Prime Forestry Bankrupt
Sunday, May 28 2006 @ 04:09 PM EDT
Contributed by: Don Winner
But that publicity attracted questions from timber industry experts. They said the area had unsuitable soil and too much rain. High quality teak production was impossible and the big profits advertised by Prime Forestry were not feasible.
All this would have been clear to one member of the president's visiting party, agriculture minister Guillermo Salazar. However, he has now been revealed as a director of a Prime Forestry offshoot.
It would also have been clear to officials of the government's Forestry Service. But when a former boss of Panama's National Environmental Authority went to Prime Forestry's offices, he found four of the Service's staff working there part time.
Eric Jackson, the editor of English-language newspaper Panama News, said that Torrijos, 42, the son of Omar Torrijos, dictator of Panama from 1968 to 1981, had also given backing to a mining company headed by a former provincial governor who is facing embezzlement charges.
(Editor's Comment - Jackson is talking about Petaquilla and Richard Fifer here.)
Jackson said: 'This is not the first time that this president has been caught plugging schemes by questionable people.' And this is the key factor behind the decision by Swiss authorities to close down the parent company in Zurich and force it into bankruptcy.
Two years ago, a Financial Mail investigation revealed that the man behind Prime Forestry was Kurt Emil Meier, a key figure in one of the world's biggest stockbroking frauds, which cost investors more than £1 billion in the Eighties.
Meier was president of Chartwell Securities, part of a corrupt network of 'boiler rooms'. Chartwell took £16.5m from 8,000 victims, mainly by selling them shares in a London gambling company called Derby-Vision, connected to convicted American mobster Jimmy 'The Weasel' Fratiano.
But Meier's mob links did not stop there. Chartwell's real boss was Tommy Quinn, a disbarred lawyer from Brooklyn and an associate of the Genovese Mafia family.
In 1988, Quinn was arrested by French police and jailed for four years. He then spent six months in custody in Switzerland. Now, Swiss investigators are examining evidence that Quinn might also be involved in Prime Forestry.
++++++++++ End of This Is Money.co.uk article +++++++++++++++++
By Don Winner and www.panama-guide.com : I'm looking at this Prime Forestry thing. As usual, I'm going to keep both my eyes and mind open, and not leap to conclusions. Now, let's see what I can find in 30 seconds or less on google...
The first thing that comes to the monitor screen is this:
When you try to surf to what would look like the Prime Forestry web site at URL http://www.primeforestry.com/en/ you get bounced to this address http://www.konkursliquidator-primeforestry.ch/aktuell?&L=1 where you can select "English" and read this:
"Opening of Bankruptcy Proceedings against Prime Forestry Switzerland Ltd.
With its ruling of 4 May 2006, the Federal Banking Commission has opened bankruptcy proceedings against Prime Forestry Switzerland AG as per 5 May 2006. Karl Wüthrich and Yves Meili of the law firm Wenger Plattner in Küsnacht-Zürich have been appointed bankruptcy trustees.
The forest enterprise in Panama is not directly affected by the opening of the bankruptcy proceedings; Prime Forestry Panama S.A. is not in bankruptcy or in liquidation and remains operative for the time being.
Creditors and tree partners will be notified on the background and the further course of the bankruptcy proceedings by way of circular until 26 May 2006. In urgent matters inquiries are to be addressed to the hotline no. 0041 (0) 43 222 38 88."
According to them, the teak operations in Panama are not "directly affected" by the bankrupcy proceedings. If I had a few thousand dollars invested with these guys, I would want an explaination as to how that works. How about "...remains operative for the time being..." Well, that's reassuring.
The next thing I ran into is this;
Check the date - 10 Aug 2004;
"ALERT: The Financial Services Authority ("FSA") has today published this statement in order to alert investors against dealing with unauthorised firms.
The purpose of this statement is to advise members of the public that:
Prime Forestry Switzerland AG and its subsidiaries (aka the "Prime Forestry Group") are not authorised under the Financial Services and Markets Act 2000 ("FSMA") to communicate invitations or inducements to enter into agreements in respect of certain types of investments; including units in a collective investment scheme. The Prime Forestry Group manages a teak tree investment scheme in Panama.
Investors should be aware that any money invested with a company or individual not authorised by the FSA will not be covered by the Financial Ombudsman Service or the Financial Services Compensation Scheme.
To find out whether a company or individual is authorised go to the FSA Firm and Person Check Service at http://www.fsa.gov.uk/consumer/fcs/index.html.
Date: 10 August 2004
Note: For the most up to date list of unauthorised firms issued by the FSA please go to: http://www.fsa.gov.uk/pubs/other/knl_unauthorised_firms.pdf.
Ok, so almost two years ago the FSA was warning people off of this "scheme." And the French warned people off of these guys in December of 2003;
Communication Division NEWS RELEASE
Paris, 24 December 2003 AMF warning on improper financial promotion (Prime Forestry Group)
The French securities regulator, the Autorité des marchés financiers (AMF), is issuing a public warning about the investments proposed by Prime Forestry Group. This company, which styles itself as a player in sustainable forestry development, is apparently incorporated under Swiss law and has an address in the United Kingdom. By means of an unsolicited letter to French residents, it is offering an investment with a 14 per cent annual return.
