Fraud > Offshore
Planning > EXHIBIT:
Anatomy of an Offshore Service Provider Gone Bad:
Harric v. David Marchant and Commetns
Marc Harric Arresting in Nicaragua
and deported the the United States
Offshore Trust Operator Convicted
in Tax and
Money Laundering Schemes
The Marc Harris Organization It Could Happen To You
A Special Report courtesy of Jay D. Adkisson, Esq., Editor of The
Adkisson Analysis, a highly-popular asset protection website and newsletter.
So you want to know what might happen to your assets when you send them offshore?
Consider those persons who chose to do business with the Marc Harris Organization.
Few people had ever heard of the Marc Harris Organization prior to the spring
of 1997. It was at that time that the very well-dressed and well-manner Marc
Harris began showing up at offshore seminars pitching the use of his full-service
Panamanian offshore service provider.
At prices which were probably 1/3 to 1/2 of the going rate, the Marc Harris
Organization provided everything from trust services and company formations,
to offshore mutual funds and annuities, to offshore insurance company and
bank formations. They also offered tax services, and through a variety of
tactics detailed in the "Harris Matrix" (essentially, a list of
strategies) could create enormous bogus paper losses for U.S. companies, while
actually moving millions of dollars offshore to be controlled by the tax-evading
The Marc Harris Organization was an immediate success, and they were soon
-- in total numbers of employees (~150) -- one of the largest, if not the
largest offshore service provider in the world. Very quickly, the Marc Harris
Organization made arrangements to "back office" many other offshore
service providers, and had offices in most of the major offshore jurisdictions.
Marc Harris himself was an American-born, American-educated CPA, with impressive
academic credentials and a flair for creating grandiose-sounding tax strategies
on the spur of the moment. He brought with him to seminars a fairly impressive
entourage of U.S. tax and financial professionals, who by strict order were
always immaculately dressed as Marc himself was. To meet and work with Marc
and his group you felt like you were with the highest of the high
in the financial world.
The Marc Harris Organization were always on the prowl for U.S. planners too,
to be conduits to send them business. Many highly-credentialed and respected
practitioners made the pilgrimage to Panama to meet with Marc and his staff
at their impressive offices, and listened to stories about all the good they
could do for their mutual clients.
In December of 1997, I traveled to London to attend the Shorex convention,
in part to meet Marc and hear him speak. The Marc Harris Organization was
at that time going full blast, and they had sent me a bunch of information
on their services. For reasons which at that time were unknown to me, the
Shorex folks would not allow Marc to speak at their seminar, and instead he
had rented a very large conference room just off of the main exhibition hallway.
Shorex had a disappointing turnout generally, and Marc had only about 15 listeners
in a room which seated 200. Marc gave an excellent speech about the offshore
industry in general, and how the other offshore service providers were "dinosaurs"
by not providing certain services demanded by clients (there is a lot of truth
During his speech, Marc went through his "Octopus" structure, whereby
clients would own many businesses, but moneys would eventually be funneled
to a Panamanian Foundation (Panama's version of the Lichtenstein Anstalt).
While I had seen this structure before, I was thunderstruck at how much Marc
was charging for several trusts, IBCs, an insurance company, a bank, and several
other structures -- about US$9,000 for a structure that any other legitimate
service provider would have charged more like $50,000 for. I recall speaking
with Oklahoma City attorney Mike Johnston and San Diego attorney Mike Potter
shortly after Marc's speech, and the three of us concluded that it was unlikely
that he could really offer such a large and complex structure that cheap,
even with cheap Panamanian labor -- so he was probably dipping into his clients'
This conclusion caused all three of us to forego doing business with the
Marc Harris Organization (the "MHO"), although a couple of months
later I did get to watch Marc's presentation for a second time in Nassau at
a seminar given by an offshore service provider there. Marc at that time was
at his peak, and I had a lot of time to socialize with some of his other planners.
They were uniformly upbeat about the future and talked about how quickly the
MHO was growing, although in response to specific queries they didn't seem
to be at all familiar with even some of the most basic principals of offshore
planning for U.S. citizens.
Little did I know that within six months the massive Marc Harris Organization
would be reduced to, well, pretty much just Marc himself and a few hangers-on.
The Investigation Begins
Remember that I told you the Marc Harris Organization aggressively recruited
U.S. planners to send them clients? One of these U.S. planners was Dallas
attorney Jim Bennett, a street-smart Texas business planner who has been in
some tough litigation and lived to tell about it. You can find Jim at http://www.jim-bennett.com
Jim met Marc Harris in London at the same Shorex which I attended. Harris
later convinced Jim to travel to Panama to visit their offices. However, Jim
decided to do something the rest of us had not thought to do, and that was
hire a professional investigator to verify that the Marc Harris Organization
was what it said that it was, and was doing business as a good business should.
