A Nation For Sale - Corruption In The Bahamas 1q435w

A NATION FOR SALE October 10, 1984

Corruption in The Bahamas By Carl Hiaasen and Jim McGee

Excerpts taken from a Miami Herald Special Reprint September 23rd - October 10th, 1984

For more than a decade, international drug traffickers have used the Bahamas as a vital gateway for U.S.-bound cocaine and marijuana. Sparsely populated and strewn over 100,000 square miles, the country’s 700 islands are a smuggler’s dream and a law-enforcement nightmare. Only an hour by air from the Florida coast, dozens of unguarded beachfront runways and scores of secluded harbors make the Bahamas an ideal spot for storage, refueling and escape. U.S. officials estimate as much as 33 to 40 percent of all illegal drugs entering Florida first through these islands. Smuggling on such a scale could not flourish without corruption, and drug traffickers say they often find a warm welcome in the Bahamas. In the glib assessment of one smuggler, it is “a payable situation” — but a tragedy for honest citizens of the developing island country. Earlier this year, as a commission of inquiry in Nassau gathered testimony about payoffs, protection and narcotics, The Miami Herald began a concurrent investigation of corruption in the Bahamas and its shattering impact. In five months, reporters followed a trail of drug-related graft from the police to the Parliament. They interviewed numerous smug glers, crooked cops, dishonest lawyers, de≠spairing civic leaders and the most tragic recipient of the smugglers’ windfall, young Bahamian cocaine addicts. The six-part series, published Sept. 23-28, was reported by staff writers Jim McGee and Carl Hiaasen, and supervised by Investigations Editor James Savage. Research assistance was provided by Gay Nemeti and Nicki Kelly. The major photographs were taken by Tim Chapman, and the art work was composed by Rick Brownlee. Graphics Editor Don Kent designed the project.

RICK BROWNLEE / Miami Herald Staff

The disclosures have left no layer of Bahamian government untainted. Some of Prime Minister Lynden O. Pindling’s closest and most powerful associates have been implicated in payoffs, money-laundering and drug shakedowns, while Pindling himself was the subject of a serious bribery accusation. The Herald also reported that the prime minister received millions of dollars in undisclosed gifts and loans from foreign businessmen - money that went to build a new $3 million mansion. Pindling and his men have denied any wrongdoing, but today the government shulders in political turmoil. The portrait of the Bahamas that emerged in recent months is a sinister contrast to its image as a sundrenched tourist resort. It is a portrait of a nation on the take, and a generation in peril. As long as cocaine and marijuana smugglers consider South Florida a prime destination, the Bahamas will be a key link in the South American drug pipeline. High-level corruption in the Bahamas directly affects the flow of drugs to American shores; more importantly, it endangers the future of 223,000 Bahamians. For most of them,who have worked hard and rejoiced in their country’s independence, drug corruption has brought shame, misery and an unprecedented crisis of leadership.

Pindling Received Millions From Foreign Businessmen The money came from those who depended on the goodwill of the government or contemplated investments in the Bahamas.

TIM CHAPMAN / Miami Herld Staff

Prime Minister Lynden O. Pindling’s mansion west of Nassau has been partly financed with hundreds of thousands of dollars from foreign businessmen.

By Jim McGee And Carl Hiaasen

During the past 12 years, foreign investors in the Bahamas channeled nearly $17 million to Bahamas Prime Minister Lynden O. Pindling or to companies in which he had a secret interest, records show. The money took various forms: gifts, unorthodox bank loans, direct payments to Pindling creditors, unusual stock deals or generous home mortgages. It came from businessmen who depended on the goodwill of the Pindling government, sought approval of governmentregulated ventures or contemplated investments in the Bahamas. The largest chunk, $14 million, came from a Bahamian bank controlled by fugitive financier Robert Vesco. The bank fin =laced companies in which Pindling had an undisclosed one-third interest. Despite this steady flow of funds, which allowed him to enjoy a millionaire’s lifestyle, Pindling sank deeper into debt. Since 1977 Pindling spent $4 million - eight times his reported total earnings during that period, according to a Bahamas Commission of Inquiry. “I owe plenty money,” Pindling testified, slipping into a Bahamian dialect. Hundreds of thousands of dollars contributed by foreign businessmen went for the construction of Pindling’s new house, a lavish lakefront home east of Nassau that his attorney says is worth $3 million. The commission’s estimate is almost certainly on the low side because thousands of dollars were paid by unidentified donors directly to the contractor building the new house. Bailey said it is misleading to combine the money Pindling received personally with the money his companies received from Vesco’s bank. “You are completely wrong to lump together loans from (Vesco’s bank) and loans to the prime minister,” Bailey said. “. . .It’s an apple and an orange, and when you put them in the same bowl you are trying to create an impression which I think is false and misleading.” Pindling, who has repeatedly denied any wrong-doing, declined to be interviewed. Pindling’s financial records were provided to commission investigators during the inquiry because of allegations he received bribes from drug dealers. The disclosures were meant to allay suspicions of drug involvement. Instead, they raised questions about a series of unusual transactions that secretly benefited the prime minister. None of the money has been linked to drug smug-