Prime Forestry Group is not authorised to make unsolicited financial promotions under Articles L.341-3 and L.341-4 of France’s Monetary and Financial Code and does not therefore have the necessary authorisations to engage in such promotions. Furthermore, the investment proposed by Prime Forestry Group has not been licensed for marketing in France.
Accordingly, the AMF urges French investors who have been contacted by Prime Forestry Group to treat this offer with the utmost caution. Since the requisite authorisations and approvals are lacking, it is not possible to ascertain whether the company or its investment provides the guarantees usually required for marketing financial products to French savers and investors.
The appropriate foreign authorities have been informed of Prime Forestry Group’s unsatisfactory in France.
Source: Communication Division, Autorité des marchés financiers – Tel. +33 (0)1 5345-6028
And the Aussies issued this warning about Prime Forestry in January 2004;
Media and information releases Printer version
04-020 Prime Forestry Group - pulp this investment offer
Thursday 29 January 2004
The Australian Securities and Investments Commission (ASIC) today issued a public warning against replying to an unsolicited investment offer from ‘Prime Forestry Group’ (Prime), a Swiss organisation with a return address in London.
Prime has illegally mailed out an offer to Australians right across the country in breach of the Corporations Act. Prime does not hold an Australian financial services licence to offer or operate an investment scheme in Australia.
‘ASIC urges anyone receiving this invitation to pulp it, shred it or otherwise recycle it. That’s all it’s worth without the backing of an Australian financial services licence’, ASIC Director of Consumer Communication, Dr Michael Dunn, said.
‘No licence, don't invest should be all Australians' golden rule to protect themselves. If you deal with an unlicensed offshore business, you lose the consumer protection offered by Australian law’, Dr Dunn said.
Following public complaints, ASIC contacted Prime. Prime has now told ASIC it has ceased offering its products in Australia.
‘Meanwhile, because the illegal offer has been made, it’s important to issue a public warning. This offer could appeal to people looking for socially responsible investments, since it claims to offer an “environmentally friendly business model”, suitable for investing towards your children’s education,’ Dr Dunn said.
‘Prime’s glossy invitation offers a return of 14 per cent per year or more. Prime’s offer goes on to say retirement and educational savings must be protected in a conservative manner. However, the return it claims to offer seems far too high to describe as “conservative” in today’s market.
‘Anyone can check the licence details of a financial services business for free through ASIC’s consumer website FIDO at www.fido.asic.gov.au or by calling our Infoline, 1300 300 630’, Dr Dunn said.
Well, if I was thinking about investing with these guys, I would have decided against it almost two years ago. Anyone who dropped money into this operation at this point had it coming. But, let me keep going, just for giggles...
Hey, look what I found on page 2 of my 30 second google trip into Prime Forestry. It looks like the address http://www.ownatree.com/ was also being used to pump these guys, but when you click on that address you get taken to the same liquidation address as their primary URL.
Next on the menu, New Zealand, also warning people off, also back in early 2004...
13 February 2004
WARNING - INVESTMENTS ILLEGALLY OFFERED BY PRIME FORESTRY GROUP
The Securities Commission warns people against investing in a forestry scheme offered by Prime Forestry Group. The Commission believes the offer does not comply with New Zealand law.
Investors are approached directly, through unsolicited mail, offering investment in hardwood forestry in Central American countries. Returns of up to 14% per annum are promised. People are asked to send personal details to a London address which, we are informed, is used for marketing purposes only. Prime Forestry's head office appears to be in Zurich.
Prime Forestry does not have a New Zealand registered prospectus or an investment statement. These documents are required for securities offered to the public in New Zealand.
A registered prospectus and investment statement give investors important information about the people involved in the investment and how their money is being invested.
Anyone who has already subscribed may be entitled under New Zealand law to have their money refunded. People who have subscribed should contact the company and ask for their money back.
The Commission warns people about paying money to schemes which do not have the required offer documents. This is especially important where money is being sent outside New Zealand. Once money goes offshore, it is very hard (if not impossible) to recover.
* * * * *
Contact: Norman Miller, Director of Enforcement.
