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Tom McMurrain and San Cristobal Land Development...
Anatomy of a scam
part 1 of a four-part series
by Eric Jackson
Every once in a great while, somebody creates something truly new in the field of fraud and deception.
A Mr. Charles Ponzi, for example, gave a name to a scheme now commonplace, in which investors are lured with promises of high return for their money, the “authenticity” of the deal is “proven” by the payment of the promised profits to early investors from the money put in by later ones, and before the whole unsustainable structure comes crashing down the promoter absconds with the last and largest group of investors’ money. The ponzi scheme is now a cliché in the swindler’s book of tricks, a ploy that still exists despite the advent of new ways to separate suckers from their money, like the “Nigeria emails” that have spread far beyond the country that gave them a name.
And of course, new technologies and changing economic and political realities also tend to carry in their wakes new sorts of crime. Before there were credit cards, for example, there was no credit card fraud.
Variations on a tired theme
However, most fraud is so common as to be banal, even if its practitioners may use the latest technologies to perpetrate it.
Typically, these are elements of the fraudulent scheme:
• Because the fraud artist is generally interested in maximum short-term yield --- there tend to be political and legal problems for those who stay visible in the game for too long --- victims tend to be selected with a preference toward those who can be taken for relatively large amounts of money, but the richest and most powerful potential targets are avoided because they tend to be in positions both to defend their interests and to take revenge when they have been had;
• The fraud artist generally appeals to his or her chosen victims’ sense of greed, offering a luxurious life without the need for much work to attain it --- so much better if the victim is enticed to break laws as part of the scheme, because then he or she will be unlikely to report the crime once the true nature of the transaction becomes apparent; and
• The fundamental distinction that separates a fraud from every other phenomenon is the misrepresentation of past or present facts, designed to entice a person into entering into a financial transaction. The misrepresentation may be by way of a positive false statement, or by concealment of a relevant fact.
Fraudulent schemes also frequently rely upon misleading statements, ambiguous representations that lead a person to believe something other than the true state of affairs, but which lawyers can argue are not false statements per se. In the Anglo-American Common Law, dishonest predictions of what will happen in the future are also generally not considered fraud --- the exception being when a promise or prediction is made with the present knowledge and intention that it won’t happen --- but in the specialized laws regulating securities and in some state consumer protection acts misrepresentations of future “facts” are sometimes called fraudulent.
In modern financial criminal enterprises, the perpetrator generally seeks to “launder” the proceeds, making money disappear into black holes of offshore bank accounts, people or companies acting as undisclosed fronts, or multiple corporate shells.
The crude fraudster takes the victim’s money and runs, giving nothing in return. More sophisticated operators give their victims something of value, but much less valuable than the victims had been led to believe. In many jurisdictions, the more sophisticated fraud artist will be able to convince authorities that he or she is not a thief, but merely a legitimate entrepreneur who has a business dispute with a customer, and that the matter should be treated as a civil dispute rather than a criminal case.
Crude fraudsters operate outside of or at the margin of “respectable” society, with relatively little publicity. The more sophisticated operators often take higher profiles, working celebrities and political connections into their pitches, and frequently buy protection from politicians or law enforcement authorities.
Sophisticated fraud artists tend to consult with lawyers. When drafting their misleading pitches, they use legal assistance to maximize the possibility of their victims’ complaints being treated as civil rather than criminal matters. They use attorneys to build elaborate corporate shell games to hide their ill-gotten gains.
When a fraudulent enterprise comes under attack in either a civil or a criminal court case, or when it seems likely that this will happen, its promoter almost always resorts to two tactics:
• Destruction or concealment of evidence --- e.g., “You can’t PROVE that we said that, or published that,” when of course the proofs of the matter are under the perpetrator’s control and uphold the victim’s complaint; and
• Denial of agency --- e.g., “Well, he may have said or done that, but he doesn’t work for us anymore and we’re not responsible for what he said or did.”