And, thus, enters the picture one David Marchant, an investigative reporter
who writes the monthly OffshoreAlert
newsletter, which reports on offshore scams. David was (and is) an excellent
investigator, and had years earlier unveiled a scandal in Bermuda which was
so pervasive that eventually he was ordered off the island by those whom he
On the instructions of Jim Bennett, David started digging into the affairs
of the Marc Harris Organization and, well, the rest is history. Eventually,
David published his findings in his excellent monthly newsletter. Instead
of having $1 billion under management, the Harris Organization had more like
$40 million under management -- an embarrassingly paltry sum for an organization
of 150 employees. And while Marc's entourage was seemingly impressive, the
real "behind the scenes" decision-makers in the Harris Organization
included such questionable personages as Larry Abraham, Alan McAloon, as well
as No. 2 man Larry Gandolfi, the latter being "permanently dressed as
if he's going to a beach party". Marc Harris himself turned out to have
only had his CPA license for three or four years before it was suspended,
and had apparently fled the U.S. because of events in Florida that we may
never know the full truth about (he wouldn't return to the U.S. to testify
at the trial, which tells you about everything you really need to know).
And his client's money? Well, for that you will have to read on. Marchant's
findings, and how they were ultimately proven to the satisfaction of a U.S.
District Judge, are set forth below.
The point to be made in all of this is that there are people offshore who
will appear to be extremely competent and flashy, but are really just putting
up a front to embezzle your money. You cannot rely on appearances to protect
you, and you cannot count on the offshore authorities to make everything right
(although the Marc Harris Organization operated in many jurisdictions, few
took any action). Instead, you should find competent U.S. counsel responsible
to you, who by their experience have over the years located and actually worked
with competent offshore professionals over a long period of time and can recommend
someone good to you. Because if you do it yourself, or if you rely on someone
whose experience is limited, then you are just about as likely to lose your
assets as anything else happening.
As set forth above, the Marc Harris Organization appeared to:
Be led by an impressive American, who had impressive academic credentials
from impressive American Universities, and was licensed as a CPA
Have other impressively-credentialed Americans in the most important
Have over $1 billion in client funds under management
Had excellent references from many other offshore service providers
Had a large and modern office complex in Panama and a large staff
Had beautiful marketing materials and exuded success
In other words, the Marc Harris Organization had many things going for it
to convince U.S. persons to use Marc's services and to place their assets
for safekeeping with his group. The truth, however, was something else
entirely, as you will read below.
The Marc Harris Organization finally obtained the level of fame Marc Harris
sought among the offshore community. Unfortunately, this fame comes in the
form of notoriety, as the Marc Harris Organization now uniquely stands in
the worldwide offshore community as a shining example of how an offshore service
provider should not be operated.
Up front we warn you that we do NOT have any first-hand information relating
to the allegations and controversy which follow, and that we are only repeating
what others have said as set forth below. We do NOT make any representations
as to the truthfulness or falsity of any of the statements which follow below;
nor do we make any editorial comment about the facts as stated by the parties.
We are only presenting what follows as an article of possible interest to
The 31 March 1998 Offshore Alert Article
Highlights of Offshore Alert's 31 March 1998 article on the Marc Harris Organization
include the following:
- Offshore Alert reported that the Harris Organization is "one of the
biggest offshore scams of all time" and "is being run as a massive
Ponzi scheme in which clients are being defrauded out of millions of dollars."
- Offshore Alert reported that the "situation is so serious that The
Harris Organization . . . is hopelessly insolvent, with net liabilities
of at least $25 million, according to sources knowledgeable of the group's
- Offshore Alert reported that "most of the funds invested by clients
for . . . services have been stripped out of the company by the group's
33-year-old boss, American-born Marc Matthew Harris, and his associates
in the form of massive salaries and bonsuses, immoral commissions and high
- Offshore Alert reported that it had "evidence that the group may
be laundering the proceeds of crime, including drug trafficking."
- Offshore Alert reported that "[m]any" of the "[w]ell-known
financial institutions that have done business with the group" have
"closed down their accounts with The Harris Organization over the last
12 months because of concerns that the group was ripping off clients and
that the manner in which the accounts were being used breached anti-money
- Offshore Alert reported that the "Harris Organization has escaped
full exposure of its activities until now because of all of its accounting
is done in-house and withdrawals have been paid by new money coming in,
which is the defining feature of a Ponzi scheme."
