The FCPA Files: Owl Securities and Investments (2001)

Stephen Kingsley had a way of coming up with big and implausible plans. An Englishman living in Kansas City, reportedly experienced in the arts of marine salvage and port development, he masterminded a proposal for a massive revival of the Port of Limon on the Atlantic shore of Costa Rica, which had suffered severe damage in a 1991 earthquake. He established a group of on- and offshore companies under the name Owl Securities and Investments. The project’s aim, as pitched to would-be investors, was to build not only a new shipping facility but an entire multipurpose cargo hub and transit infrastructure, encompassing manufacturing, hotels, a cruise terminal, agricultural enterprises, an airport, and a cross-country rail line that would compete with the neighboring Panama Canal.

The vision was ambitious, even grandiose. At a minimum It would cost hundreds of millions of dollars and occupy 50 square miles of land. Still, they didn’t seem to have much seed money backing them, instead aiming to finance the project with the contributions of individual investors (deemed “joint venture” partners to get around a 1994 cease-and-desist order against selling unregistered securities). The presentation materials were unusually forthright in explaining that a significant portion of the funds would be shared with local government officials and politicians to ensure the necessary land concession. Discussions with investors were quite explicit and precise — the “toll” was originally going to be one million dollars, then was increased another fifty percent to cover the possibility of a post-election change in ruling party.

In fact, the fundraising scheme never brought in more than about $3.5 million in toto, a good portion of which went to supporting Kingsley’s personal indulgences — particularly strippers and strip clubs. By the end of it Kingsley was wearing a wire for the FBI, and two other high-level participants were cooperating witnesses. One investor, Robert King, went to trial and was ultimately sentenced to 30 months in jail and a $60,000 fine. (His assertion of outrageous government conduct was rejected by the Third Circuit.) The cooperating CFO, Richard Halford, got off with probation, and the VP, Albert Reitz, received six months house arrest and a thousand hours of community service. Kingsley himself, in one final misguided scheme, tried to evade punishment by staging his own kidnapping, but ended up dead, ankles bound with duct tape, on the banks of the Missouri River.

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This post is part of "The FCPA Files" series, examining key enforcement cases under the Foreign Corrupt Practices Act and the lessons they offer for modern compliance.