Panama shuts UK-linked group

Offshore haven moves to restore reputation by closing Harris Organization

Panama has cracked down on a controversial financial services group that owns several quoted UK companies. The move is seen as an attempt by the Central American country to be removed from the "hit-list" of questionable offshore centres.

Panama has cracked down on a controversial financial services group that owns several quoted UK companies. The move is seen as an attempt by the Central American country to be removed from the "hit-list" of questionable offshore centres.

The Harris Organization (THO), which also handles some 95 investment trusts internationally, was suspended last week in an unusually aggressive move by the Panamanian regulators.

La Comisión Nacional de Valores, which is Panama's equivalent of America's Securities & Exchange Commission, has suspended the business operations of THO, which is headquartered in Panama but has its main entities incorporated in the British Virgin Islands and Nevis.

Marc M Harris, 35, THO's chairman and chief executive officer, has been notified of the decision and has said he will appeal. His career has been marked by a string of controversies in Florida, Monserrat and now Panama.

THO controls three British plcs: Marc M Harris Group plc, Worldwide Real Estate plc and Cuban Investments plc, which are based in London and Essex. The first company was intended to be the ultimate holding company for the group.

Each of these companies is empowered to sell up to £5m of shares to the public. They were formed with a view to all being listed on Ofex, the lightly regulated stock exchange. Mr Harris told his clients some months ago they were about to be listed, but problems in the Caribbean had set back plans.

The suspension follows complaints made by clients of THO (motto: "Safe Offshore Business") that they had been unable to redeem their investments and were ignored by the group when they complained.

Mr Harris said yesterday from Panama: "It is quite clear that La Comisión Nacional de Valores acted well beyond its authority. My lawyers have requested that I do not comment concerning specifics of our legal strategy, which will be presented on Monday."

In further correspondence with the Independent on Sunday, Mr Harris denied any wrongdoing and claimed he was the subject of conspiracies to undermine his business.

The Panamanian suspension follows a campaign by the Miami-based Offshore Alert newsletter, run by British investigative reporter David Marchant. Mr Harris has tried to counter press criticism by issuing libel writs, unsuccessfully in the case of Offshore Alert.

"Offshore Alert exposed THO in March 1998 and spent $160,000 [£110,000] in successfully defending a libel lawsuit in the US, which went to trial last year, and then on appeal, which we also won," said Mr Marchant.

In his judgment, Judge Michael Moore agreed there was "persuasive evidence" to support the central allegations of Offshore Alert that THO was insolvent, stealing clients' funds, operating as a Ponzi scheme (a complex fraud) and involved in money laundering.

"Despite this, the regulators in Panama, the British Virgin Islands and Nevis, where THO's primary operations are either based or registered, refused to take any action against the group. In doing so, these jurisdictions sent out a clear and rather stupid message that they simply don't care about the security of funds invested by the very people who give them whatever prosperity they have - foreign investors," said Mr Marchant.

He argued last week's suspension was an attempt by Panama to improve its financial reputation. The country was recently identified as a key haven for money laundering.