State’s offshore banking a bust

Sometimes easy money isn’t so easy.
Offshore banking was supposed to bring effortless millions to Montana. But in the six years after its
creation, it has only produced brushes with scandal.

Associated Press Billings Gazette

The only application to open a "foreign capital depository" was allegedly funded by the kind of criminal
element feared by offshore banking’s opponents.
The would-be depository’s first investor is out $26 million and suing its representative to the state Banking

And the founder of the company the state hired to promote the entire program was convicted in February of
money laundering.
Those incidents, combined with new anti-terrorism money laundering laws, have some officials doubting if
the super-rich will ever cache their billions in ultra-private, Swiss-style banks in the Treasure State.
Though often called banks, foreign capital depositories are set up specifically to safeguard large sums of
money from tax collectors and government regulations in the depositor’s homeland. Depositors must be from
countries foreign to where their money is placed. U.S. citizens could own and operate the depositories,

By now the state expected to be making millions of dollars through a 0.75 percent tax on every transaction
made at Montana-based foreign capital depositories.
"I’m very concerned with the applicants we’ve had," said Montana Bank Board Chairman Jim Drummond. "I
wonder with the new concerns over terrorism if we can proceed."
Drummond, who is also president of First Security Bank, said there’s been tremendous political pressure
to make the program work. And some board members believe their resistance to fast-tracking the state’s first
offshore banking proposal spared Montana the embarrassment of being snarled in scandal.

The state Department of Commerce appears to have been less cautious. The company it hired to promote
Montana’s Swiss-style banking and ferret out shady applicants has itself been linked to money laundering.
"Mistakes were made. I’m not denying that, but certainly no one made them with any malfeasance," said
former Commerce Director Peter Blouke.
Rather, through friend-of-a-friend type assurances, Commerce’s Division of Banking and Financial
Institutions officials partnered with Globalink, an Oregon-based company supposedly respected and
knowledgeable when it came to offshore banking.

Highlighted members of the company included Globalink President Doug Hamilton, of Whitefish, and
Bruce Caputo, a former New York congressman and one-time member of the House Banking Committee.
Neither a Montana native nor a noteworthy person, William Abraczinskas wasn’t included in the
announcement. Abraczinskas founded the company, Hamilton confirmed recently.
Hamilton, who two years ago spoke publicly about offshore banking’s promise, doesn’t talk about Globalink
anymore other than to say he never controlled it, despite his corporate title.

Sixteen months after the Commerce Department partnered with Globalink, in a unrelated incident,
undercover FBI agents arrested Abraczinskas for agreeing to launder Mexican drug cartel money. According to
the FBI agents, the money was to be laundered through Globalink.
Abraczinskas’ plan was to deposit the drug money in foreign depositories like the ones Globalink had
agreed to market for Montana. From a depository, Abraczinskas would wire the amount to the undercover
agent’s place of choice, according to the FBI.

Montana’s Banking Division, now under the Department of Administration, didn’t terminate its contract with
Globalink until this past March, after a federal court in Miami sentenced Abraczinskas to 10 years in prison.
Deputy Banking Commissioner Chris Olson, a 27-year employee of the division, said he didn’t think his
office ever truly did business with Globalink. And he questioned Abraczinskas’ level of involvement with the
Other state officials quickly pointed out that Abraczinskas wasn’t convicted of money laundering for nearly
two years after the state’s partnership.

However, Abraczinskas did have an extensive civil court record before the partnership, most cases
stemming from business disputes in his home state, Oregon.
Five lawsuits were filed against Abraczinskas in Bend, Ore., during the 1990s.
And there was more information Montana could have found on Abraczinskas, said offshore banking
watchdog David Marchant. Marchant, the owner of Offshore Business News & Research Inc., published an
investigative report on Abraczinskas in February.

In it, Marchant follows Abraczinskas’ business dealings from an alleged Oregon timber scam through the
money laundering conviction.
Earlier, Marchant exposed a Montana registered company, known as "The Bank Exchange" that is accused
of helping operate and form bogus offshore credit unions. Abraczinskas was the previous owner of The Bank
Exchange, Marchant reported, but wasn’t an owner last December when the credit union scam was revealed.
The Bank Exchange’s principals last December were Darryl K. Willis and Dale A. Erickson, who were
charged in June with bilking 100-year-old Una Anderson of Jens out of her $6 million life fortune.

Each man is currently being held on $2.5 million bail.
More than $2 million of Anderson’s money was allegedly used to establish Montana’s first offshore banking
The offshore banking investigator/reporter concluded Montana officials either didn’t investigate Globalink
with due diligence, or didn’t mind what they found.

However Montana officials did mind when Willis presented vague financial information to the state’s
banking board in November 2000 during a hearing on his application to open a depository.
Willis told the banking board his net worth was less than $200,000 at the hearing. But he also claimed he
had personally spent $300,000 applying to be Montana’s first offshore bank. The numbers didn’t add up.
Drummond said the banking board postponed its approval of the application until Willis provided more
financial information. Eventually Willis stopped responding to board requests for more information. He and
Erickson’s application is now considered dead.

Sen. Mike Sprague, R-Billings, said there are many reasons to keep pursuing offshore banking.
Sprague drafted the Foreign Capitol Depository Act that launched Montana’s offshore banking program in
He hopes the offshore program won’t be discarded because of its record thus far.
"A bad batter doesn’t make the game bad," Sprague said.
The senator faults the board for not moving faster and for not establishing application rules that were
easier to follow. He faults the Banking Division for not doing more to market offshore banking.

As a result of terrorism laws passed after last Sept. 11, offshore banking might have lost its luster.
"We had the USA Patriot Act, which was signed late in October or early November, that really created a lot
more reporting requirements for a variety of finance-oriented businesses," said Olson, and privacy was one of
offshore bankings big draws. "There was a lot of interest initially and it was pretty steady I think for quite a while.
But I don’t know if we’ve gotten a single call since the 11th of September."

Copyright 2002 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten,
or redistributed.

Copyright © The Billings Gazette, a division of Lee Enterprises

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