Fraud > Offshore
Planning > EXHIBIT:
Unlike, say, the blazing arrogance of Jerome Schneider, author
Terry Neal who wrote “The Offshore Advantage” is a very likeable
guy who burst on the offshore scene around 1997 and wooed several high-profile
asset protection planners to send clients to his Nevis American Trust, an offshore
service provider in Nevis.
Warning signs about Terry came early enough. In 1999, the SEC filed a fraud
case against Terry and several of his employees for alleged securities fraud
involving “Itex Corporation”, which claimed to be involved in the
barter exchange business. The SEC claimed that Terry created a series of sham
barter deals involving “mysterious offshore entities” to inflate
the company’s value and thus defraud shareholders (see Litigation Release
16305 below). A federal judge subsequently barred Neal from serving as an officer
of any publicly-traded company and ordered him to disgorge $2.3 million in “ill-gotten
gains” and pay a $200,000 penalty.
Amazingly, Neal’s involvement in the ITEX fraud was viewed by the asset
protection gurus who enjoyed his cheap services as some sort of U.S. government
overreaching, and they continued to use Nevis American Trust. At some point,
Nevis American Trust basically started holding itself out as basically a “bank”
and Nevis Financial Services took issue. Around this same time, Neal began boasting
to colleagues about having a “compound” in Oregon and that he was
ready to slip across the U.S. border into Canada at any time.
Finally, on Friday, December 27, Neal was arrested in Portland, Oregon, on
charges of tax evasion.
Although Terry is a nice and personable guy, he typifies the “Hide Your
Money” mentality of the 1990’s offshore planning. While preaching
secrecy and stealth, he maintained a very high profile, writing books and lecturing
at seminars about ways to screw the U.S. and Canadian governments – things
sure to draw attention to his activities. We suspect that the IRS and Revenue
Canada will hold Terry and “milk him” for information about those
who have done business with Nevis American Trust and his other companies, just
as they did when they got their hands on the owner of Guardian Bank in Cayman
(which has since netted the IRS over $1 billion in back taxes, penalties, and
interests, and resulted in dozens of convictions and felony plea-bargains).
In retrospect, Terry readers will wish his book had been called the “Offshore
Disadvantage”. Oh well.
REPOST FROM JOHNDOES FORUM
by Les L. French
Long time fraudster Terry Neal, who traded a promising career as CEO of ITEX
Corporation, then the world's largest barter and trade exchange organization,
for a life of swindle and conmanship in the penny stock market and the offshore
bank scam business, was arrested and hauled off earlier today on various charges,
according to an informed source.
Details are not available, but according to Brent Mudry of Stockwatch Canada,
several individuals related to the Neal/Exchange Bank & Trust case are spending
the holidays behind bars. If the charges against Neal bare (no pun intended)
any similarity to the charges against the others, Neal is looking at Rico charges
of money laundering, including money laundering for individuals with Mafia ties,
tax evasion, and securities fraud, to mention a few possibilities.
Recently indicted and arrested were Neal associates Mr. Jerome Schneider and
L.A. attorney Eric Whitmeyer. The indictments were sealed, so it was impossible
to know if Neal was on the list or not.
Terry Neal has been in the midst of secretly constructing a new multi-million
dollar home and property near Portland, Oregon. Ever since the security lockdown
of Sept. 11, 2001, he has curtailed his visits to the U.S. Previously, he would
slip accross the Canadian border near Vancouver, B.C., driving a Cadillac with
British Columbia plates registered to others. Lately, he has been hanging out
in the Portland area, using an alias. His secretary would deny that he was in
town, and even state that she had never heard of him.
One enterprise in which Neal was recently involved was "rich" in
questionable activity, according to one former employee, who requests to remain
anonymous. Everyone in the office was using aliases, and setting up accounts
for very questionable people, according to this source.
Neal allegedly was also running a business registration and incorporation service
out of Carson City Nevada, managed by Neal associate Gerald Pitts, according
to other sources. The Nevada corporation service allegedly would not only set
up corporations, but provide nominee officers and directors. It allegedly acted
as an entrance portal to Neal's offshore banking enterprise.
Neal's alleged criminal and civil charges, including a civil action brought
against him from the S.E.C., have left scars on the struggling ITEX Corporation
from which the small company has never recovered. Neal still controls a large
percentage of the stock of the company, and it has been alleged that Neal has
ties to former CEO's Graham Norris and Collie Christensen. Mr. Christensen is
still a director of the company, although he was fired from his CEO position
earlier this year by the board. Altogether, Neal, Norris, and Christenen could
muster sufficient votes to elect board members. An annual shareholders meeting
is being held on January 28, 2003.
