for five years.
Details from the court ruling reveal the conviction was based on the Basic Court's findings regarding four transfers made between September 2008 and May 2009 from bank accounts of US lawyer Michael S Krome and totalling US$431,943 into accounts owned by Capital Conservator at Stopanske Bank, a subsidiary of the National Bank of Greece.
The transfers were "obtained by fraud activities" from clients in Britain, said the judgment.
Documents filed in proceedings in the Supreme Court of the State of New York shed further light on this. Those documents record that Stopanske flagged the transfers as suspicious in April 2009 and was further concerned by an email from Chris Davey, assistant vice-president of treasury services at JPMorgan Europe. In early June 2009, Davey wrote to the bank saying after monitoring transactions and public domain information it would no longer process transactions for Capital Conservator.
And in the same month, Stopanske terminated its services to Capital Conservator and ordered it to shift its balances totalling US$3m to another bank.
Why would Stopanske be concerned about transfers from Krome?
In May last year, Krome was jailed for 34 months by US District Judge Richard Goldberg in the Southern District of Florida after he pleaded guilty of conspiracy to commit securities fraud, wire fraud and mail fraud.
The sentence followed a US investigation led by the FBI of a "pump and dump" stock trading fraud that generated about US$7 million in illegal proceeds between late 2006 and April 2007. Krome was one of several people involved in the scheme organised through Costa Rica to sell stock in a company called CO2 Technologies via a web of nominee accounts.
According to the US Department of Justice, US$1m in cash was delivered during the fraud to co-conspirators in Miami by private jet from an airport outside New York.
Putting the details together, a picture emerges linking the people and entities allegedly involved in pump and dump fraud to proceeds of crime that the Basic Court of Macedonia has found were being laundered through accounts facilitated by Capital Conservator, an international group domiciled in New Zealand and registered here since September 2010 as a financial services provider.
Yet last October Capital Conservator, renamed Guardian Fiduciary, popped up with a claim against the Republic of Macedonia filed under an international arbitration scheme, the International Centre for the Settlement of Investment Disputes, run under the auspices of the World Bank.
Details of the claim are confidential and lawyers representing both parties declined to comment.
It is not the only claim by Guardian Fiduciary relating to the shutdown of its accounts in Macedonia. In 2011 a court in Skopje threw out a claim for compensation of € 250m ($400m) brought by Guardian Fiduciary against Stopanske Bank. The lawsuit's allegations that the bank's actions were unjustified and seriously damaged Guardian Fiduciary's business were dismissed as groundless.
Guardian Fiduciary tried again in May last year, filing a claim against Stopanske at the Supreme Court of the State of New York claiming damages of US$400m.
The essence of the claim is that the bank's actions meant Capital Conservator was unable to open a bank account anywhere using the name Capital Conservator, which damaged its reputation with clients and hence its business, requiring a change of name to Guardian Fiduciary in July 2010.
What is more, it says the transfers from Krome cited by Stopanske were not suspicious, but originated from two British Capital Conservator clients in Spain.
The statement of claim in the case said: "To [Guardian Fiduciary's] knowledge, said funds were neither connected to any illegal activities nor derived from illegal sources. They were legitimate funds held in trust by [Guardian Fiduciary] for its clients . . . To [Guardian Fiduciary's] best knowledge, Markovic's arrest and subsequent conviction was unrelated to Krome's indictment."
The New York case is currently grinding its way through the court process and lawyers representing the parties could not be reached for comment.
One person who could be reached was Dunedin-based international counsel Nico Francken, director of Capital Conservator Trustees, the parent company of Guardian Fiduciary, as well as director and principal of In Asset Management, owner of Capital Conservator Trustees.
As a specialist in trust and company law, particularly New Zealand foreign trusts, Francken, according to his website, helps clients "to preserve and grow their capital through the creation and management of tax effective business and investment structures".
As a result, although a director of Capital Conservator, Francken says he was acting only as nominee and had no involvement in the Guardian Fiduciary business, but he said he was aware of the legal action.
"Our clients [Capital Conservator Group] run an international payments system and mainly they are acting for clients who like their privacy basically," Francken said.
"What the people who use their services don't like is what is done in many countries like in America and others, where all the bureaucrats want to know what everybody does with their money."
Finzer had been an active libertarian in America, he said. "They are people basically against any form of government. They don't like bureaucrats; they don't like politicians; they want freedom for everybody.
"Some journalists are more like communists or socialists who want everybody to do only what the bureaucrats want, but others - they agree with that approach."
He said Capital Conservator had strong "know your client" systems and despite Markovic's conviction he was convinced there was no money laundering involved.
"Don't forget countries like Macedonia in the Balkans, they have their own ways of doing things," he said. "I checked the moment I read about it because we don't want to have involvement in any of that sort of stuff."
Francken said his firm also went through proper processes to satisfy itself all its clients were legitimate.
"It's very important to be holier than the Pope and to do things properly. We do all the checks on all our clients and Capital Conservator group was one of them. We were satisfied that they do the necessary things. And for them it is important because the nature of their business is such that everybody thinks they are into money laundering."
Francken, who was convicted in 2008 on Securities Act charges and fined $21,000 relating to distributing an advertisement for investment firm GlobalFXSecure containing untrue statements, said there were limits to how much an outside consultant could find out about clients.
"It's one of the disadvantages of any lawyer. You rely on what your client tells you. You can't check everything. That's just the way life works."
So would it be possible for a client to be secretly engaged in money laundering?
"Yeah, it would be possible . . . Long story short, no we cannot guarantee our clients' activities. Some clients do things which by their very nature they won't tell us, and we have no way of checking that."
- Sunday Star Times