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Tom McMurrain and San Cristobal Land Development...
Anatomy of a scam
part two of a four-part series
by Eric Jackson
In the last issue, we reviewed the usual hallmarks of a fraudulent scheme and noted the people to whom San Cristobal Land Development directs its sales efforts and how the company appeals to potential buyers’ sense of greed.
Now THAT isn’t so...
As noted above, there is a “forward-looking statement” exception in the Common Law definition of fraud, and Panama’s Civil Code jurisprudence has similar provisions. Thus it can and would be argued that wildly unrealistic predictions of profitability can not be the basis of fraud. (Such a defense isn’t necessarily airtight, however, if what appears to be a forward-looking statement is in reality a misrepresentation of the maker’s present intentions or expectations.)
Conjuring up a road
One apparently forward-looking statement that probably wouldn’t qualify for the exception to fraud --- which was pulled from the Internet within a short time of this reporter identifying it in a face-to-face meeting with McMurrain at the Hotel Bristol --- was the claim that now is the time to buy at San Cristobal’s Palmira development on the coast of Colon, because the road to Kuna Yala will soon be paved. There is no road from Colon to Kuna Yala. The coastal road stops at the Cuango River, many miles short of Palmira. There is no current plan to extend the road. Any attempt to extend the road all the way to Kuna Yala would provoke fierce indigenous opposition because such a road would bring land invaders to the comarca. While the part about a road soon being paved may arguably be forward-looking, the implication that THERE IS such a road is a fraudulent misrepresentation of present fact.
McMurrain made another version of the road to Kuna Yala claim in EscapeArtist.com, at http://www.escapeartist.com/OREQ5/Beachfront.html, which has also been taken down from the web --- but not before being recorded for publication, posterity, and presentation before any court in which McMurrain or San Cristobal complains of being unfairly maligned for fraud:
"Currently the paved road ends two miles before Palmira. (The road is in the process of being extended all the way to the San Blas islands --- the home of the Kuna Indians as well as some of the best coral reef snorkeling and diving in the world). My guess is that when the road is complete the price will immediately increase substantially."
Still on the San Cristobal website at http://www.sancristobalsa.net/corp/main.php?sid=1&cat=40&subcat=106, one finds the following claim:
“What are the distances to the plantations from Panama City?
“... To Palmira: 40 minutes by helicopter, 3 hours by car (to Colon 50 miles, then another 50 miles to Palmira).
“... Palmira currently has a dirt road that is under construction.
“What is the distance to the closest community?
“In ... Palmira, a one-hour drive to the historic town of Portobello.”
But of course, the road doesn’t go from Panama City, Colon or Portobelo to Palmira, because it stops just short of the Cuango River, which is well short of Palmira.
What title do purchasers get, is the Isla San Cristobal project really reforestation, and what immigration benefits do investors get?
In the three-page Roger Gallo classic at http://e-caribbeanrealestate.info/html/article_on_san_cristobal.html, a misrepresentation is slickly posed as a question: “How about an investment that will yield 20-25% per annum from exotic fruits, hardwoods and the time tested appreciation and security of fee simple real estate?” Ah, but it goes on to answer the question: “Yes? Yes.” Actually, fee simple is a Common Law form of land ownership that does not exist in Panama or other Civil Code legal jurisdictions.
Might a defense attorney object that the “fee simple” terminology was a necessarily inexact but close enough and good faith translation of similar concepts in different legal systems? That argument could wash in certain circumstances, if by “fee simple” one means “titulado.”
However, to equate any Panamanian real estate short of title with the Anglo-American fee simple is fraudulent. Couple that with representations about the legal and tax benefits that supposedly accrue to buyers in San Cristobal developments --- who get far less that title --- and it adds up to a really flagrant fraud.
“Everyone who invests in this project gets residency in Panama,” the Roger Gallo article proclaims about McMurrain’s development on Isla San Cristobal, going on to “explain” that a residency visa comes via Law 24, Panama’s reforestation incentive legislation.