- Offshore Alert reported that "One insider said: 'There's a huge black
hole where the money has been taken out. Once the new money stops coming
in, the group will collapse like a house of cards' and that a $25 million
shortfall was found".
- Offshore Alert reported that "Harris is no stranger to defrauding
clients [and he] was involved with Fidelity Overseas Bank, which was one
of the many banks in Montserrat that were closed down by British police
in 1991 because they were being run fraudulently [and that he] had an association
with Jerome Schneider, who helped form several Montserrat
banks that were closed."
- Offshore Alert reported that "Harris' CPA license was suspended in
Florida in 1990 . . . for 'negligence and misconduct' in relation to MMH
Equity Fund, Inc."
- Offshore Alert reported that its "investigation uncovered widespread
mis-management of clients' funds, including [b]orrowing clients' funds without
permission and without compensation [; b]illing out Harris' services to
clients at a rate of $5,000 per hour [; m]aking junk investments and raking
off massive commissions [; m]arking up assets to absurdly high levels to
balance the books [and that] Harris is said to simply guess the value of
assets [; i]ssuing $20 million of worthless preference shares in a Nevis
subsidiary so they would appear as 'assets' on the books of the group's
87 mutual funds [; and s]ending clients' misleading reports showing how
their investments are performing.
- Offshore Alert reported that Marc Harris' "schemes have included
investing $500,000 of clients' money in a venture in Chile to manufacture
exercise bicycles called 'Infra-fit" [but i]nsiders doubt that a single
machine was ever made or sold and suspect it was a sham so Harris could
move money to Chile, where he lives.
- Offshore Alert reported that "long-time Harris business associate
Robin Baily and Derek Sambrook, a former chief regulator of the Turks &
Caicos Islands . . . discovered that Harris had been effectively stealing
clients' funds [and] accused The Harris Organization of 'co-mingling of
client funds and unauthorized use of funds.'"
The 30 April 1998 Offshore Alert Article
Highlights of Offshore Alert's 30 April 1998 article on the Marc Harris Organization
include the following:
- Offshore Alert reported that it had been sued by companies of The Harris
Organization for $30 million for alleged libel & slander.
- Offshore Alert reported that "La Prensa, which is the main newspaper
in Panama, has already run several articles, including one which compared
The Harris Organization to The Titantic in that it appeared to be a sinking
ship since so many officers had left or were on the verge of leaving."
- Offshore Alert reported that "Banco de Brazil has closed down bank
accounts it operated for The Harris Organization".
- Offshore Alert reported that it "is aware of at least two individuals
or entities who have invested funds with The Harris Organization who have
been trying for over a month to get all or some of their funds out without
- Offshore Alert reported that "on June 1, 1998, the [U.S.] Comptroller
of the Currency . . . made an official complaint about Harris to the ethics
committee of the American Institute of Certified Public Accountants because
of [Harris'] involvement with Montserrat banks."
- Offshore Alert reported that Harris "has a team of bodyguards to
protect him who are trained by a former member of the British SAS".
Several of Marc Harris' companies (but notably not Marc Harris, who
refused to return to the United States) sued David Marchant and Offshore Business
News & Research, Inc., for libel and slander in the U.S. District Court
for the Southern District of Florida, Miami Division, civil case no. 98-761-CIV.
The case was assigned to the Hon. K. Michael Moore, U.S. District Judge, who
tried the case without a jury from July 6-8 and July 28-30, 1999, and then
Marc Harris lost in a spectacular fashion, the Court essentially holding
that OffshoreAlert had proven that it had substantial proof that all of its
allegations were true. Some highlights from the judgment:
Actual Excerpts from the Court's Finding of Facts:
12. Marchant learned from Shockey [Mr. John Shockey, former head of the
United States Department of the Treasury's Comptroller of the Currency office
in Florida] that Marc M. Harris ("Harris"), the founder and de
facto head of The Harris Organization, had operated several offshore shell
banks in Montserrat in the 1980s. These banks were subsequently closed down
in 1988 by British banking authorities for conducting "illegal and
fraudulent activities." According to Shockey, these banks exhibited
numerous financial and fiduciary improprieties. One of the banks, the Fidelity
Overseas Bank, took fees from clients even though it never performed any
services for them. Another bank, the First City Bank, doctored its financial
statements. Finally, a third bank, the Allied Reserve Bank, was issued cease-and-desist
orders for operating in the United States without authorization.
