International action because of suspicion of investment fraud

The Fiscal Intelligence and Investigation Service (FIOD)

has arrested four suspects in a criminal investigation directed by the National Public Prosecutor’s Office for Financial, Economic and Environmental Offences into a suspected international investment fraud in American life insurances by the company Quality Investments B.V. (referred to below as ‘QI’).

On Tuesday, 27 September, the Fiscal Intelligence and Investigation Service and foreign authorities carried out searches at 27 locations in the Netherlands, Spain, Turkey, Dubai, England, Switzerland and the United Stated. Real estate, cars, expensive watches, yachts and an airplane worth millions of euros were seized all over the world. The international action is aimed at securing as much money as possible for the investors of QI.

Suspicion
The four Dutchmen arrested are a 49-year old man living in Switzerland, a 46-year old man living in Turkey, a 38-year old man from Hoorn and a 48-year old man from Bussum. QI and the arrested men are suspected of participation in a criminal organisation, committing forgery of documents and fraud. The two principal suspects first-mentioned are in addition suspected of money laundering. QI sold products to wealthy investors between 1 July 2007 and now, especially in the Netherlands and Belgium, but also in other European countries. The suspicion arises that the suspects have attracted large sums of money by giving false information about the actual construction of its investment product. It is suspected that hundreds of investors have transferred more than USD 200 million to QI in all.

Because the minimum investment was more than EUR 50,000, QI did not need a permit of the Netherlands Authority for the Financial Markets (AFM). The Financial Supervision Act assumes that in case of the investment of such sums professional investors are concerned who are deemed to be able themselves to assess the integrity of the investment product. Trust is crucial to financial transactions. Investment fraud is detrimental to trust and therefore the government deals with it by way of supervision and, if necessary, criminal enforcement.

Investment product
The investment product recommended by QI offers the participants a participation for a limited period of time in a fund which allegedly includes a life insurance policy and a return-of-premium insurance. If the insured party dies during the participation period, the life insurance is paid out. If the party insured is still alive after the period of participation, an equally high payment is allegedly made by the return-of-premium insurer.

Only after insistence by the Authority for the Financial Markets, QI made known the name of the return-of-premium insurer in June 2010; the company Provident Capital Indemnity ltd (PCI) would allegedly provide the so-called bonds. This company with registered office in Costa Rica had a reputation of untrustworthiness in the United States and elsewhere. The Managing Director of the company was arrested in the United States in January 2011 and will be prosecuted there, together with his accountant, because of defrauding investors all over the world.

In the few cases payments had to be made, this was probably done by investors participating in the construction at a later stage. According to the Public Prosecution Service, a Ponzi scheme is involved (payments are made out of the money received from new investors). It is suspected that the suspects knew that PCI would not pay and furthermore that they colluded with the Managing Director of PCI in the defrauding of the investors. It is suspected that the investors still awaiting payments would only have seen back a small amount of their money. The guaranteed payments held out appear not to exist.

The company of one of the suspects always put the life insurances and the return-of-premium insurance in an American Trust. According to the prospectus, the participants became joint owners of the insurance policies concerned via the Trust. The suspicion has arisen that the reality was otherwise and that the two main suspects would have the payments of the life insurance policies at their disposal on the death of an insured party.

Seizure
The Fiscal Intelligence and Investigation Service searched five residences in total in Grootebroek, Alkmaar, Hoorn, Amsterdam and Bussum. In addition, three companies were searched in Sassenheim, Amsterdam and Heemskerk. Two law firms were searched in Amsterdam and Arnhem. Apart from that, nine residences, two business premises and a law firm were searched abroad.

The action could be realised because of excellent cooperation with the Virginia Financial & Securities Fraud Task Force and investigative departments in, for instance, Belgium, Germany, England, Denmark, Malta, Cyprus, Switzerland, Spain, Turkey, Bermuda and the United Arab Emirates. The foreign actions were coordinated by Eurojust.

The worldwide seizing of goods focuses not only on fact-finding, but also on tracing assets. Under the direction of the Prosecution Service Criminal Assets Deprivation Bureau, criminal financial investigations are carried out apart from the criminal investigations into the actions of the suspects.