Saturday, May 7, 2016


How 800 Washington state investors, average people, wound up listed in the Panama Papers

After Vernon Jenkins and his wife, Lynda, put $5,000 into a Washington state real-estate partnership in 1980, their investment took an odd turn.

The company was sold to a Canadian firm and then changed hands again and again until the couple ended up owning 1,558 shares in Blue Earth Refineries, an offshore firm that mined for cobalt in Uganda.

“I had no idea — I think it became a scam after my initial investment,” said Vernon Jenkins, 78, a retired Boeing electronics worker from Federal Way, Wash. “They changed their name so many times I just kind of gave up.”

Actually, the couple just made an unfortunate investment choice and watched the corporate handoffs diminish their share values.

The Jenkinses have plenty of company: They’re among nearly 800 Washington state investors named in the Panama Papers, the leak of 11.5 million secret documents that exposes offshore accounts.

When they made their investments decades ago, no one could have guessed that they would someday end up in a database alongside records about the dealings of world leaders, tax dodgers and alleged drug dealers.

In a peculiar twist, the Washington state residents were all invested in Accelonic, another company incorporated in the British Virgin Islands that ended up taking over Blue Earth. Its sole director was a close ally of Slobodan Milosevic, the former Serbian strongman who died in prison while being tried on war-crimes charges.

Hung on to stock

Those investors who chose to hang on to their stock ultimately wound up with shares in MFC Bancorp, a Vancouver, B.C., merchant-banking firm with mining interests.

Their investment odyssey is a reminder that the leaked files from the Panamanian law firm Mossack Fonseca contain not only the names of the wealthy and powerful, but average people as well, many of them innocent.

Curiosity seekers will be able to see that for themselves Monday, when a huge searchable database of investors goes public for the first time.

“I think there’ll be a lot more scrutiny of ordinary individuals, definitely, once it’s released,” said Christopher Adolph, associate professor of political science at the University of Washington. “There will be another wave of stories from people scraping through the database. And I think that this story will become a lot more immediate to a lot of Americans.”

“Buyer beware”

The Washington investors’ fate — their investments are worth pennies on the dollar — is also a cautionary tale for anyone who gets excited about a tip from an investment adviser.

Lillian Young, 89, of Bellingham, said she and her husband, James, 90, ended up with 125 shares in Accelonic as a result of advice they received from an investment firm.

“We’re just elderly investors, that’s what we are,” said Young, a retired schoolteacher. “I don’t think we’re considered in the same category as some of the others who might want to do offshore investing. … We don’t have a lot of money, and what little investment we have I don’t think should be a worry to anybody.”

Adolph called it a case of “buyer beware” but added that it could easily happen to anyone: “If you invest in a company that is then sold to a shell company that may or may not exist or may not be incorporated in your country, then any local investment could quickly turn into an international investment that is not easy to monitor.”

For some, the murky trail of their investments dates to the 1980s, when becoming a limited partner in Thompson Properties, a group buying raw land near Everett, Gig Harbor and Olympia was a hot commodity.

“Originally, it sounded like a good deal, and I was familiar with the property that was involved,” said Ray Biggs, 79, a retired consulting engineer from Bellevue, who said he’d invested $161,000. “We were expecting like a 4-to-1 return on our money.”

When the economy tanked, credit froze and the Environmental Protection Agency threw up roadblocks to Thompson’s plans to develop wetlands, the company went bankrupt. Rather than taking 10 cents on the dollar for his investment, Biggs said, he chose to hang on to his stock in hopes he might eventually recoup his losses. Instead, he said, the company’s ownership flipped at least three times before he ended up with his Blue Earth stock.

Biggs did not recall Accelonic’s takeover of Blue Earth and its subsequent failure. But he’s taken solace that MFC Bancorp, which had $1.6 billion in revenue last year and paid dividends in recent years, now controls his shares after another round of corporate shuffling. Biggs said he had received about $900 annually for the past several years. A spokesman for MFC did not respond to a request for comment.

Assets frozen
The investors’ names surfaced in documents in the Panama Papers showing their holdings in Accelonic, a company overseen by Slobodan Andjic, a Milosevic associate whose assets were temporarily frozen by the U.S. Treasury Department in 1995.

“Oh, great,” deadpanned Dayton Maltby, a retired Alaska Airlines pilot from Tacoma, when told of Andjic’s involvement.

There’s been no evidence that Andjic, who also served as vice president of a Swiss investment group, was involved in wrongdoing at Accelonic. Andjic, who now lives in Serbia, could not be reached for comment.

Maltby had 29 shares in Accelonic. While he said he was unfamiliar with the company, he said he recalled once owning stock in Blue Earth, part of an investment in his 401(k) retirement plan, but he figures it’s pretty much worthless.

“I have no knowledge of Accelonic. … Can you find me the $10 million that I’m supposed to have?” Maltby asked.

While there’s no tally of how much money Washington state investors may have lost, Dennis DeYoung, 70, a retired business owner from Kirkland, estimates he lost at least half the $50,000 he’d invested in Thompson Properties. In 2005, he ended up owning 2,528 shares in Blue Earth.

“For a few years I was getting checks from Blue Earth, but I’m under water,” he said.

DeYoung said the experience left him angry: “It’s been forever that I’ve had these certificates and I’ve not heard anything, so I figure that’s just money down the drain.”

788 state addresses

Of the more than 2,700 Accelonic investors listed in the Panama Papers, at least 788 have Washington state addresses.

DeYoung speculated that the disproportionate representation reflects a large number of state residents who invested in similar limited partnerships.

Washington was first linked to the Panama Papers last month, when McClatchy reported that Robert Miracle of Bellevue was listed in the files. Miracle went to jail for a $65 million Seattle-area Ponzi scheme involving investments in Indonesian oil fields.

Even the Washington state Department of Revenue learned it was listed as a shareholder in the Panama Papers, with 24,531 shares in Accelonic.

After taking a few days to look into the matter, Beverly Crichfield, a spokeswoman for the Revenue Department, said the state had acquired the shares under its unclaimed-property program and wants only to return them to their owners.

“First of all, I want to let you know that the Department of Revenue has no public ownership in this company. That’s not the way it works,” she said. “We do not take ownership of those securities. But what we do is we hold them in custody or in trust for the rightful owner.”

Vernon Jenkins said he’d invested his $5,000 in a separate partnership with hopes of helping to develop nearly 100 acres in Federal Way. But he said the project had stalled when developers couldn’t install sewers because of environmental concerns. That resulted in the company being sold.

When Jenkins tried to follow the progression of his investment, he said, he got lost in the maze of business transactions, even using a flow chart at one point to try to determine how many companies had changed hands.

“It just got so convoluted with the paperwork. I wrote it off,” he said.

Jenkins and the other investors said they had never heard of Andjic, who has had other business ties in Washington state.

And while Jenkins said he was familiar with the Panama Papers, he never expected to show up in them.

“Yeah, well, that’s a good place for me, I guess,” he said.

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