glers. But the prime minister could not explain the source of $238,000 in bank deposits. Nor could he explain who paid $60,000 on his behalf to the building contractor. “I am more concerned, quite frankly, about what I do not see in the bank than what I do see,” said Frank Richter, a financial investigator with the Royal Canadian Mounted Police. R i c h t e r, w h o i s a s s i g n e d t o t h e commission, referred specifically to payments that were made to Pindling’s creditors “without going through the prime minister’s s.” This is the first detailed of the source and circumstances of money that flowed to the prime minister. It is based on Pindling’s financial records and other information obtained by Commission of Inquiry and The Herald. It shows that the hero of the Bahamian independence movement has received huge sums from rich foreigners. The records show: .

• Boca Raton developer George Barbar gave Pindling $250,000 in personal loans in 1983 that were secured by a second mortgage on which no monthly payments have been made. “The Bahamas needs a prime minister’s residence,” Barbar said. “The country needs a place where he can receive dignitaries.” After a Commission audit found that Pindling had not made monthly interest payments on a bank loan of nearly $1 million, Barbar guaranteed another $500,000 to reduce those charges.

A friend in need “I believe a sincere friend will stand by his friend when he needs help,” Barbar said. This money, which Barbar said has not yet been delivered, was provided under a generous financing arrangement in which the Pindlings transferred ownership of the mansion to their son Obie. The house served as collateral for the no-interest $500,000 loan, which was actually made to Obie. To repay the debt, Obie agreed to work for Barbar in a “business relationship.” Barbar said he plans to Obie in a building project in Nassau. “When I help Obie, I help the country also,” the developer said. “... He will pay back that money.” Barbar, who is part owner of a sevenacre estate on Cat Cay, said he has no business interests in the Bahamas. A year ago, he said he was “very much interested” in constructing office buildings in Nassau - a venture that could require government approval. Bailey said Barbar once considered

going into business with Pindling after the prime minister left public office. “If he had not run for another term... they [Pindling and his son] were going to go into the development business with the guidance of Barbar.” During the Commission investigation, Bailey was asked about large deposits to the bank of Pindling’s political party during the 1982 election. Bailey said that Barbar arranged for $500,000 in campaign contributions -roughly $5 for every ed voter in the Bahamas. But Barbar told The Herald he had nothing to do with those deposits: “I have never made a contribution to the (political party).” • The major stockholders of the Bahama Development Company, Ltd., in Freeport gave Pindling a total of $750,000 in 1983 at a time when the Prime Minister needed money to complete work on his mansion. The arrangements were handled by Edward St. George, a major partner in the Freeport-based development company, who said during the Commission that he does not expect the money to be repaid.

Loan Forgiven “If necessary it (the St. George loan) would be forgiven,” Bailey explained. “...It is a personal loan.” An initial $250,000 went through an in the law firm of attorney Kendal N o t t a g e , a c a b i n e t m i n i s t e r. N o t t a g e himself is being investigated on unrelated charges that his law firm laundered drug money for a Boston Mafia figure. “The original approach to St. George was from Kendal Nottage,” Bailey said. The Nottage law firm paid some of the Freeport money directly to the prime minister ’s creditors. The rest went to Pindling’s bank . Later, St. George arranged another infusion of $500,000 to Pindling. It took the form of a loan which St. George told the Commission Pindling would not have to repay. “I’m not the least bit interested in what you publish,” St. George said. “.. . It sounds to me like you are making some appalling mistakes.” The Grand Bahama Development Company, Ltd., which is controlled by foreign investors, manages the deep water port, public utilities and airport in Freeport under a t operating agreement with the government. “It is certainly accurate to say they have