Tom McMurrain and San Cristobal: an Internet Age real estate fraud
The selection of suckers
Because of the nature of some of the misrepresentations used to lure buyers to San Cristobal Land Development’s “Tropical Working Farms” and other investment schemes, it would not be suitable to make the pitch to Panamanians with $100,000 or more to lose because the claims would appear clearly preposterous to such people. Thus, and possibly in violation of Panama’s weak and generally unenforced anti-discrimination laws, San Cristobal does not sell to Panamanians. All of McMurrain’s pitches are in English. “I'm going to offer this to other Americans as well as to Europeans,” McMurrain said in a three-page appeal published at http://e-caribbeanrealestate.info/html/article_on_san_cristobal.html and the links that follow on that web page.
And not just ANY American or European. There is a target generation, personality and income bracket. On San Cristobal’s websites they have questionnaires for interested parties to separate out “qualified” potential buyers --- those with enough money to be worth Tom McMurrain’s trouble --- for further contacts or to participate in one of the enterprise’s high-pressure sales “seminars.” As San Cristobal describes its targeting strategy: “SCLD has successfully targeted a client base compromised of frustrated market players looking for alternative revenue streams, baby boomers seeking a secure retirement and purchasers who want to buy reasonably-priced, Caribbean real estate.” Ibid.
On warning flag that should be clearly seen and understood by anyone thinking of investing in any branch of Tom McMurrain’s San Cristobal operation is the following disclaimer at the bottom of an Internet pitch for investment in San Cristobal Land Development’s “parent company,” San Cristobal International (“You can earn a 12 percent return from San Cristobal International,” at http://www.sancristobalsa.net/corp/main.php?sid=3&cat=35):
“Important Note: THIS OFFERING IS NOT BEING MADE TO RESIDENTS OF THE UNITED STATES OF AMERICA OR THE REPUBLIC OF PANAMA AND NO OFFER OF SECURITIES IS BEING MADE TO, AND NO SALE OF SECURITIES WILL BE CONSUMMATED WITH, ANY RESIDENT OF ANY OTHER JURISDICTION TO WHOM SUCH OFFER OR SALE MAY NOT LAWFULLY BE MADE.”
What McMurrain and his accomplices are implicitly admitting is that their appeal amounts to a violation of Panamanian and US securities laws.
Appealing to the sense of greed
Do you want to get rich quick --- or, should we say, richer quicker?
“Caribbean Water Front Land In Bocas Del Toro For $5,000 An Acre That Yields A 50-75% Cash Return,” proclaims the headline in a pitch bylined by San Cristobal shill Roger Gallo, who publishes EscapeArtist.com (http://e-caribbeanrealestate.info/html/article_on_san_cristobal.html). Gallo, who did not respond to our emailed questions about the subject, reputedly has or had an arrangement by which he received a portion of the proceeds from every San Cristobal sale generated through his website. "Panama is on a roll," says Tom,” (ibid.), who has taken to calling this country’s Atlantic side “Panama's ‘Billion Dollar’ Caribbean Coastline.” (February 25, 2004 pitch bylined by San Cristobal’s Dennis Smith and published on Pressbox.co.uk.) The ad continues that “now is the time to cash in on Panama's Caribbean ‘Gold Coast’ boom.”
When first The Panama News reported on San Cristobal last year, they were promising 20 to 30 percent per year return on investment in their teak and noni farms --- the sort of claim for a commodities investment that, if made by a broker at the Chicago Commodities Exchange, would quickly lead to prosecution.
That’s because in the US commodities market, as in other areas of American law, the prohibitions go well beyond Common Law fraud. “It shall be unlawful... to cheat or defraud or attempt to cheat or defraud... [or] willfully to deceive or attempt to deceive... by any means whatsoever,” says Title 7, Chapter 1, Section 6b(a) of the US Code, which regulates commodities exchanges.
Since we called San Cristobal on that prediction, those extravagant claims have been somewhat scaled back or rewritten to be less explicit. But the claims that McMurrain continues to on the web cited in this section, all of which were gathered in the past few weeks, are still pretty extravagant.
