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Oban’s investors hit by $5m ‘fraud’

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PETER KRIEGER

• Used by controversial GB project chair to fund lavish lifestyle

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The principal behind the controversial $5.5bn Oban Energies oil refinery deal has agreed to be sanctioned and pay fines after being accused of defrauding investors in the project of some $5.2m.

Peter Krieger, Oban Energies’ non-executive chairman, who was its public face and chief promoter, “without admitting or denying” the Securities & Exchange Commission’s (SEC) allegations against him last week consented to the imposition of civil penalties as well as “disgorgement” and associated interest payment sanctions after he misused investor monies to fund his lavish lifestyle.

The US federal securities regulator, in a March 13, 2023, lawsuit that raises fresh questions about the level of scrutiny applied by the Bahamian government to Oban and its principals, alleged that Mr Krieger raised $15m to finance the proposed Grand Bahama-based oil refinery and storage terminal from 23 investors.

However, it claimed that more than one-third - some $5.2m - was subsequently “misappropriated” by Mr Krieger for his own personal use, including the purchases of “luxury cars, jewellery and vacations”. The SEC action reveals that, while Mr Krieger seemingly stepped away from the project after Tribune Business and others raised questions about his background and that of other project principals, he remained its “spearhead” and driving force.

It was only in late 2020, the SEC alleged, that he was finally removed after Oban Energies’ other Board members discovered the theft of investor funds. “From May 2016 through August 2020, Oban Energies, a Florida-based entity managed by Peter D. Krieger, raised approximately $15m from 23 investors,” the US regulator said. “Investors, some of whom were elderly, were told that their funds would be used to develop an oil refinery and storage facility in The Bahamas.

“In reality, from January 2017 through August 2020, defendant misappropriated approximately $5.2m of investor funds to pay for personal expenses, such as luxury cars, jewellery and vacations.” The SEC added that Krieger, 49, served as “Oban’s manager, ran its day-to-day operations from 2017 through 2018, and maintained exclusive control over Oban’s bank account from January 2017 through August 2020”.

Effectively revealing that Krieger was the mastermind behind Oban Energies, the lawsuit alleged he began negotiations with the Government for the oil refinery project as far back as 2009 when the last Ingraham administration was in office. However, it was only in mid-2016, when the final Christie administration was in its last year, that Oban was incorporated and sought to raise the necessary financing from investors.

“Most investors in Oban are friends with [Krieger] and each other, live at least part-time in the same community, and were solicited by word-of-mouth,” the SEC said. In return for their investment, they received a ‘member interest’ in Oban, which brought the company under the regulator’s oversight as the investment agreement is deemed to be a security.

“Defendant ran Oban’s day-to-day operations and led its efforts to develop the project. In February 2018, Oban and the Bahamian government signed a Heads of Agreement awarding Oban the rights to develop the project. Shortly thereafter, however, the Bahamian government sought to renegotiate the terms of the agreement,” the SEC noted.

The Minnis administration’s renegotiation was sparked by this newspaper’s revelations on Mr Krieger’s questionable past, plus questions about the background and qualifications of other Oban principals. “Oban formalised a Board of managers in March 2018. The Board consisted of four investors who were to provide oversight over the project, and status updates to members, while renegotiation discussions with the Bahamian government ensued,” the SEC alleged.

“The Board had exclusive authority to manage and control all aspects of Oban’s business and operations, including but not limited to,overseeing Oban’s day-to day operations, making expenditures to conduct Oban’s business, and investing Oban’s assets.

“Despite stepping back as the face of Oban in early 2018 shortly after the [Heads of] Agreement was executed, Krieger continued to spearhead the project on behalf of Oban and maintain exclusive control over its bank account. In late 2020, Oban’s Board discovered that defendant was misappropriating investor funds for personal use and immediately took steps to remove him from Oban.”

The Minnis administration had sought to renegotiate key economic, environmental and legal provisions of Oban Energies’ Heads of Agreement following its signing and the subsequent media disclosures. Oban’s team was purportedly headed by Alexander Grikitis, but the talks never appeared to make much progress and the oil refinery/storage terminal project disappeared from public view and was seemingly discontinued.

However, the timelines detailed in the SEC lawsuit suggest that Mr Krieger, despite taking a background role, remained Oban’s mastermind and driving force from just after the Heads of Agreement until his late 2020 removal - meaning he was still in place during the subsequent talks with the Minnis administration.

Detailing Mr Krieger’s purported deceit, the SEC alleged: “From January 2017 through August 2020, defendant was the sole signatory on Oban’s bank account and exercised exclusive control over it. During that time, defendant misappropriated at least $5.2m of investor funds to pay for personal expenses, such as luxury cars, jewellery, designer clothing, vacations to Aspen and Hawaii, and day-to-day living expenses.

