U.S. Government Brings Civil Fraud Case Against Costa Rican Company for Prime Bank Debentures

On January 7, 2003, the Securities and Exchange Commission (SEC) issued a press release concerning a civil fraud case it brought against a Costa Rican Company and three individuals that purported to offer ?prime bank debentures? to unknowing investors and accompanying asset freeze. The SEC alleges in its complaint that Frank R. Johnson and Milton E. Vaughn, both residents of Montgomery, Alabama, and Carlos Fernandez Alfaro, a resident of Costa Rica, founded Assets Recovery and Management Trust (ARM), a Costa Rican company. Between 1996-1999, which targeted more than 9,000 investors. They lost millions of dollars. In 1999, the U.S. Attorney in Alabama prosecuted Johnson for the IBFT fraud scheme and effectively closed IBFT and the fraudulent conduct by the three defendants then developed the ARM scheme to replace and exploit the earlier scheme. One of the common characteristics of prime bank debentures and this type of fraud is that increasingly there are transnational elements. Here, the transnational elements the SEC alleges include: the use of foreign joint venture partners, both a foreign individual and corporate entity. Other foreign elements are the foreign bank accounts. The foreign elements make investigation and evidence gathering more difficult and sometimes pose insuperable barriers for the defrauded investor and/or regulatory agencies.