[107124] in Cypherpunks
Fantasy Island
daemon@ATHENA.MIT.EDU (Robert Hettinga)
Sat Jan 2 17:28:30 1999
Date: Sat, 2 Jan 1999 16:55:02 -0500
To: cypherpunks@cyberpass.net
From: Robert Hettinga <rah@shipwright.com>
Reply-To: Robert Hettinga <rah@shipwright.com>
--- begin forwarded text
Date: Sat, 02 Jan 1999 12:45:15 -0500
From: Somebody
To: rah@shipwright.com
Subject: CRIME - December 10, 1998
http://www.feer.com/Restricted/98dec_10/crime.html
Fantasy Island
Melchizedek passport scam reveals how the Internet can take fraud to new
frontiers
By Bertil Lintner in Bangkok
December 10, 1998
T he Melchizedek of the Old Testament wouldn't be amused. About 4,000 years
ago, according to the Christian scripture, Abraham rescued Lot and his
family after Sodom was invaded by neighbouring tribes. To celebrate their
deliverance, Abraham gave Melchizedek--Jerusalem's high priest--a tenth of
everything he owned.
But Melchizedek's 20th-century incarnation, say law-enforcement agencies,
is quite the opposite: a symbol of greed, fraud and conning the gullible.
It's the name given to a fictitious Pacific nation by a group of men who,
say Philippine immigration authorities, were running a passport scam that
netted about $1 million.
Neither transnational crime nor passport scams are new, but the Melchizedek
case poses new headaches for investigators: It involves an imaginary land,
a shadowy cast of characters, a key figure said to be dead, and the
nebulous world of the Internet.
Melchizedek--though variously sited in Antarctica, the Pacific and even the
Carpathian Mountains of Central Europe--exists only in cyberspace. But it
made a brief foray into physical reality in late November, when Philippine
police raided a hotel in Olongapo, near Subic Bay, and arrested three men.
Duped workers, mostly Filipino, Chinese and Bangladeshi, had paid $3,500
for worthless Melchizedek documents they were told were internationally
recognized passports.
The hotel raid came after a tip-off by the United States embassy in Manila
when a Chinese citizen attempted to a get a visa for his Melchizedek
passport. Hundreds of others had applied to become citizens of Melchizedek,
and some had paid up to $32,500 for the promise of a government job in a
"low-cost, tax-free paradise."
Melchizedek is not unknown to the world's law-enforcement agencies. It has
a presence on the World Wide Web--www.melchizedek.com--and several
agencies, such as the Office of the Comptroller of the Currency, a
U.S.-government bank regulator, have warned against doing business with its
principals; its so-called banks operate in the U.S. illegally. "We have
sent out a number of alerts regarding banks chartered in Melchizedek," says
William Kerr, a special assistant at the office's enforcement and
compliance division.
The three men held in Olongapo are Stuart Mason-Parker, a British lawyer
who was a prosecutor in colonial Hong Kong, Dennis Oakley of Australia, and
a Malaysian, Chew Chin Yee. Chew was described by Philippine immigration
officials as Melchizedek's "honorary consul" in Hong Kong and "minister of
public works and gaming"; Mason-Parker was a "legal official" and Oakley
claimed to be "minister of the navy and coastguard." Immigration officials
are also seeking others, including John Gillespie, described on the Web
site as Melchizedek's "president." Gillespie, an Australian, served jail
time over a racehorse-substitution case in the 1980s.
Mason-Parker, Oakley and Chew are still in detention. They have been
charged only with failing to pay their hotel bill, but, say Philippine
authorities, may face other charges. The nerve centre of the "dominion of
Melchizedek," however, remains hidden behind its Internet home page, beyond
the reach of most national statutes. The frustration associated with trying
to enforce laws on the Internet is well known to major agencies. "Our most
important challenge is cyber-banking and crime in cyberspace," says Tim
Morris, an investigator with the Australian Federal Police.
But investigation reveals the Melchizedek phenomenon is older and deeper
than the Philippine case. U.S. law-enforcement officials say the brains
behind "the dominion of Melchizedek" are David and Mark Pedley, an American
father-and-son team of convicted swindlers, known to California's police
and prisons since the early 1980s.
In 1983, Mark Pedley was convicted in San Francisco of mail and interstate
fraud and sentenced to eight years in jail. His father, who had been
convicted of four counts of stock fraud, theft and counterfeiting, escaped
standing trial with his son because he was in a Mexican prison, accused of
having orchestrated a fraudulent scheme to convert the then fast-devaluing
peso into dollars through a bank in Saipan, a U.S. possession in the
Pacific. On the Web site, Mark Pedley says his father wrote "The
Melchizedek Bible" while incarcerated in Mexico.
In 1987, a casket purporting to contain the remains of Pedley senior was
sent back to the U.S. At the funeral, two FBI agents requested permission
to take the corpse's fingerprints but the family refused, leading to
speculation that David Pedley is still alive and living somewhere under an
assumed identity.
Law-enforcement officials say Mark Pedley was paroled from the prison in
Walla Walla, Washington state--one of America's toughest penitentiaries--in
1990, and almost immediately launched his "Dominion of Melchizedek" on the
Internet. Under a new name, Branch Vinedresser--which he later changed to
Tzemach Ben David Netzer Korem, basically the same name in Hebrew--he
organized a Web site offering a wide range of services, including
passports, banking facilities, university degrees and lawyers'
certificates. For $1,000, he would incorporate corporations and trusts in
his own private tax haven. He set up a virtual stock exchange on his home
page.