For more information on Neal/EBT, you can visit the Stockwatch Cananda site
Best regards to all,
BCSC-known EBT founder Neal arrested in Portland
2002-12-31 17:02 PT - Street Wire
by Brent Mudry
Offshore financier Terry L. Neal, best known as the head of Nevis-based Exchange
Bank and Trust, an offshore money-laundering account based in a downtown Vancouver
bank, and the mastermind of the Itex Corp. fraud, has been arrested and jailed
in his hometown of Portland, Ore., for alleged false statements in personal
tax returns filed with the Internal Revenue Service.
Mr. Neal was arrested Friday, Dec. 27, on a criminal complaint and arrest warrant
signed and sealed on Boxing Day by Judge John Jelderks of United States District
Court for the District of Oregon. He made a brief first court appearance later
that day and was remanded without bail.
Mr. Neal faces an initial detention hearing on Thursday in Portland. While
U.S. officials are expected to oppose bail on the basis of flight risk, courts
in Oregon generally have a catch-and-release policy, unlike Florida, New York
and other jurisdictions with more experience with alleged white-collar criminals.
The arrest follows an extensive probe by the Criminal Investigation Division
of the IRS in Portland.
Under federal court rules, the U.S. Attorney's Office has 30 days from Mr.
Neal's first appearance to seek a grand jury indictment. After that, speedy
trial rules allow for a trial within 70 days, although complex white collar
and tax cases such as Mr. Neal's usually take six to nine months to go to trial,
once the discovery and evidence argument phases are completed.
SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16305 / SEPTEMBER 28, 1999
ACCOUNTING AND AUDITING ENFORCEMENT
RELEASE NO. 1175
SEC V. ITEX CORPORATION, TERRY L. NEAL, MICHAEL T. BAER, GRAHAM H. NORRIS,
CYNTHIA PFALTZGRAFF AND JOSEPH M. MORRIS, CIV. NO. 99-1361 (HA) (D. Ore. September
SEC FILES FRAUD CASE AGAINST ITEX CORPORATION
On September 27, 1999, the Securities and Exchange Commission filed a civil
fraud action in the United States District Court for the District of Oregon
against Itex Corporation ("Itex"), Terry L. Neal, Michael T. Baer,
Graham H. Norris, Cynthia Pfaltzgraff and Joseph M. Morris (Civil Action 99-1361-HA).
The Commission's complaint alleges that from at least December 1993 through
February 1998, Itex, a company engaged in the barter exchange business and formerly
listed on the NASDAQ Small Cap Market, materially inflated its revenues and
earnings in financial statements filed with the Commission and in other disclosures
made to the investing public. The Complaint alleges that Terry Neal, Itex's
founder and control person orchestrated and implemented a broad-ranging fraudulent
scheme by making materially false and misleading disclosures about the company's
business and by failing to disclose numerous suspect and in many cases sham
barter deals between Itex and various mysterious offshore entities related to
and/or controlled by Neal. Neal was assisted in the fraud scheme by various
people who, at the time, were members of Itex management, specifically, Michael
Baer, Graham Norris, Joseph Morris and Cynthia Pfaltzgraff.
The Complaint alleges that the defendants defrauded Itex investors by bartering
assets of little or no value and by designating the value of many of Itex's
assets and transactions in "trade dollars" rather than their far lower
U.S.-dollar fair market values on its financial statements. On the Itex Exchange,
members trade goods and services. In lieu of trading (or bartering) such goods
and services directly, Exchange members use Itex trade dollars, issued to them
by the Itex Exchange. Itex corruptly took advantage of the process, however,
by orchestrating numerous bogus barter deals, in which the goods and services
exchanged were grossly overvalued, and then reported in Itex public filings
as income and/or assets, thus facilitating the fraud.
The Complaint alleges that Itex reported substantial revenue from sham barter
transactions as a principal in its own name or through its Swiss-based subsidiary,
Associated Reciprocal Traders ("ART"). In fiscal years 1994 through
1997, approximately 56%, 56%, 43% and 60%, respectively, of Itex's reported
revenues derived from such barter transactions. Almost all of the Itex barter
transactions were suspect inside deals involving Neal himself. The barter deals
involved difficult-to-value assets, such as artwork, pre-paid advertising due
bills, and worthless stocks in public companies. Some Itex deals involved purely
bogus assets such as leases on vacant property, a non-existent stamp collection,
and highly-questionable unpatented and undeveloped mineral claims.