About the McMurrain’s teak and noni farms, Roger Gallo in pseudo-journalistic form reports the following conversation about noni with Tom McMurrain:
“Each plant will produce a $10 bill each year...just like an ATM machine, just add water."
"Each property owner will earn $40,000 per year just off of the Noni?"
"You've got it."
"Just add water?"
"Well, we've got people here working the plantation, but yes, essentially, you just add water, Noni thrives in Bocas Del Toro."
(At http://e-caribbeanrealestate.info/html/article_on_san_cristobal.htm.)
In a 2002 pitch for a McMurrain development at Palmira, on the roadless coast of Colon’s Costa Arriba, adjacent to Kuna Yala, it is claimed that “In Palmira, owners who purchase 10 acres of beachfront land receive an amortized return of 10%-30%+ from their hardwoods, generate $30,000K+ per year in cash flow from their exotic fruits, while gaining from the inevitable appreciation and security their beachfront, titled real estate in the Caribbean....” See http://kxp.e-xl.com/en/7176/real-property-magazine/ --- and don’t be fooled by the appearance that this is the independent arms-length analysis of an industry publication: Tom McMurrain owns Real Property Magazine.
In March of 2003, at http://www.prweb.com/releases/2003/3/prweb59327.htm, erstwhile McMurrain operative Tom Lennon proclaimed that "In all modesty, it's no wonder people are purchasing sight unseen and are, literally, battling to get in on the ground floor!" That pitch claims that “Distrust of conventional markets and fear of war have caused baby boomers to seek solid cash-generating opportunities showing stable, double-digit returns,” that “Some of our plantation owners have even been offered prices of 20%-30% more than they paid six months ago by others that are trying to get in on this opportunity,” that San Cristobal’s Palmira project “is designed to repay their purchase within five years” and that potential buyers are "battling to get in on the ground floor." The ubiquitous Roger Gallo is cited as if he were an independent authority in the following manner: “Roger Gallo of EscapeArtist.com speaks for the investment community when he called the TWF model, ‘The best investment I've seen in 20 years!’"
In another McMurrain pitch from earlier this year, at http://www.free-press-release.com/news/200402/1077737912.html, the promise is that one of San Cristobal’s Bocas plantations is selling “at a price 10 times less than similar land currently available in the Caribbean region today” and that “investors also receive... tax-free status....” That same pitch also promises an offshore bank account and an offshore corporation as part of the bargain.
While Panamanian law does provides certain exemptions from on income taxes for the proceeds of certain reforestation projects and also allows some of the equipment used for such investments to be imported duty free, there is no blanket exemption from all Panamanian taxes merely because one invests in reforestation.
Moreover, it should be borne in mind that McMurrain doesn’t sell to Panamanians. The Americans who have so far been the bulk of his buyers would owe US taxes on the proceeds of any Panamanian teak and noni farm, minus certain possible deductions. Hence the importance of the “offshore” part of the McMurrain pitch --- it’s a barely disguised inducement for Americans to commit tax evasion against the United States. And of course, a person who buys into such a thing and gets cheated in the transaction would be unlikely to go to the FBI and say that he or she was the victim of wire fraud.
Ah, but a lucrative investment and tax-free status aren’t all that San Cristobal is hyping. No, McMurrain, a self-proclaimed born-again Christian, hints at http://real-estate.press-world.com/v/7227.html that something other than accepting Jesus Christ as your savior may be the key to something like eternal life: “Retirement-minded Boomers move to Caribbean Panama as a new tourist destination and their desire to stay young and healthy by using natural anti-aging products suits our farm yields perfectly.”
Next issue: fraud, deception and outright stupidity.
Editor's note: The links listed in this article worked when it was written. However, San Cristobal has a habit of pulling outrageous clams off of the Internet when these are pointed out --- but we have saved copies of the deceptive sales pitches cited above in case they will be needed in legal proceedings.
Also in this section:
Business & Economy Briefs
Old Panama Canal dredging record broken
Anatomy of a scam, Part 1
Our March web statistics
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