“Specifically, defendant diverted approximately $3.7m of investor funds through various means to the bank account of an unrelated entity he controlled, Mid-Atlantic Group.. For instance, defendant deposited approximately $795,000 of investor funds directly into Mid-Atlantic Group’s bank account. Defendant also diverted through hundreds of electronic funds transfers approximately $1.37m of investor funds from Oban’s bank account to Mid-Atlantic’s bank account.

“Furthermore, in an effort to conceal his misappropriation, defendant transferred $1.5m of investor funds from Oban’s bank account to an account for another entity he controlled, S&P Projects. From there, defendant transferred the $1.5m to the trust accounts of Oban’s outside attorney, who then routed the money back to Mid-Atlantic Group,” the SEC continued.

“Additionally, defendant transferred another $1.5m in investor funds from Oban’s bank account to pay credit card charges for S&P. Defendant’s transfers of approximately $5.2m of investor funds for his personal use were not disclosed to or authorised by Oban’s Board.”

Oban was ultimately dissolved in March 2021, and its assets and liabilities - presumably including the rights conferred to the company by the 2018 Heads of Agreement - sold to Lucayan Trans Fuels. The latter is an entity formed by other former Oban investors.

Krieger, in court filings on March 14, 2023, has agreed to be barred from serving as an officer or director of any company that issues/offers securities. He has also agreed to be prohibited from issuing securities and further violations of US federal securities laws.

The Government’s normal practice is for the Bahamas Investment Authority (BIA) and National Economic Council to use Interpol and other established sources to conduct background checks on the principals involved in foreign direct investment (FDI) projects, ensuring they have clean records and no criminal past.

However, under questioning from The Tribune, Krieger confirmed at the time when the Oban Energies’ Heads of Agreement was signed that he had been involved in two earlier lawsuits where he was accused of misusing investor monies. No stranger to the SEC, he was one of three defendants who it accused of misappropriating more than $3.7m of investor monies back in 2005.

That was settled without going to trial some three years later. Mr Krieger, who challenged the allegations against him, paid a $110,000 civil penalty “without admitting or denying” the claims, and agreed to be bound from committing future securities law violations.

And, following further research by The Tribune, Mr Krieger confirmed he was also named as a defendant in a legal action filed in 2013 by the Bahamas-based judicial manager for a sister company of the insolvent insurer, CLICO (Bahamas).

John Lopez, the KPMG (Bahamas) accountant who took over British American Insurance Company (BAICO) in the wake of its collapse, and that of its CL Financial parent, alleged that Mr Krieger misappropriated $8.7m of the company’s funds for his own personal use. The case against Mr Krieger, though, was dismissed on a technicality, as it was “time barred” according to the “statute of limitations” that applies in the US.

The Oban Energies principal said then that the claim against him had subsequently been defeated in the appeals courts, and added: “They really have no grounds to stand on.” Mr Krieger argued that he was the injured party, given that BAICO had failed to fully pay him the purchase price for 14,000 acres of land he sold to the insurer prior to its failure.

He alleged that he had obtained a $70m judgment against the company, and that the judge had “scolded them for perjury and making these outrageous claims against me, and dragging my wife into it”. However, The Tribune could find no record of the case or judgment, which Mr Krieger said he had filed in the middle district Florida court, despite an extensive search of that court’s case database.

Comments

ThisIsOurs 1 year, 3 months ago

This is why character counts. Now we need to find out why Minnis went on a one man campaign to ensure this Oban project got environmental approval down to stripping MPs of their responsibility so every aspect of the project would be under his control.

Then we need to ask, exactly what protection does an EIA give to the hiers and successors of it can be so easily manipulated, and what does this mean for RCI?

ThisIsOurs 1 year, 3 months ago

"Mr Krieger confirmed he was also named as a defendant in a legal action filed in 2013 by the Bahamas-based judicial manager for a sister company of the insolvent insurer, CLICO (Bahamas)."

TalRussell 1 year, 3 months ago

Cries see that justice is done! --- Thee Hubert Minnis red shirts administration, --- Ministry of finance people, the attorney general's people,the office of the premierships people ---- were well made aware in advance of the questionable past of all the OBAN characters.' ---- Yet they proceeded --- Including the intentional staging of the faking of the agreement's signatory, ---- Under the glare of the cabinet room's camera lights. Even the alleged went missing incriminating documents are still being reported as missing.--- Yes?

killemwitdakno 1 year, 3 months ago

Roll em out. Make a shining wind up example.

Do we need to require local bank investment accounts for all the customer funds around here? Registration= bank and audit. Can Sand Dollar all and only allow the customer to convert (That's not going to work when a company has to buy things away, or for FOREX). There's no other way to know that the company is misappropriating customer funds, and there's less chance of it leaving the country.

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