The Complaint alleges that without the fabricated barter earnings from Neal's
transactions, Itex would have reported losses rather than profits for fiscal
years 1994 through 1997. Itex's materially overstated financial condition and
results of operation were reported in its financial reports for this period
and touted in numerous press releases. Riding this wave of financial misinformation,
Itex's stock price rose from $2.25 to $12.50 per share from January 1994 through
The Complaint alleges that to cash-in on their fraud, Neal and Baer both sold
Itex stock to the market throughout this period, realizing profits of approximately
$6.3 million and $1.4 million, respectively. Morris exercised stock options
during this period and realized profits of approximately $45,000.
The Complaint also alleges that while Itex managed to inflate its income statement
from barter transactions conducted and reported in trade dollars, it needed
cash to pay its operating expenses. Since the company had in reality been losing
money from fiscal 1995 through the present, it made up the operating shortfall
with $11.7 million in proceeds from the sale of its common and preferred stock.
To facilitate the fraud, the bulk of the shares, approximately 1.2 million,
were initially sold at substantial discounts to offshore entities secretly controlled
by Neal, under cover of Regulation S (which allows offshore sales to foreign
investors who have no present intention to sell them back into the U.S. market).
Neal, however, quickly sold the stock back into the U.S. market, and used the
approximately $10.7 million in gross proceeds to, among other things, fund Itex
and to enrich himself and his family members. During the same period, Neal received
an additional half million shares and/or options from Itex in exchange for services
and for certain barter transactions.
The Complaint alleges that the defendants violated Section 17(a) of the Securities
Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5
thereunder, as well as certain reporting, internal controls and record-keeping
provisions of the federal securities laws. The Complaint alleges that Itex and
Neal violated the securities registration provisions of Section 5 of the Securities
Act and that Neal violated Sections 13(d) and 16(a) of the Exchange Act of 1934,
and Baer violated Section 13(d), by failing to make filings disclosing their
beneficial interest and changes in their interest in the securities of Itex.
The Commission is seeking injunctive relief, civil penalties, disgorgement
of Neal, Baer and Morris' ill-gotten gains, and officer and director bars against
Neal, Baer and Morris.
SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16708 / September 18, 2000
ACCOUNTING AND AUDITING ENFORCEMENT 1302 / September 18, 2000
SEC V. ITEX CORPORATION, TERRY L. NEAL, MICHAEL T. BAER, GRAHAM H. NORRIS,
CYNTHIA PFALTZGRAFF AND JOSEPH M. MORRIS, CV 99-1361 BR (D. Ore. September 27,
SEC SETTLES FRAUD CASE AGAINST TERRY L. NEAL
The Securities and Exchange Commission today announced that on September 13,
2000, the United States District Court for the District of Oregon permanently
enjoined Terry L. Neal from committing securities fraud and violating certain
other provisions of the federal securities laws, barred him from serving as
an officer or director of a public company, and ordered him to disgorge $2,300,000
in ill-gotten gains, including prejudgment interest, and a $200,000 civil penalty.
The Complaint alleged that, among other things, Neal devised a comprehensive
scheme to materially overstate Itex's financial condition and results of operations.
Neal caused Itex to enter into sham barter transactions, which inflated assets,
revenues and earnings during fiscal 1994, 1995 and 1996. Neal caused press releases
to be issued touting Itex's extraordinary gains in financial condition and results
of operation, causing the price of the stock to rise from $1.25 per share to
$12.50 per share in eighteen months. The fraudulent scheme included the issuance
of unregistered Itex stock to Neal-related entities and family members at substantial
discounts or in exchange for grossly overvalued assets, after which the stock
was then resold in the U.S. public market for an estimated $1.6 million in profits.
Neal consented to the entry of the judgment without admitting or denying the
allegations against him. In addition to the disgorgement and civil penalty,
the judgment permanently enjoined Neal from violating Sections 5 and 17(a) of
the Securities Act, Sections 10(b), 13(d) and 16(a) of the Exchange Act and
Rules 10b-5, 13b2-1, 13d-1, 13d-3, 16a-2 and 16a-3 thereunder Section 17(a)
of the Securities Act of 1933 and Sections 10(b) and 13(b)(5) of the Securities
Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13b2-1 and
With the entry of this judgment, five of the six defendants in this proceeding
have settled with the Commission. At the time of this release, Michael T. Baer
is the only defendant who has not yet settled with the Commission.
For further information, see LR-16305 (announcing complaint), LR-16430
(settlement with Morris), LR-16437 (settlement with Itex), and LR-16536 (settlements
with Norris and Pfaltzgraff). All of these releases are available at the Commission's
website at http://www.sec.gov/enforce/litig.htm
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