Colo. shuts down last 'offshore bank'

By David Milstead, Rocky Mountain News (Contact)

Wednesday, November 21, 2007

Colorado's last remaining "offshore bank" is out of money and has been shut by state regulators.

Colorado Banking Commissioner Richard Fulkerson delivered an order of involuntary liquidation to American Intercapital Depository & Trust on Tuesday after the state's Banking Board voted to seize the institution.

The order referred to AIDT as "hopelessly insolvent" and said there is a "general untrustworthiness" of its officers and managers.

The board appointed local attorney Phil Feigin, the former state securities commissioner, as the receiver. Fulkerson and Fei gin secured AIDT's records and changed the locks Tuesday.

Feigin will now search for any missing assets, manage its liquidation and prepare a report to regulators as to whether there was any wrongdoing in the institution's failure.

Fulkerson left the door open for AIDT, saying, "If everything's there and they're solvent, they get it back. And that would be the ideal outcome."

The closure was a dramatic development in an ongoing tussle between AIDT and the Colorado Division of Banking, which filed an enforcement action against the depository in the state's Office of Administrative Courts a year ago.

Jerry James, AIDT's ex-chairman and founder, said Tuesday evening the company was "very confident" it would win that case, scheduled to be heard next month, and had promises of new money that could be injected into the company in coming weeks.

"The regulators offered to settle with us, and when our board rejected their offer, they closed us, knowing we had a letter of intent for $6 million in new capital," he said. "Thirteen business days before the hearing, our opportunity to be heard by a judge is eliminated."

The action was spurred after a customer wanted AIDT to return a $4 million deposit and $120 million in assets AIDT was managing, according to the Division of Banking. The customer sent a demand letter Nov. 9 and went to state regulators last week to express concern.

"We demanded the management of AIDT address and resolve that situation," Fulkerson said. "They were either unwilling or unable to do so."

Attorney Joseph Bartel said his client, an entity called Market Maven, is the customer who contacted regulators. He declined to provide additional detail on who his client is. "We're very much looking forward to working with the receiver for a resolution," he said.

The Division of Banking's earlier enforcement action against AIDT was sealed by order of a Denver district judge. At a public hearing Jan. 25, Assistant Attorney General Stephen Smith said the purpose of the hearing was "to suspend or revoke" AIDT's charter.

Documents released Tuesday by the Division of Banking show it has been requiring AIDT to maintain liquid assets equal to its amount of deposits.

But Fulkerson, using AIDT's monthly reports to the division, thinks the depository had a deficiency of about $6.9 million on Oct. 31. That means its liabilities outweighed its liquid assets.

American Intercapital reported $6.63 million in deposits on Oct. 31 and had $10.7 million in reported liquid assets, the Division of Banking said. But many of the assets, such as $4.1 million in stock in the Chicago Board of Trade, come from a commodity-trading subsidiary and cannot be used to pay depositors, the division says.

The $120 million AIDT is managing for the customer would be held by a custodian and wouldn't show up on AIDT's balance sheet.