to look to the government for some things,” Bailey said. “(But) . . . the Grand Bahama Development Company does not get any favors.” He added: “You are dealing with what we would call (in the U. S.) the appearance of impropriety, versus impropriety itself.” Questions about money from Freeport have a special irony for Pindling, who came to power in 1967 on the heels of the “Bay Street Boys” scandal. At that time, disclosures of illicit payments from Freeport casino interests to g o v e r n m e n t o ff i c i a l s d i s c r e d i t e d t h e previous Bahamian istration. • Resorts International casino company in 1981 gave a Nassau law firm $91,000 that was promptly ed along to a building contractor working on Pindling’s new mansion. The money went through the Nassau law firm of Rolle, Knowles, which ed it along to Yasmar Investments, a firm controlled by Everette Bannister, Pindling’s friend and confidante. Tw o d a y s a f t e r Ya s m a r r e c e i v e d a slightly larger sum from the Resorts’ law firm, Bannister bought a $91,000 bank draft payable to general contractor Arnold Cargill.

“It wasn’t done at my request,” Pindling insisted. Initially, the lawyer involved in the transaction, Jack Duffus, told investigators he was specifically instructed by Resorts t o p a s s t h e m o n e y t o B a n n i s t e r ’s corporation. But Resorts officials insisted the money was an advance for future legal fees - not to pay Pindling’s construction debts. Duffus later changed his statement. The lawyer said he’d re≠freshed his memory and that his firm’s records showed the money was meant for legal fees. He declined to comment further Sunday. “Everette Bannister had asked him [Duffus] to loan him 90 grand for a very urgent matter,” Bailey said. “Duffus went [to Resorts] and got an advance on the legal fees. He said nothing to anybody about Bannister ... Bannister did not tell Duffus why he needed the money.” At the time of the payment, a Resorts subsidiary was seeking a contract from the government’s Hotel Corporation to manage a casino in Freeport. Pindlingsits as chairman of that regulatory board. “Resorts International has done nothing either illegal or wrong,” said Robert Peloquin, a senior official with the casino firm. Aside from the money originating with Resorts, the Commission identified three more payments totalling $60,000 to Cargill on behalf of the prime minister. Pindling said he could not recall who supplied the money. • Everette Bannister, a Bahamian businessman now under investigation for taking an undercover payoff from U.S. agents, gave Pindling $533,000 that originated with foreign investors. The funds were delivered in 1980 and 1981, and were never reported on the prime minister’s financial disclosure forms. “He needed the money, ” Bannister explained. “He was building his house.” The total included $333,000 of a “finder’s fee” that Bannister said he earned from the 1980 sale of the Paradise Island bridge. The seller was Resorts president J a m e s C r o s b y, w h o c o n t r o l l e d t h e corporation that owned the bridge. We were shocked when we found out ... this guy Bannister had an interest in it,” said attorney Charles Murphy, Crosby’s lawyer in the bridge sale. He said Crosby thought the law firm that handled the sale g o t t h e f i n d e r ’s f e e . “ We ’ r e i n n o c e n t victims,” he said. “But it looks horrible. ” Bannister is a $50,000-a-year consultant for Resorts International. Pindling said he never knew that the Bannister money came from the bridge sale. He said he thought it stemmed from a real estate deal. Resorts International, one of the l a rg e s t i n v e s t o r s i n t h e B a h a m a s , i s

periodically subject to a wide range of decisions by the Pindling government. Bannister also gave Pindling $200,000 in 1981 obtained during a business deal that involved two would-be casino investors, Sorkis J. Webbe Sr. and Victor Sayyah, both U. S. citizens. Bannister said the money was an investment in Bahamas World Airways ’74 Ltd., an ailing airline Bannister operated. Instead of using the Webbe-Sayyah money to fly airplanes, Bannister gave most of it to Pindling.

