I was ribbed for omitting to mention two scandals in a recent post, PwC has other problems besides Nelson’s Canadian $500 million law suit! The omitted scandals were PricewaterhouseCoopers’ involvement in both the Enron and the AIG sagas. Enron was linked to companies in the Caymans, but Barbadian offshore reinsurance companies were involved with AIG. Were these “shell corporations“? Would they be found in the Barbadian Corporate Registry (CAIPO)? The named companies were Union Excess Reinsurance Co. and Capco Reinsurance Co. Ltd.
As I started to investigate, another thought came to mind. Was this the tip of the iceberg?
I felt that if these were legitimate Bajan companies, they would be listed in both the Barbados White Pages and the Yellow Pages. They would have a web site, email, employees and a physical office. These are multi-million dollar companies, so signs of their existence should have been most evident. My search revealed little evidence of a Barbadian presence. I looked at the offshore industry as a whole to see if this “invisibility” was a common practice. Phone listings were found for less than 3% of the 4,635 International Business Companies (IBCs) in Barbados!
 
AIG Scandal and Barbados Reinsurers
Source: MSNBC - Breadth of AIG’s problems is clear - Accounting experts: Accounting woes widespread

According to AIG:

  • Barbados-based Union Excess Reinsurance Co. does business almost exclusively with AIG, and its shareholders are entwined with a holding company that owns 12 percent of AIG and has a board made up of current and former AIG executives. If AIG is required to consolidate Union’s liabilities with its own, it could cut shareholder equity by $1.1 billion, the firm said.
  • AIG engaged in improper transactions with Barbados-based Capco Reinsurance Co. Ltd. that had the effect of reclassifying $200 million in operating losses from its automobile insurance business as capital losses. Investors tend to pay more attention to operating losses, analysts said.
 
Two “Barbadian” reinsurance Companies
One of companies involved with the AIG scandal, Union Excess Reinsurance Company Ltd., is registered in Barbados with CAIPO. The other, Capco Reinsurance Co. Ltd., although known to have been based in Barbados, was not found in the Registry.
 
International Shell Corporations
Did these reinsurance companies have a substantial presence in Barbados, or were they “shell corporations“? I have never heard of the above two before now, but there are many more. According to CAIPO, there are 86 companies in Barbados with “reinsurance” in their names. Of these 86, I recognized two names: CIBC and CIGNA!
Exhaustive internet searches did not reveal the Barbados address of either two of the AIG - related companies. The New York Times called them “Obscure Offshore Entities“! They must also have had difficulties searching!
The evidence suggests that neither Capco or Union Excess Reinsurance Co. has a significant physical presence in Barbados.
 
What about the other Reinsurance companies?
The Barbados Cable & Wireless Yellow Pages only has one listing for “Reinsurance”! That is IIB REINSURANCE, not found in CAIPO, possibly because it merged with CGM. In sub-categories I found four more Barbados registered reinsurance companies. This is four telephone numbers for 86 registered companies, implying 4.7% of Bajan reinsurance companies have listed Barbadian phone numbers!
The evidence suggests don’t try to call us because we don’t even have a listed phone number!
 
What about the other IBCs?

The offshore sector includes 4,635 international business companies (IBCs), 164 exempt insurance companies and 55 qualified exempt insurance companies, seven mutual funds companies and one exempt mutual fund company, seven trust companies, seven finance companies, and 55 offshore banks. Source US embassy
In the C&W Yellow Pages online there are eight pages of phone numbers under the category “international business companies”. Each page had around 15 numbers, so the total was around 120 numbers for 4,635 companies! This means that only 2.6% of IBCs have listed Barbadian phone numbers.
 
Are Barbadian IBCs legitimate?
I occasionally buy frozen fruit in Miami, sold under the name Europe’s Best with a Bajan address on the package. Europe’s Best International Srl is registered with CAIPO, the Barbados Registry. On the package “Europe’s Best” gives a Barbados address, but gives an Ohio, USA, phone number on the web site! I could find no mention of Barbados on Europe’s Best web site. Calling the contact phone number put me in contact with a lady in Ohio. I asked for their Barbados number. She replied that she was unaware of a Barbados office. She gave me a Canadian number, which I called. The lady in Canada was also unaware of a Barbados office. She politely redirected me back to the Ohio office.

Left: Company information from a package of frozen mangoes purchased in Miami, Florida.
I have been told that I know nothing about international finance, so I am going to let you, the reader, decide whether this is a legitimate operation. Drop by the John Lovell Building and tell me how large the Europe’s Best office is.
What is going on? Are these Offshore Companies perfectly legitimate businesses afflicted with crippling shyness? Have the external auditors become more diligent? Or am I going to wake up tomorrow and see yet another offshore scandal?
 
US Upset with Secrecy
I have been griping about the secrecy in Barbados for a long time. Every time you look to see who is involved with a real estate transaction you come across a shell corporation and you can’t document the beneficial owners. Now the Americans are getting angry. Here is what New York District Attorney Robert Morgenthau said:

“The headquarters will be in a country where that company is not permitted to do business. They’re saying a company is managed in Barbados when there’s one meeting there a year. In the prospectus, they say legally controlled and managed in Barbados. If they took out the word ‘legally,’ it would be a fraud. But Barbadian law says it’s legal, so it’s legal.”
Three powerful US Senators, Carl Levin, Norm Coleman, and Presidential candidate, Barack Obama, have introduced the “Stop Tax Haven Abuse Act“, in which Barbados is named as an “Offshore Secrecy Jurisdiction”. All three commented as they introduced the act:
“It is simply unacceptable that some individuals are using offshore tax havens and secrecy jurisdictions to shelter trillions of dollars in assets from taxation,” said Coleman.
“None of these offshore schemes would work,” said Levin, “without the secrecy that prevents U.S. agencies from enforcing our laws. … “
Obama said: “We need to crack down on individuals and businesses that abuse our tax laws so that those who work hard and play by the rules aren’t disadvantaged.”
 
The former Europe’s Best web site had a Bajan address and a US phone number!

Disclaimer: The above post expresses my own opinions. The quotes are from published sources. I am not familiar with the situations described therein. Some of the quoted sources express unproven allegations. I invite others to express their views, both on my opinions and on the quotes. I would greatly appreciate hearing from individuals associated with either the named companies or the offshore industry in general. You may also email me confidentially at [email protected]