GRENADA: THE PRIME MINISTER, OFFSHORE BANKS AND

C O N F I D E N T I A L BRIDGETOWN 000429

SIPDIS

SIPDIS

SOUTHCOM ALSO FOR POLAD

E.O. 12958: DECL: 02/28/2016
TAGS: PGOV PINR PREL CPAS EFIN EINV KCRM OFDP GJ XL
SUBJECT: GRENADA: THE PRIME MINISTER, OFFSHORE BANKS AND
CORRUPTION

REF: A. BRIDGETOWN 315

B. BRIDGETOWN 294

C. BRIDGETOWN 239

Classified By: DCM Mary Ellen T. Gilroy for reasons 1.4 (b) and (d).


1. (C) Summary: Keith Mitchell's ten-year tenure as Prime
Minister of Grenada has been tarnished by numerous
allegations of corruption, the worst of which involve
Grenada's once thriving offshore banks and its economic
citizenship program. This situation was highlighted in
February by the conviction in the U.S. on fraud charges of an
individual who reportedly paid a US$50,000 bribe to the PM in
exchange for being named a Grenadian Ambassador. Mitchell
has also been linked to several offshore banks that defrauded
investors of millions of dollars before collapsing. The
former executives of one Grenada-based bank have been
indicted in the U.S. for fraud. While a certain amount of
corruption is expected in the Caribbean, PM Mitchell has been
accused of an exceptionally high level of wrongdoing that has
impacted negatively on his domestic political standing and
may call into question his reliability as a political
interlocutor. End summary.

--------------
PM Mitchell and a Suitcase Containing $50,000
--------------


2. (U) The corrupt practices Grenada Prime Minister Keith
Mitchell has been accused of range from typical padding of
public works contracts to the extraordinary charge that in
2000 Mitchell personally accepted US$50,000 in exchange for
granting an unsavory figure diplomatic status. The
circumstances surrounding this allegation were first revealed
in 2004 by an offshore banking industry newsletter, which
reported that during a trip to Switzerland Mitchell was given
a suitcase containing the cash by German-born businessman
Eric Resteiner. In return, Resteiner was named Ambassador at
Large for Grenada. Mitchell has denied this charge and said
that he received US$15,000 from Resteiner as reimbursement
for expenses incurred during official travel to Europe and
the Middle East to attract investment to Grenada.

--------------
Mitchell Associate Jailed in the U.S.
--------------


3. (U) Eric Resteiner is suspected of obtaining Grenadian
diplomatic status as a means to facilitate his corrupt
business practices and to help him avoid prosecution. A
diplomatic passport, however, did not protect Resteiner from
the USG, which had him extradited from Singapore in June 2004
to face multiple fraud charges. On February 10, 2006,
Resteiner pled guilty in U.S. Federal Court to charges that
he defrauded more than 50 people of over US$47 million
through a scam that was purportedly a high-yield
international bank trading investment program. Resteiner,
who is scheduled to be sentenced on May 8, faces up to 20
years' imprisonment and a multi-million dollar fine.

-------------- --------------
How Much Does it Cost to be a Grenadian Diplomat?
-------------- --------------


4. (SBU) When Resteiner was indicted on fraud charges in
2004, this made him the second Grenada "diplomat" to be
indicted in the U.S. in less then a year. Czech-born Viktor
Kozeny, who obtained a Grenada passport through the country's
now-defunct economic citizenship program and was subsequently
named Honorary Consul for Grenada, had been indicted just
months earlier in New York on charges that he stole US$182
million from several investment funds. Another "diplomat,"
the Israeli-born Yoav Rubinstein, obtained Grenada
citizenship through the economic citizenship program in 1999
and was immediately given, on paper at least, a diplomatic
post at the Embassy of Grenada in Washington. In 2005, the
Department determined that Rubinstein was not a bona fide
diplomat and denied the GOG's application to renew his A-2
diplomatic visa.

--------------
Mitchell Caught on Tape
--------------


5. (C) While in U.S. custody, Eric Resteiner revealed to law
enforcement officials that he possessed a videotape that
showed PM Mitchell taking the suitcase containing US$50,000.
Resteiner offered to turn the tape over to the USG in the
hope that this would help him obtain a more favorable plea
arrangement. Federal prosecutors and FBI agents viewed the
tape and confirmed that it showed Mitchell accepting the cash
and unsuccessfully attempting to stuff it into his pockets.
They did not, however, accept the tape as part of a plea
because Mitchell could not be indicted as a co-conspirator by
law enforcement officials without their first receiving
high-level approval from within the USG.