However, to legally get a reforestation visa, a foreigner must have title to the land that she or he is reforesting. Possessory rights (derecho posesorio) or an interest in a land contract will not suffice, and of course a vendor can not convey better title than he, she or it possesses.
And what does San Cristobal’s lawyer, Barry Miller admit about the nature of the real estate interest that the company has to convey?
In a letter to The Panama News, Miller wrote that:
“SCLD is the purchaser under several contracts that have not yet culminated in transfers of land or possessory rights. Some of these contracts relate to titled land; others to possessory rights land.
“We prefer titled land, but it is not always available in Bocas del Toro. In addition, the process of assembling a salable tract will often require that we purchase possessory rights land. All of our contracts with our customers require that we ultimately deliver titled land. We have been working diligently to obtain deeds to possessory rights property through a local attorney.
“We have also used a so-called "contrato de promeso" as a means of obtaining rights to property that is then sold to customers.... Underlying this contract, which is recorded, is an unrecorded private agreement which provides that, as SCLD pays for the lots into which the property is subdivided, the owner will deed these lots directly to our customers.
* * *
“In all, SCLD owns, or has possessory or contractual rights in, approximately 390 hectares of land.”
In other words, San Cristobal DOES NOT have the title to convey that would allow every purchaser in the project to qualify for a reforestation visa. In fact several purchasers, one of whom actually still believes in McMurrain, have told The Panama News that they have paid their money for McMurrain’s teak and noni farms on Isla San Cristobal and have not received title. Thus “Everyone who invests in this project gets residency in Panama” is a fraudulent misrepresentation of present fact based on the title issue alone.
But it’s a fraudulent misrepresentation on account of more than just the matter of land titles.
To legally get a reforestation visa, one must actually be reforesting land. However, much of McMurrain’s project on Isla San Cristobal would not properly qualify as “reforestation” under Law 24. What McMurrain is doing is not actually planting trees on land without trees.
What he’s actually doing is cutting down a prior generation’s failed bid to get rich on a tropical commodity --- cacao trees --- to gamble on new commodities --- teak and noni. But cutting down one kind of tree to plant another does not qualify as “reforestation” under Panamanian law.
Yes, there have been examples in which public officials have improperly granted reforestation benefits to people who have cut down the jungle and replaced it with teak. However, this is highly illegal and, given the overwhelming probability that the Mireyistas are going to be badly defeated in the upcoming elections, the odds are great that any reforestation certificates improperly granted by the Moscoso administration will be revoked by the next government.
For a lot of American retirees, the residency hook is no big issue because merely having an US Social Security pension is in most cases sufficient to become a legal resident of Panama. But Tom McMurrain is not content to leave his residency fib as cited above. On the San Cristobal website, at http://www.sancristobalsa.net/corp/main.php?sid=3&cat=27, he sells shares in a Bocas development called Riverwest Plantation, and makes the following claim:
“Investors purchase units in a plantation located on the Caribbean side of Panama. Each unit is equal to a 1% interest in the whole plantation. The plantation is planted with medicinal plants and reforested with tropical hardwoods, so that each hectare has hundreds of cash-flow-producing medicinal plants and wealth-generating reforested tropical hardwoods. The underlying value of the land and the opportunity for appreciation of Caribbean real estate are also attractive elements.
“Each unit holder is entitled to receive an dual citizenship under Panama's Reforestation Law 24. This Investor's Visa includes eligibility for Panamanian residency and dual citizenship.”
DUAL CITIZENSHIP? Yes, that is available to those born in Panama to foreign parents, or abroad to Panamanian parents. However, Article 10 of Panama’s Constitution requires that those who would acquire Panamanian citizenship by naturalization must, in addition to learning Spanish and the basics of Panamanian history, geography and governance, renounce such other citizenship that they hold. A person can’t constituionally get dual citizenship by investing in one of Tom McMurrain’s schemes.
