Global Policy Forum

Ex-Financier Used Code Names and Dummy Firms,


By Robert Hanley

New York Times
March 13, 2001

While in bankruptcy, Robert E. Brennan, the former penny-stock promoter, has presided over about $42 million tucked away in overseas banks, relying on secrecy, code names and dozens of dummy companies to hide his use of the money, his former financial manager testified today.

The witness, Peter M. Bond, opened the second week of Mr. Brennan's trial on federal charges of bankruptcy fraud and money laundering by describing, during six hours on the witness stand, myriad loans, investments and other payments he said Mr. Brennan ordered him to make from 1995 to 1999.

Mr. Bond is the head of Valmet Group, a financial services company based on the Isle of Man, in the Irish Sea. While creditors and bankruptcy officials were pursuing Mr. Brennan in the late 1990's, Mr. Brennan went to elaborate lengths to shield his use of the $42 million, Mr. Bond testified.

Mr. Bond said the money came from two sources he oversaw for Mr. Brennan: about $22 million in three family and philanthropic trusts Mr. Brennan set up in Gibraltar in the early 1990's, and about $20 million in stock profits Mr. Brennan realized after investing the proceeds from the sale of about $4 million in municipal bonds.

His failure to report the bonds on his bankruptcy petition is at the heart of the government's fraud charges against Mr. Brennan, 57, the founder and former head of First Jersey Securities. Mr. Bond said he could no longer remember the names of all 30 dummy companies he set up to use the trust funds or the 23 other companies he created to spend the $20 million, a fund he called the "pot." And he testified that he did not know how or where Mr. Brennan had spent some of the money.

As his day's testimony in Federal District Court was ending, Mr. Bond said that in the first half of 1999, Mr. Brennan ordered him to withdraw $775,000 from the Bank of Scotland, where the "pot" was deposited. The money was sent to a company called New World Aviation, Mr. Bond testified. Under questioning by Paul Weissman, an assistant United States attorney, he said he knew nothing about that company and had no idea how the $775,000 was spent. He also said he never learned what became of $3.2 million in loans that three dummy companies with access to the pot made to a company named Trinity Financial Services.

Yet Mr. Bond made it clear that Mr. Brennan, for all his problems with federal securities regulators and creditors seeking his assets, had not lost his taste for a globe-trotting high life. In 1996, Mr. Bond said, Mr. Brennan used $12 million from the trust funds and $10 million from the pot to buy two cruise ships and refurbish one of them, a 450-foot vessel named the Palm Beach Princess.

He also invested $750,000 in the stock of a diamond mine in Namibia, in southwest Africa, and $1.2 million in a company called Las Vegas Entertainment Network Inc., Mr. Bond said. And in July 1996, Mr. Brennan spent almost $61,000 to rent a yacht in Monaco for an overnight cruise on the Mediterranean, Mr. Bond said.

Over the years, Mr. Bond said, he prepared about 15 statements on spending from the trusts and the Bank of Scotland account. The statements, Mr. Bond testified, were "sanitized" at Mr. Brennan's orders and did not list the names of the people involved in the transactions.

"Particular care was taken not to have them identifiable to any party or entity," Mr. Bond testified. He said he was under orders from Mr. Brennan not to send the statements by mail, fax machine or computer. Instead, Mr. Bond said, he had to fly to various places, including London, the French Riviera, southwestern Ireland and Mr. Brennan's homes in Colts Neck, N.J., and Juno Beach, Fla., to deliver the statements.

During phone calls, Mr. Brennan insisted that people use code names to identify themselves or any stock under discussion, Mr. Bond testified. He said he had to identify himself by his mother's maiden name, Grimes, when he called Mr. Brennan at home.

Mr. Brennan declared bankruptcy in August 1995, shortly after the Securities and Exchange Commission won a $75 million judgment against him after a judge found that he had defrauded investors in the 1980's. The current charges against him stem from his failure to report, on his bankruptcy petition, $505,000 in gambling winnings at a Las Vegas casino in September 1995 and the $4 million in bonds and their interest coupons that were eventually converted into $20 million in profits.

In June 1995, Mr. Bond said, he picked up the bonds at Mr. Brennan's home in Colts Neck. Mr. Bond said that the bonds, which were in an easily cashable form, were in a "black pilot's case" and that he was told to "just hang on to them for the time being."

On his return trip to Britain, Mr. Bond said, he fretted about misplacing the case and bonds. "You think about putting it down in the gent's toilet and losing it," he said. "It was a very bizarre experience."

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