--------------
PM Attempts to Muzzle the Press
--------------


6. (U) The allegation that Keith Mitchell took US$50,000 from
Resteiner was first publicly reported in 2004 by Offshore
Alert, an offshore banking industry newsletter that covers
unscrupulous activity in this often shady industry. Once the
story broke, the PM attempted to subvert the efforts of the
Grenada press to report on the story. The GOG said it would
sue local media outlets that reprinted the article from
Offshore Alert, and Mitchell personally threatened a Grenada
journalist who reported on the story. The journalist, Leroy
Noel, was also detained by the Grenada police for questioning
about his sources. These incidents brought criticism from
several international NGOs dedicated to protecting the rights
of journalists and were included in the Department's 2004
Human Rights Report for Grenada.

--------------
Official Investigation Goes Slowly
--------------


7. (U) An official investigation into the allegations against
PM Mitchell has moved slowly, leading to charges that the GOG
is failing to pursue the case aggressively. In August 2004,
the Governor General of Grenada appointed Barbados lawyer
Richard Cheltenham to undertake an investigation of the
suitcase bribery case, which was delayed after Hurricane Ivan
devastated the country in September. Since getting underway
in June 2005, the Commission of Inquiry has held only a
handful of hearings, much to the consternation of the
political opposition which has long held that PM Mitchell is
corrupt. The Commission has denied the opposition's repeated
requests to be involved in the investigation. There is
presently no indication as to how long the investigation
might take and many Grenadians appear to believe it will be a
whitewash.

--------------
Offshore Hall of Shame
--------------


8. (U) While the suitcase bribery incident is the most
damning allegation against Keith Mitchell, it is not by any
means the only one. The PM has also been accused of
accepting payoffs to allow a number of unscrupulous offshore
banks to operate in Grenada before they collapsed in 2000.
This legacy led Mitchell to be inducted into Offshore Alert's
Hall of Shame for making Grenada "synonymous with
white-collar crime." Grenada's former regulator of the
offshore sector, Michael Creft, is also in the Hall of Shame
as the "village idiot of offshore regulators" for having
allowed more than 40 banks to operate fraudulent activities
from the country before they collapsed and investors lost
their money (see
http://offshorebusiness.com/hall of shame.asp).

--------------
Another Indictment
--------------


9. (U) Among the questionable figures Mitchell is suspected
of colluding with is Gilbert Allen Ziegler, alias Van Arthur
Brink, founder and CEO of the First International Bank of
Grenada (FIBG),a now defunct offshore bank that defrauded
investors of millions of dollars. During the years FIBG
operated, Ziegler publicly thanked Mitchell on several
occasions for his support of the bank including when the FBI
was investigating FIBG. Ziegler and others involved in the
bank were indicted in January 2004 in a Federal Court in
Portland, Oregon for fraud and money laundering. (Note:
Ziegler was extradited to the U.S. from Uganda in June 2004
and died of heart failure in December 2005. The trial of the
other indicted FIBG executives is scheduled to begin later
this year. End note.) In Grenada, meanwhile, the political
opposition has accused the PM of using GOG legal adviser Hugh
Wildman to frustrate USG efforts to extradite and interview
witnesses who could tie Mitchell to the defunct bank.


10. (C) Note: On February 25, 2006, PO Grenada received a
call from an attorney representing a defendant in the FIBG
case, who explained that he was part of a legal team that was
in Grenada to talk to witnesses who might be able to help
their client. The attorney was worried by the negative
reaction of some witnesses to the lawyers' visit, as well as
what he said was the interest taken in their activities by
police officers who are part of PM Mitchell's personal
security detail. The attorney believed that the legal team
was being misconstrued as an FBI effort to secure evidence in
a case against the PM. LEGATT Bridgetown reported that on
February 26 the Grenada police force's Special Branch
inquired about FBI agents who were supposedly in Grenada.
End note.

--------------
Just How Corrupt is Keith Mitchell?
--------------


11. (C) Comment: Keith Mitchell's corruption may not reach
the heights of the Bird family, which ran Antigua as its
personal fiefdom for decades. (Note: It is LEGATT
Bridgetown's opinion that Mitchell, who created Grenada's
offshore banking industry largely for his own enrichment and
did nothing to reign it in, could be considered more corrupt
than former Antigua Prime Minister Lester Bird. End note.)
But, neither do Mitchell's activities appear to be on the
lower level of Prime Ministers in the region who accept
campaign donations in exchange for favors. In the recent
case, for example, of Dominica, its Prime Minister was
accused of accepting campaign donations from wealthy
expatriates who were given diplomatic status. The money,
however, was used to fund the ruling party's 2005 re-election
campaign and is not believed to have gone into the PM's own
pocket (ref C). Keith Mitchell, on the other hand, has
reportedly been videotaped literally pocketing money given to
him by an individual who is now a convicted felon. Such
apparently unscrupulous activity should call into question
the PM's veracity when he deals with international
interlocutors. Moreover, this demonstrated lack of judgment
and self-serving attitude may help explain why Mitchell
regularly attempts to discredit the political opposition with
wild claims that Grenada is on the verge of a coup despite
the damage this might do to his country (refs A and B). End
comment.
KRAMER