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Posted by: Adrienne Carter on February 17
Matt Goldstein’s recent stories about Stanford Financial Group, which detail the investigations into the high-flying firm that boasts CDs with rates doubled the market average and assets of more than $50 billion, has generated quite the buzz—good and bad. One reader questioned Goldstein’s analysis, essentially saying it was unfair to compare the CD rates of an offshore bank to that of U.S bank. Offshore banks, the reader said, often have higher yields than their U.S. counterparts. His example: Millennium Bank, which offers interest rates on CDs between 6% and 7.75%.
If you read the off-shore bank’s Web site, there seems to be a lot to like about Millennium, which is located in Kingstown, the capital of St. Vincent & the Grenadines in the Caribbean. The firm says it hasn’t been affected by the global financial crisis caused by subprime mortgage practices of large domestic banks. It says it has a “100% track record of customer satisfaction.” So far, so good. Millennium also says it’s wholly-owned by United Trust of Switzerland S.A. a Swiss-registered trust company founded in 1931. The bank’s regulator, International Financial Services Authority, also lists Millennium as a licensed offshore bank.
But a closer look at Millennium Bank and its purported parent company, United Trust of Switzerland, raises some serious questions. First, there’s the investment strategy. Millennium offers precious few details about how it manages such outsize returns. The firms’ Web site indicates that Millennium—“free from the limitations” of those pesky regulators, the FDIC—can invest in a wide range of assets, including foreign stocks, real estate, and debt. Trouble is, those categories of investments aren’t exactly doing that well these days. Millennium Bank did not return calls for comment.
As for the United Trust of Switzerland, it’s hard to track down much information about the firm. Millennium says its parent company doesn’t have a Web site. Why? “We are confident that our readers will understand the strict obligation that United Trust of Switzerland must exercise on a daily basis to maintain absolute privacy,” Millennium writes on its site. “Until our premier private clients have complete trust in the security of public Web sites, United Trust of Switzerland’s policy not to maintain a public Web site will remain in place.”
The regulators in Switzerland haven’t heard of United Trust. A spokesperson for the Swiss banking authority said: “The United Trust of Switzerland is not a registered/licensed bank in Switzerland and has also no other license of the Swiss Financial Supervisory Authority.”
BusinessWeek's Adrienne Carter, Jessica Silver-Greenberg, and David Henry deconstruct the mysteries of high finance, Wall Street, and hedge funds for pros and ordinary investors. E-mail them directly if you've got tips about big deals, a hedge fund, or even securities industry gossip.