A not so universally appealing pitch
Then there is the fallacious “jump on the bandwagon” appeal, Tom McMurrain’s unqualified statement that “Everyone who has seen the project has purchased, and not only that, half of those who've purchased so far did so sight unseen.” This is found at http://e-caribbeanrealestate.info/html/article_on_san_cristobal.html.
However, The Panama News has received emails from people who tell us that they took the tour and did not buy. The following, which we received in April of last year, is an example:
“I was one of those Americanos who went down last New Years to take a look at what was on the internet, a very nice spread and sales pitch. I wanted to spend some time in a warmer place so why not look San Cristobal over. I was duly wined and dined and really treated nicely by McMurrain and company. I'm no spring chicken and when on the last night in Panama City I was subjected to intense pressure to buy immediately before the "opportunity slips away" by Ian Calvert, it was deja vu (all over again like in a used car lot) and I smelled a rat. In short, I told him that there was no way I was going to buy anything that night and had a lot of homework to do before I bought anything. I immediately contacted a Panamanian attorney to check them out. It was discovered that they had no property registered anywhere and certainly none that was fee simple as promoted. I considered my legal fees well spent....”
If the people who wrote to us are to be believed, then the claim that everybody who has seen McMurrain’s project has bought is also a fraudulent misrepresentation.
Ambiguous statements designed to mislead
What return on investment?
By the way, specifically what does “yields a 50-75% cash return” that Roger Gallo touts on behalf of San Cristobal mean? Annual return on investment? Net income --- or gross receipts --- over 50 years?
The extravagant-sounding figure that appears to say more than it really does is a Tom McMurrain specialty.
In one of the latest spins, San Cristobal claims that in “Palmira, owners... generate $30,000K+ per year in cash flow from their exotic fruits....”
Of course, if the owners spend 30 grand on their fruit crop and it’s a total loss, that would amount to a $30,000 cash flow --- outwards.
It’s not nice to misrepresent Mother Nature!
Maybe the most misleading claims short of outright lies in San Cristobal’s archive of hype are about the elemental forces at play in Bocas del Toro province. At http://www.sancristobalsa.net/corp/main.php?sid=1&cat=3, the assertion goes:
“The climate is perfect as well. Average annual rainfall and temperature are approximately 4000 mm (no monsoon season) and 30°C (86°F) respectively, due to the presence of cooling, tropical breezes. The calm, warm, Caribbean water has an average temperature 29°C (85°F). Panama is also located out of the hurricane and major earthquake belts.”
Of course, “monsoon” is the word used only for southern Asia’s cyclical rainy seasons, some of which are amazingly wet by anybody’s standards, and some of which are comparable to the rainy season in Bocas del Toro. Different parts of that province get differing amounts of annual rainfall --- 4000 millimeters of precipitation would in an ordinary year be the rainfall in one of the province’s dryer parts, but in terms more readily understood by Americans that amounts to 157.58 inches of rain per year. That means that during the Atlantic side’s nine-month or so rainy season they get an average of more than a half-inch of rain per day --- maybe a “perfect” climate for a Colon native like this reporter, but a bit rainier than most Americans --- or Panamanians --- would prefer.
There is less ambiguity about the weather when Roger Gallo plays shill for San Cristobal at http://e-caribbeanrealestate.info/html/article_on_san_cristobal.html: “No... inclement weather,” in Bocas, goes the claim on the second of that Internet ad’s three pages. So what is “inclement?”
Look to the National Geographic for a more objective statement about the weather in Bocas, at http://www.nationalgeographic.com/wildworld/profiles/terrestrial/nt/nt1407.html: “The Bocas del Toro-(Spanish for "mouths of the bull") San Bastimentos Island-San Blas mangroves weave along Panama’s Caribbean coast in a tangled braid of roots, branches, and dark green leaves that covers about 23 square miles (59 sq. km). These abundant mangrove forests are drenched with the highest rainfall in the country--as much as 236 inches (6,000 mm) per year.”
