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You've Never Heard of the "Bank of Sark?" – Read On.

12/01/2004 - I like to talk about the "Bank of Sark" because it sounds so silly. Silly sounding things are easy to remember and if you remember the lesson of the Bank of Sark, you might save yourself some money.

First, let me tell you what the Bank of Sark was – and is. It's still around, just under different names. The Bank of Sark is the name of an infamous swindle from a number of years ago.

An experienced check forger in Europe was looking to expand his vistas and decided to go into the banking business. He had no experience in banking but he knew – by way of his forgery expertise – how to make things look pretty and convincing.

He set up an office on the Island of Guernsey off the coast of England. "Sark," was the name of one of the neighboring islands and he thought it had a nice ring to it, so he decided to call his company the, "Bank of Sark."

The actual "bank" consisted of an office, the name on the door, a telephone, a telex machine, some very nice looking stationery on some very expensive paper, a supply of cashier's checks, certificates of deposit and letters of credit. These were all courtesy of our friend the forger.

The forger, whose name was Phillip Wilson, put together a balance sheet showing that his bank had $72 million in assets. Wilson polished it off with the claim of a fellow in Nassau, purporting to be a certified public accountant, who said that he had examined the books of the Bank of Sark and that they were correct.

Wilson made his money in several ways, one of which was to sell Certificates of Deposit in the Bank of Sark. Trouble was, they were difficult to cash when you needed the money. But they were very attractive to look at. He'd also sell loan commitments for a fee to desperate borrowers. Everyone involved got very fancy, very official looking paperwork back. And, everyone had the assurance of the Nassau accountant that things were legitimate.

The bottom line is that Wilson was able to scam his victims out of the equivalent of $170 million in today's dollars.

What's the lesson? Know whom you're doing business with. If you're dealing with a local company, you've got the ability to check their reputation, go by and kick the tires, see how they maintain their premises. But the farther you go from home (I believe Dorothy found this to be true), the stranger things can become and the less control you may have over a situation. Be a little cynical, be a little cautious and if it's too good to be true, it probably is.

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