Casino Application At the time, Sayyah had applied for permission to operate a casino in Freeport. Bannister said he didn ’ t know Webbe was the source of the money. Last year, Webbe was described by a federal prosecutor as “a working associate member of La Cosa Nostra” in St. Louis an allegation he vigorously denies. Webbe was also general counsel of the Aladdin Casino in Las Vegas at a time when federal officials said it was controlled by organized crime. Sayyah couldnot be reached for comment. Webbe acknowledged loaning money to a Sayyah corporation that was l a t e r g i v e n ’ s , , t o B a h a m a s Wo r l d i n exchange for a stock interest. But Webbe said he had no idea the bulk of the money would be ed along to Pindling. “Absolutely not,” Webbe said. To explain these payments, Bannistersaid he had an “obligation” to the prime minister. Bannister said he felt bad because of the failure of another airline in in which Pindling had a secret interest. Bannister said it was a handshake deal. “Nothing was written down,” the prime minister agreed. The $533,000, Bannister said, was meant to compensate Pindling for his stock in the airline and another company - a successful airport catering service. Commission investigators questioned whether Pindling deserved anything for the airline stock. One testified that the stock was worthless, and Pindling hadn’t paid a dime for it anyway. Commission Chief Counsel Robert Ellicott said the commission must consider whether the Bannister-Pindling stock deal was just an “excuse” to cover up “certain illicit payments” to the prime minister. • A bank controlled by fugitive conman Robert Vesco loaned $14 million to two corporations in which Pindling had a secret interest. Only $3.6 million was ever repaid. Vesco’s Bahamas Commonwealth Bank was the principal backer of both Bahamas Wo r l d A i r l i n e s ( B WA ) a n d B a h a m a s Catering, Ltd., during the early 1970s.

More than most foreign investors, Vesco depended heavily on the goodwill of the Pindling istration. He was wanted in the U. S. for his alleged role in a $224 million mutual fund swindle. He needed a safe hideout in the Bahamas Except for a three-year sojourn in Costa Rica, Vesco was allowed to remain in the Bahamas from 1972 until 1981. “I didn’t go to bat for him one way or the other, ” said Pindling. The Vesco bank loaned BWA $3.6. million to purchase two jets and allowed the airline another $7 million in unsecured bank loans. The bank also provided $3.6 million for the purchase of Bahamas Catering, which provides food service at the government-owned Nassau International Airport. “In 1970 and 1971, we all looked at Mr. Vesco as something of a financial wizard,” Pindling said. Vesco’s bank collapsed in 1974, partly

because of the huge, unsecured loans to the Pindling-Bannister airline that were never repaid. The catering firm repaid its loan. When it came to BWA, the Vesco bank was a “continuous tap that somebody forgot to turn off,” according to liquidator David Jones. Even after it was obvious the money would never be repaid, the bank kept loaning millions to the airline, eventually allowing the total debt to swell to $10.5 million. P i n d l i n g ’s A t t o r n e y G e n e r a l , P a u l Adderley, recently described Vesco as the “single most criminal, corrupting factor in the Bahamas in the last 10 years.” • The Whitfield Corp. bought Pindling’s previous residence, known as “Long Bay,” for $650,000 in April 1979 under a generous lease-back arrangement that allowed him to continue living in the home.

Whitfield Corp. was controlled by Texas entrepreneur Abe Lieber, who opened the Nassau-based Amford Bank and Trust Company in 1978. He was involved with Bannister in several transactions and once considered financing the government-owned casino at Cable Beach.

Helping Pindling “I did it to help the prime minister,” Lieber said of the Long Bay sale. “There is no question about that, I don’t see anything wrong with it. I didn’t pay more than the value of the house.” Documents obtained by the House of Assembly indicate that Lieber’s purchase of Long Bay was part of a package that included other business ventures in the Bahamas - projects which would have required government approval. Lieber says those documents are forgeries.

“Show me one favor I got from the Bahamian government,” Lieber says. After the sale, the Prime Minister continued living in the Long Bay house for four years. Pindling’s monthly payments were charged off against the balance he was still owed by Lieber. After Pindling finally moved out of Long Bay this year, Lieber put the house on the market. Pindling did not disclose the income from the 1979 house sale until three years later, when a Select Committee of the Parliament was emed to investigate the Bannister-Lieber transactions. Similarly, the prime minister did not reveal the interest he says he had in Bahamas Catering and BWA until Commission investigators acquired his bank records. Both firms had government contracts. The Bahamas Code of Ethics forbids cabinet ministers from holding an active interest in companies with government contracts.