17. Marchant learned from Dilley [Mr. Carl Dilley "the equivalent
of the Chief Operating Officer of The Harris Organization [and] was therefore
in a position to have intimate knowledge of the financial status of The
Harris Organization, as well as its various operations and financial flows"]
that financial record-keeping at The Harris Organization was in a state
of extreme disorganization, and was not subject to any form of independent
or objective oversight, such as through regular independent auditing of
financial records. This conclusion was verified by internal memos provided
by Dilley which described the accounting system at The Harris Organization
as "completely chaotic." Important documents went missing, and
accounting procedures were haphazard, including arbitrary adjustments to
financial records without any authorizing documentation. This state of affairs
led one internal observer to remark as late as March 1997 that "[a]
first-year accounting student from a US university would have known better
than to make these entries," and "[c]learly the definition of
'CPA' does not carry the validity in [Panama] as it does in the USA."
19. Marchant was given additional evidence which revealed that the apparent
chaos in the accounting system at The Harris Organization was deliberate,
and not the innovative product of Harris's accounting genius, or even charitably,
incompetence. Specifically, there was a serious on-going dispute within
The Harris Organization between Harris and several officers and managers,
including Dilley and Messrs. Derek Sambrook and Robin Bailey, the President
and Vice-President, respectively, of Trust Services S.A., a Harris Organization
entity. In numerous memos, they aired their concerns regarding the commingling
and unauthorized use of clients' trust funds and the susceptibility of The
Harris Organization's accounting system to abuse.
20. Marchant learned from Dilley that according to financial records available
to him, including The Harris Organization's "Consolidated Financial
Statements" and the "Trustco Balance Sheet," The Harris Organization
had a net equity deficit of at least $25 million as of November 1996.
21. Marchant learned from Dilley the mechanism by which The Harris Organization
commingled the funds and assets in clients' trust accounts. Funds in client
accounts were held in a common "pool account" called the Third
World Trust Company ("Trustco"), along with funds from entities
and persons affiliated with The Harris Organization, including Harris, the
founder and majority shareholder of Marc M. Harris et Cie, S.A., and Larry
Abraham ("Abraham"), a minority shareholder. It appeared to Marchant
from an examination of the documents and discussions with Dilley that entities
and persons affiliated within Trustco without disclosing these credits or
transactions to clients. In sum, persons and entities affiliated with The
Harris Organization were "borrowing" client funds that should
have been kept in segregated accounts, using those funds without paying
interest to clients, and exposing those clients to the risk of liquidity.
22. Marchant learned from Dilley that entities and persons affiliated with
The Harris Organization were billing each other, and ultimately clients,
so-called administrative and management fees that were not in fact correlated
in any meaningful way with actual services rendered.
23. Marchant learned from Dilley that approximately $500,000 in clients'
money had been transferred to accounts in Chile belonging to Harris and
Abraham. This was done by simply crediting Harris's and Abraham's accounts
within Trusco, and then transferring the funds to bank accounts in Chile
that were purportedly for investment in the "Infra-fit" project.
The Infra-fit project was supposed to develop and produce exercise bicycles
in Chile, but apparently failed without even having produced a single bicycle.
The funds were never recovered.
24. Marchant learned from Dilley that principals in The Harris Organization,
including Harris and Abraham, purchased land in Argentina, and then promptly
turned around and sold the land at an arbitrarily inflated price to Latin
American Real Estate ("L.A.R.E.") fund, an Organization-affiliated
entity, in an interested transaction without disclosing their prior interest
25. Marchant also learned from Dilley that the value of the land owned
by L.A.R.E. was subsequently marked up on its financial statements, even
though no substantial improvements had been made on the land, there were
squatters on the properties who needed to be removed and otherwise presented
a threat of possible claims on the property, and the land -- essentially
arid scrubland -- had little apparent potential for generating positive
26. Marchant learned from Dilley that The Harris Organization had issued
$20 million in preferred shares that were not supported by corresponding
contributions of capital. Dilley's information was supported by internal
memoranda which showed that managers within The Harris Organization had
refused to cooperate in the issuance of these preferred shares because Organization-affiliated
assets that were being transferred in exchange for the shares were overvalued.
27. Marchant learned from Dilley that Messrs. Wallace Stull, James Sommerville,
Joseph Vigna . . . were either clients, shareholders, and/or directors of
The Harris Organization. Marchant had previously learned from other sources
that these individuals had been convicted of various criminal offenses,
including drug trafficking.
28. Marchant learned from independent research that The Harris Organization
maintained substantial links, either directly or indirectly, with persons
and entities known variously as "PT Shamrock," "Peter Trevelian,"
and "Adam Starchild," that advocated in print and on the Internet
offshore mechanisms for evading the payment of taxes, judgments, and other
debts in the United States. That is, Marchant had reason to believe that
The Harris Organization was both directly and indirectly advertising its
services for, in essence, tax evasion and fraudulent conveyance of funds
to offshore locations.