Lacking any territory other than a spurious place in cyberspace, Pedley
first laid claim to Isla de Malpelo, an island 450 kilometres off the
Pacific coast of Colombia. But when Bogota asserted that the island was
within its jurisdiction, Melchizedek moved to a spot 1,500 kilometres south
of Tahiti, to Karitane, which it claimed had been acquired from "the
kingdom of Polynesia," a nonexistent entity. The authorities in French
Polynesia--the territory closest to "Karitane"--found the only "land" at
the site was at least nine metres under water.
Determined not to give up, Pedley moved his fictional nation once again,
this time to Taongi atoll in the Western Pacific. According to a
Melchizedek press release, posted on its home page, Taongi was leased in
1997 under a treaty with representatives of "the kingdom of EnenKio,"
another only-in-cyberspace country, which in this case claims the U.S.-held
Wake Island. In real life, Taongi is an uninhabited atoll in the Marshall
Islands.
But despite all the farcical elements to the Melchizedek saga, it is no
joke, asserts a U.S. law-enforcement official: "Their so-called banks are
involved in serious fraud, and we are watching them closely. It's possible
to transfer funds from one jurisdiction, via Melchizedek, and on to a real
tax haven such as Gibraltar or Antigua. In this way, the origin of the
money can be totally obscured."
Investigators say the Pedleys have contacts in several Latin American
countries, as well as in Nigeria and Australia. Cheques issued by
Melchizedek banks have been discovered all over the world. Using
legitimate-sounding names such as the Zurich Euro Bank, the Swiss
Investment Bankers, Morgan Guarantee, Banco de Asia, Canam Pacific
Management and the Cambridge Merchant Bank, the cheques have managed to
fool quite a few.
In June this year, the dominion "liquidated" one of its banks, the London
Chartered Bank, when the Swiss and British police were on its tail. Its
reputed owner, Robert Styer, had been sentenced to four years in jail in
1994 for financial fraud, but escaped before he was imprisoned and is still
at large. In September, yet another banking fraud was alleged, this time in
the Dominican Republic: more than 2,000 creditors had claims to a
Melchizedek-registered, nonexistent financial institution called Credit
Bank.
Following these disclosures, Pedley issued a statement saying that
Melchizedek "will do everything in its power to dissuade and stop
individuals or groups from using banks licensed by the Dominion of
Melchizedek for any illegal purposes." Speaking on the phone from his home
in Belmont, California, Pedley told the REVIEW that "these are independent
banks which operate on their own." One police officer described this as a
"by-now-familiar pattern of denying any involvement in a major fraud once
it has been discovered."
In the same vein, Pedley now claims that the three men arrested in the
Philippines were "former officials" who were acting on their own behalf.
Pedley says "we may remove Chew from our list [of officials] if we find out
that he's really involved in this." He claimed that both Gillespie and
Oakley had already quit the "dominion."
In Asia, Melchizedek first gained notoriety in 1995 when a man claiming to
be its "crown prince" tried to open several bank accounts in Hong Kong with
cheques issued by phoney Melchizedek banks. "His Serene Highness
Gerald-Dennis Sayn-Wittgenstein-Hohenstein" turned out to be a baker, not a
banker, and certainly wasn't a prince. The 22-year-old unemployed Austrian
had been living in the passenger terminal at Kai Tak airport in Hong Kong.
After his arrest, magistrate Yung Yiu-wing dismissed the idea that the
scheme was a practical joke. "A fraud on the banking system in Hong Kong is
a very serious business." The baker was jailed for six months.
Disturbingly, it was discovered that the baker had actually managed to
visit a number of Asian countries with his Melchizedek "diplomatic
passport." In January this year, the "dominion" even managed to have the
immigration authorities in both Singapore and Malaysia respond favourably
to letters asking whether "Melchizedek passport holders" needed visas to
visit those two countries. In the same month, the Asia-Pacific
Parliamentarians' Union in Taipei issued a statement recommending observer
status for Melchizedek, unaware that it's not an actual country, but a
virtual one.
Obviously, crime in cyberspace is here to stay. The creation of the
"Dominion of Melchizedek" may serve as a harbinger of more to come in a
field with which today's law-enforcement officials are yet to become
familiar. The Australian Federal Police's Transaction Reports and Analysis
Centre said in its most recent report that fighting "cyber-crime" will be
the most important challenge of the 21st century.
Correction
Pearlasia, wife of Mark Pedley (alias Tzemach Ben David Netzer Korem) is
described by the Melchizedek Web site as president of the fictional state,
not John Gillespie, as we stated in Fantasy Island [Dec. 10]. Until
recently, the site identified Gillespie as "minister of external affairs,"
among other titles.
<http://www.feer.com/Restricted/index.html>
<http://www.feer.com/feer/owa/country.contents>
<http://www.feer.com/feer/owa/industry.contents>
<http://www.feer.com/Restricted/contents.html>
<http://www.djmarkets.com.hk/htmls/webhk/djtelerate.html>
<http://www.feer.com/Restricted/r.html>
<http://www.feer.com/Restricted/bestweb_hk.html>
<http://www.feer.com/Restricted/books.html>
<http://www.feer.com/Restricted/air.html>
<http://www.feer.com/feer/owa/article.srharti>
<http://www.feer.com/Restricted/feedback_form.html>
<http://www.feer.com/Restricted/98oct_29/where.html>
--- end forwarded text
-----------------
Robert A. Hettinga <mailto: rah@philodox.com>
Philodox Financial Technology Evangelism <http://www.philodox.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