“If you want to apply U.S. standards you can do a hatchet job on the Bahamas very easily, ” Bailey said. The one man who was involved in all these transactions was Pindling’s busnness attorney, Jack Duffus. It was Duffus who was hired to form BahamasWorld Airways and BahamasCatering, Ltd. More recently, it was Duffus who handled the Resorts International money that subsequently went into Pindling’s new house. During the final week of public testimony of the Commission of Inquiry, Duffus was asked to appear to tell thestory of the money. He didn’t. When investigators tried tofind him, Duffus’ secretary said her boss had left the country. D u ff u s t o l d T h e H e r a l d h e w a s n o t o ff i c i a l l y summoned to the commission. The lawyer said he went on vacation instead.

Prime Minister Concedes Big ‘Errors In Judgement’ P i n d l i n g ’s a d m i n i s t r a t i o n h a s b e e n f r a c t u r e d b y accusations of bribe-taking, money-laundering and other corruption involving international narcotics smugglers. By JIM McGEE And CARL HIAASEN Herald Staff Writers. Nicki Kelly also Contributed to this report.

B a h a m a s P r i m e M i n i s t e r Ly n - d e n O . P i n d l i n g acknowledged Tuesday night that his government is caught in “the eye of a storm,” and that a lengthy investigation of drug-related corruption has caused “severe political and economic damage” to the country. “I know that as the country’s leader, I must take responsibility for that,” the prime minister said in a national radio and television broadcast. “Where there is a storm, it is the duty of the captain to step up ...and take control.” Pindling’s istration has been fractured by accusations of bribe-taking, money-laundering and other corruption involving international narcotics smugglers. The prime minister, who has ruled the Bahamas for 17 years, conceded that his istration has made “serious errors in judgment.” “Where I have been too trusting, I must now be more vigilant,” he declared. “Where I have been too lenient, I must now be more exacting.” The 15-minute speech came one day after three top Cabinet ministers resigned and two others were fired in the lingering wake of the Bahamas’ drug scandal.

Under pressure The prime minister recently has been under pressure to resign or call new elections, but he gave no indication Tuesday night that he was ready to do either. “The government will not be swayed by the noise in the marketplace,” Pindling said. M e a n w h i l e , a n o t h e r k e y m e m b e r o f P i n d l i n g ’s g o v e r n m e n t r e s i g n e d Tu e s d a y a m i d a l l e g a t i o n s o f corruption. Senator Edward A. “Dud” Maynard, former chairman of Pindling’s Progressive Liberal Party (PLP) and a vocal er of the prime minister, announced that he was quitting the Senate “in the best interest of the country and our party.” In a Miami Herald article published Sept. 28, Charles Hilliard, a convicted robber and confessed cocaine was

Pindling’s istration has been fractured by accusations of bribe-taking, money laundering and other corruption involving international narcotics smugglers.

arrested on U.S cocaine conspiracy charges last month in Atlanta. Tu e s d a y n i g h t , P i n d l i n g a n n o u n c e d a m a j o r reorganization of his Cabinet, shifting several Cabinet to posts left vacant by Monday’s resignations and firings. Edward Maynard’s brother Clement was named both foreign affairs minister and minister of tourism; A. Loftus Roker was appointed to the newly created post of mMinister Of National Security, and Darrell Rolle was named Minister Of Works, Housing and Insurance. In addition, Economic Affairs. Minister Alfred Maycock takes over the duties of exAgriculture Minister George A. Smith, who resigned Monday, and Livingstone Coakley assumed the duties of former Youth Minister Kendal W. Nottage, who also quit. Both Smith and Nottage were implicated in drug-

related corruption in testimony before a Commission of Inquiry. Both deny any wrongdoing. Pindling also announced that Transport Minister Philip Bethel would be put in charge of local governments, and Attorney General Paul Adderley would give up the Foreign Affairs Ministry to become minister of education. The only new Cabinet member is Dr. Norman Gay, who will be minister of health. The prime minister said a smaller Cabinet would deal more effectively with the Bahamas’ problems. “You and I know that a hard tough line will have to be taken on crime and drugs,” he said. In closing, Pindling asked for the of the Bahamian people “to pledge anew that we will preserve, defend and protect our heritage as free Bahamians.