Go through the archives of Panama’s Spanish-language dailies, or the websites of disaster relief agencies (e.g., http://www.reliefweb.int/w/rwb.nsf/0/df5147b833df94ddc1256bb90057aa6d?OpenDocument) or Dartmouth University’s flood archives (e.g., http://www.dartmouth.edu/~floods/Archives/1993sum.htm) for stories about the consequences of heavy rainfall in Bocas del Toro.
More to the point of Tom McMurrain’s whole teak and noni business proposition, note what another company in the Bocas del Toro commercial forestry business has to say about the weather in the province:
“The Archipelago of Bocas del Toro has two seasons: wet and wetter. Although rainfall varies from a low of 8 inches during the months of February and September to a high of nearly 16 inches most of the other months, the islands do not know a dry season. Indeed, at any time of the year, showers lasting five days or more are fairly common. As a result, great care must be taken with regard to the species of tropical hardwood trees that should be planted on the islands or the quality of the wood produced won't meet international standards. Among the hardwoods that require a dry season lasting no less than four months each year are teak, cocobolo and African mahogany. Due to the demand for these hardwoods on the international market, Bocas-area "forestry experts" seeking investment capital often boast about the (specious) benefits of growing these species on properties they own or manage.” (At http://www.panamahardwoods.com/pages/955719/.)
And is Bocas del Toro in a “major” earthquake belt? They do get plenty of earthquakes in that province, but because it’s sparsely populated and most people live in single-story wooden houses, a quake that registers more than six points on the Richter scale --- of which Bocas has had several in recent years --- isn’t nearly as deadly as a temblor of similar magnitude in a place like Turkey or Iran. But if McMurrain leaves readers of his website with the impression that destructive earthquakes are not a problem in Bocas del Toro, he has misled them.
How far off the mark is the notion that Bocas del Toro isn’t in an earthquake zone?
See the map below, on which the US Geological Survey charts earthquakes --- represented by dots --- over the past decade or so.
Statements that would have most Panamanians rolling on the floor laughing
• At http://www.free-press-release.com/news/200402/1077737912.html San Cristobal says that:
“The Bocas del Toro Archipelago... has little or no crime....”
Yet in a letter to The Panama News, San Cristobal’s lawyer notes of the local people McMurrain hires: “As is common there, many of them had had brushes with the law.”
• At http://www.prweb.com/releases/2003/7/prweb72067.htm, San Cristobal’s pitch goes:
“The Pacific side is attractive to investors and travelers, but it also has temperamental weather patterns, a 15 to 20 foot tide change and the beaches simply can't compare to those on the Caribbean side.”
But most Panamanians, and most foreign residents, prefer the Pacific side because it gets less rain and because they perceive Pacific beaches to be much nicer than those on the Atlantic side.
• At http://www.prweb.com/releases/2002/12/prweb51595.htm, prospective buyers are told:
“In terms of marketing, SCLD has conducted a high-profile, Internet marketing campaign in which prospective buyers can see photos and videos of their land, along with satellite images that allow them to zoom in on their property in real time. Numerous high-profile international real estate, and other related, experts have recognized the attractiveness of SCLD's concept and are actively recommending it to their networks. Finally, SCLD's high-commission broker program gives the company a local presence in over 20 countries.”
They’ll show you a PICTURE of your land? They claim to be in 20 countries, and they have by their own account sold about 50 of their farms? In New York they tell jokes about selling the Brooklyn Bridge, and this sort of claim is more or less a Panamanian equivalent.
• At Pressbox.co.uk, February 25, 2004, McMurrain claims:
"We are in Bocas in order to develop what could be the next Key West.”
Right. Tom McMurrain is going to make Bocas the next gay Mecca like Key West --- especially by throwing around homophobic epithets like “That is why you and Okke are butt buddies I guess,” as he did in his recent extortion note demanding that this reporter sell The Panama News to him or else face dire consequences.
Next issue: the basic fallacy of Tom McMurrain’s teak and noni profit projections
Also in this section:
Business & Economy Briefs
Anatomy of a scam, part two
US pleads with RP over mad cow restrictions
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