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Finally, something I can really get my teeth into. I don't know who the guys are at Precious Woods, but they seem to be speaking plain English and don't seen to have a political agenda. Check this one out;
"Bankruptcy of Prime Forestry
18 de mayo de 2006
With the bankruptcy of Prime Forestry, numerous investors are likely to lose a large portion of the money they have invested. We are very sorry about that. This negative development does not however come as a surprise to us. Prime Forestry always sold investments in Panamanian teak at exceedingly high prices. We at Precious Woods estimate that depending on which growth class the trees can be assigned to, an 18-year-old teak plantation will generate timber revenue of USD 10,000 to USD 38,000 per hectare (see graph). At Prime Forestry investors paid around USD 36,000 for one hectare of newly planted teak. Only if growth proves to be excellent will the value of the plantation at the time of harvesting, i.e. 18-20 years after planting, be anywhere near the acquisition price. Unfortunately, growth is never uniformly excellent throughout an entire plantation and it will always be necessary to assign a proportion of the trees to lower growth classes. Even if it is assumed that real prices for teak will increase considerably in the coming years, if growth is excellent and all costs can be kept down, the most investors paying such a high acquisition price can hope to achieve is a modest return. With conservative assumptions, an acquisition price of over USD 30,000 for one hectare of newly planted teak rules out any possibility whatsoever of a positive return on investment.
Precious Woods anticipates prime costs amounting to a few thousand USD per hectare for planting and maintaining one hectare of teak until the trees are ten years old. From that time onwards, usable timber from thinnings provides sufficient revenue to at least cover the further cost of maintaining the plantations. Such low prime costs mean that teak does indeed represent a sensible long-term investment, yielding even with conservative assumptions a 7–14% annual rate of return. A cash return, however, is only generated by the final harvest. Prior to this, the return is in the form of an annual increase in the fair value of the growing trees. For details of our valuation assumptions, please refer to note 6 (until 2004, note 5) to the Consolidated Financial Statements contained in Precious Woods' Annual Report.
Prime Forestry is not the first case in which investors have been lured into acquiring over-priced teak investments by exaggerated profit claims. In the early 1990s, the Costa Rican-based company, Bosque Puerto Carillo, touted exorbitantly priced teak investments in a most aggressive manner, even issuing its own complimentary newspaper which was then placed in airports and tourist hotels. Investors lost most of the value of their investment. Later a rescue company was founded and new money was used to maintain the plantations until final harvesting. Today thousands of cubic metres of teak from these plantations are exported to India every year and – following substantial write-offs – parquet flooring is being manufactured at break-even. In the late 1980s, Holland was rocked by a similar investment scandal. The company in question was called Flor y Fauna. Via an insurance company, Flor y Fauna promoted life insurances based on revenues from a teak plantation located in the east of Costa Rica. Here too, wildly optimistic growth and price assumptions promised high returns in spite of the exorbitant acquisition price. What all these cases have in common are the aggressive marketing methods used to sell the investment, the excessive acquisition prices for a newly planted hectare of teak, and the correspondingly huge profits reaped by the seller. A Google search for "teak investments“ provides further examples."
Uh, oh. Nobody told the good people at "Global Wood" about what's going on. Maybe somone should drop them a line...
And "Sustainable Development International" is still happy to be dealing with them:
Hey, wait a minute... Let me check the Panama Guide database to make sure they don't have a press release or something in the database. Ok, I'm clean.
The STRI made this press release on 17 May 2006;
CLARIFICATION TO THE PUBLIC
May 17, 2006
1. The Smithsonian Institution in Washington DC, the Smithsonian Tropical Research Institute in Panama (STRI) and the PRORENA project, a joint project of STRI and Yale University, have no relationship of any kind with PRIME FORESTRY PANAMA S.A. or PRIME FORESTRY SWITZERLAND AG.
2. STRI recently learned of the existence of information regarding an alleged collaboration and exchange of information among the Smithsonian Institute, the PRORENA project and PRIME FORESTRY PANAMA, S.A, contained in the “Annual Audit Report 2006” performed on PRIME FORESTRY PANAMA S.A. published in the Rainforest Alliance internet site, as part of the Public Summary of the Certification of PRIME FORESTRY PANAMA S.A.
3. Said information and references are false.
4. STRI has informed PRIME FORESTRY PANAMA S.A. of the existence of these irregularities contained in the “Annual Audit Report 2006”, and has requested that they be corrected.
5. STRI is in the process of informing and making a similar request to Rainforest Alliance, for the elimination of this information and references from their internet site.
I'm going to track down the guys (if there are any) here in Panama and see what they have to say. It looks like there might be enough value in the local land and growing teak to recover and sell at a loss to get something back for investors, if banruptcy managers can somehow connect the Panama operations to the European accounts. But if these guys have taken 26 million euros from more than 3,000 investors who were STUPID enough to pay $36,000 per hectare of new teak, then they will be very lucky to recover about $.50 to $.75 cents on the dollar when it's all said and done.
For the record (and if anyone cares, please search the VEP archives for some very old stuff I wrote on teak investments in Panama) a hectare of planted teak should cost you about $4,000 to $5,000 max. Anything above that is flat-out profit for the guys pumping the investment. And now that the Panamanian government has given life to the "reforestation visa" again, this kind of thing will keep going on.
And for the record, the reforestation tax incentives passes by the Panamanian government were originally designed as a way for Panamanian businesses to defer paying income tax by investing in reforestation projects as a way of recovering abandonded cattle lands.
Caveat Emptor, all the time, 24/7. It's your money.