29. Marchant also learned from internal materials provided by Dilley that
The Harris Organization offered products and services that could reasonably
be interpreted as mechanisms for tax evasion and fraudulent conveyances.
Specifically, the so-called "Harris Matrix," an internal document
discussing the products offered by The Harris Organization, included numerous
references to "black holes" in the context of strategies for avoiding
payment of taxes to the IRS, or to judgments and other debts in the United
States. Dilley told Marchant that a "black hole" was a term used
within the Harris Organization to describe dummy offshore corporations that
were set up to go out of business, permitting the shareholders to claim
bogus capital losses to offset capital gains.
Actual Excerpts from the Court's Conclusions of Law:
8. From the time he published the initial article to the present, Marchant
had evidence which provided persuasive support for the truth of each of
the allegations at issue. He spoke with numerous inside sources, including
Dilley, and outside sources such as Shockey, who appeared credible and knowledgeable
about Harris, The Harris Organization, and the financial situation within
The Organization. Marchant was privy to internal financial and management
documentation which supported the information learned from his sources.
9. At the March 1998 meeting in the Bahamas, Marchant provided Harris and
the other senior officers of The Harris Organization with a full and fair
opportunity to address the issues raised in his articles. Plaintiffs' representatives
failed to take advantage of this opportunity. Plaintiffs' representatives
offered no substantive information or explanation to rebut the allegations,
apart from unsupported denials and claims of innocence.
10. Marchant was justified in discounting those explanations that Plaintiffs
did provide in light of the fact that: (a) Plaintiffs' finances were in
a state of complete disorganization during the relevant period; (b) Plaintiffs,
though and including the de facto head Marc M. Harris, had been implicated
in fraudulent and criminal activity in the past, and had a continuing association
with persons and entities that had been involved in or advocated criminal
activity; (c) Plaintiffs advertised products and services that were euphemistically
referred to as "asset protection", but which could reasonably
be interpreted as vehicles for tax evasion and fraudulent conveyances of
funds out of the United States; and (d) Plaintiffs never produced any documentation
or evidence to support their denials.
Read the full Judgment of the U.S. District Court in favor of Offshore
Business News & Research, Inc. and David Marchant against the Marc Harris
Organization, in Adobe PDF format, takes about 5 minutes to download -- but
Click Here to Download Judgment in
The Adkisson Analysis:
Even if the U.S. District Court had not ruled that OffshoreAlert had proof
of its allegations, Marc Harris's infantile and amateurish responses to the
allegations were the final, definitive proof that Marc Harris was all flash
but had no real talent or abilities. The libel & slander lawsuit was a
stupid knee-jerk reaction which was doomed from the outset, which called additional
negative press to his Organization, and which had as its result that the real
truth about the shoddy accounting practices, improper commingling of funds,
missing funds, crazy valuations of property, involvement with drug traffickers,
etc., etc., etc., all came out. This lawsuit was a major miscalculation, but
apparently it was only the bad icing on the bad cake that was The Harris Organization,
and it stands as proof alone as to why no sane person would even consider
doing business with them.
Will they make similarly serious miscalculations with your affairs as they
have made with their own? Will another offshore organization come along which
is similarly flashy but that nobody has exposed yet which will get your
Update: 10 October 2000
Harris lost his appeal to the United States Court of Appeals for the 11th
Circuit, the court finding "no merit" in Harris' challenges to the
District Court's judgment. See Appellate
Update: 16 July 2000
As of this date, the following URLs were registered by Network Solutions
to The Firm of Marc M. Harris, Inc., being:
Have a question for Quatloos?
Open forum where offshore scams and offshore scammers can be freely
discussed. Includes offshore investment and tax fraud and the latest
goings-on in the Dominion of Melchizedek, Principality of New Utopia,
Kingdom of Enen-Kio, the OITC, and other fake nations and world
Documents about Marc Harris and The Harris
Loses Appeal -- Harris lost his appeal to the United States
Court of Appeals for the 11th Circuit, the court finding "no
merit" in Harris' challenges to the District Court's judgment
of The Harris Organisation weigh in
Message from OffshoreAlert about the
Marc Harris Organiation
Ark Accountants Convicted -- Accountants Roosevelt L. Drummer
and Roy Lentz, who prepared returns for Keith Anderson in the Anderson's
Ark fiasco, will spend some serious prison time after being convicted
of tax fraud.