Loan Fees--Now You See Them, Now You Don’t

Thomas M. Berry needed big money in a bad way.

An official of a railway workers union in Chicago, Berry watched in 1987 and 1988 as the Chicago & North Western railroad sold off rail lines and tried to eliminate hundreds of union jobs.

Last summer, he and some fellow union members decided to try to buy part of the railroad to protect the jobs and run the line themselves. But no conventional bank would provide the financing.

So, Berry said, an investment banker put him in touch with Otis Cheerful Canupp of Tucson, Ariz., chief executive of Regal Bank of Montserrat, a tiny Caribbean island.

Regal’s financial statements showed assets of $2 billion. The bank’s license application in Montserrat listed assets of $51 billion, according to court papers.

And Berry said Canupp was very accommodating, promising to lend the union the money it needed. But Berry said Canupp told him that the bank needed an advance fee of $55,000.

Federal labor law prohibited using union money for the fee. So Berry withdrew his life savings and borrowed some more to come up with the money. Last Nov. 3, he sent a cashier’s check for $55,000 to Canupp. He has been waiting for his loan ever since.

Paid Personal Expenses

“We’re against the wall now, but I still haven’t given up,” Berry said in a telephone interview last week.

A federal law enforcement official said at least seven other people paid $55,000 each to Regal Bank in recent months for loans they have yet to receive.

An affidavit prepared by FBI agent Robert M. Keefe for a search of Canupp’s Tucson office last month said Berry’s money was used to pay personal expenses for Canupp and some associates, including department store charge accounts. The affidavit said Canupp admitted to Keefe in February that the bank’s entire assets consisted of stock in a defunct mining company.

Regal Bank, which was not chartered by WFI Corp., is one of the Montserrat banks now under investigation by Scotland Yard, according to the island’s attorney general.

The FBI is also investigating the bank, according to Keefe’s affidavit. Along with the alleged advance-fee schemes, the Keefe affidavit said Otis Canupp told undercover federal agents that he could launder drug money and help them acquire illegal weapons, all through his bank.

Canupp and his mother, Alberta, were jailed briefly in Montserrat last month on charges of conspiring to defraud the island government. Free on bail, they are restricted to the island and awaiting a hearing in June.

Alberta Canupp said in a telephone interview that she and her son are innocent of any wrongdoing. She said they were unfair victims of the problems created by a few offshore banks and she said the loans had not been fulfilled because of “interference” by banking authorities.

“Everybody is being lumped into one pot and everybody is being penalized,” she said.