Print this articleSAN FRANCISCO — The era of the American Internet is ending.
Invented by American computer scientists during the 1970s, the Internet has been embraced around the globe. During the network’s first three decades, most Internet traffic flowed through the United States. In many cases, data sent between two locations within a given country also passed through the United States.
Engineers who help run the Internet said that it would have been impossible for the United States to maintain its hegemony over the long run because of the very nature of the Internet; it has no central point of control.
And now, the balance of power is shifting. Data is increasingly flowing around the United States, which may have intelligence — and conceivably military — consequences.
American intelligence officials have warned about this shift. “Because of the nature of global telecommunications, we are playing with a tremendous home-field advantage, and we need to exploit that edge,” Michael V. Hayden, the director of the Central Intelligence Agency, testified before the Senate Judiciary Committee in 2006. “We also need to protect that edge, and we need to protect those who provide it to us.”
Indeed, Internet industry executives and government officials have acknowledged that Internet traffic passing through the switching equipment of companies based in the United States has proved a distinct advantage for American intelligence agencies. In December 2005, The New York Times reported that the National Security Agency had established a program with the cooperation of American telecommunications firms that included the interception of foreign Internet communications.
Some Internet technologists and privacy advocates say those actions and other government policies may be hastening the shift in Canadian and European traffic away from the United States.
“Since passage of the Patriot Act, many companies based outside of the United States have been reluctant to store client information in the U.S.,” said Marc Rotenberg, executive director of the Electronic Privacy Information Center in Washington. “There is an ongoing concern that U.S. intelligence agencies will gather this information without legal process. There is particular sensitivity about access to financial information as well as communications and Internet traffic that goes through U.S. switches.”
But economics also plays a role. Almost all nations see data networks as essential to economic development. “It’s no different than any other infrastructure that a country needs,” said K C Claffy, a research scientist at the Cooperative Association for Internet Data Analysis in San Diego. “You wouldn’t want someone owning your roads either.”
Indeed, more countries are becoming aware of how their dependence on other countries for their Internet traffic makes them vulnerable. Because of tariffs, pricing anomalies and even corporate cultures, Internet providers will often not exchange data with their local competitors. They prefer instead to send and receive traffic with larger international Internet service providers.
This leads to odd routing arrangements, referred to as tromboning, in which traffic between two cites in one country will flow through other nations. In January, when a cable was cut in the Mediterranean, Egyptian Internet traffic was nearly paralyzed because it was not being shared by local I.S.P.’s but instead was routed through European operators.
The issue was driven home this month when hackers attacked and immobilized several Georgian government Web sites during the country’s fighting with Russia. Most of Georgia’s access to the global network flowed through Russia and Turkey. A third route through an undersea cable linking Georgia to Bulgaria is scheduled for completion in September.
Ms. Claffy said that the shift away from the United States was not limited to developing countries. The Japanese “are on a rampage to build out across India and China so they have alternative routes and so they don’t have to route through the U.S.”
Andrew M. Odlyzko, a professor at the University of Minnesota who tracks the growth of the global Internet, added, “We discovered the Internet, but we couldn’t keep it a secret.” While the United States carried 70 percent of the world’s Internet traffic a decade ago, he estimates that portion has fallen to about 25 percent.
Internet technologists say that the global data network that was once a competitive advantage for the United States is now increasingly outside the control of American companies. They decided not to invest in lower-cost optical fiber lines, which have rapidly become a commodity business.
That lack of investment mirrors a pattern that has taken place elsewhere in the high-technology industry, from semiconductors to personal computers.
The risk, Internet technologists say, is that upstarts like China and India are making larger investments in next-generation Internet technology that is likely to be crucial in determining the future of the network, with investment, innovation and profits going first to overseas companies.
“Whether it’s a good or a bad thing depends on where you stand,” said Vint Cerf, a computer scientist who is Google’s Internet evangelist and who, with Robert Kahn, devised the original Internet routing protocols in the early 1970s. “Suppose the Internet was entirely confined to the U.S., which it once was? That wasn’t helpful.”
International networks that carry data into and out of the United States are still being expanded at a sharp rate, but the Internet infrastructure in many other regions of the world is growing even more quickly.
While there has been some concern over a looming Internet traffic jam because of the rise in Internet use worldwide, the congestion is generally not on the Internet’s main trunk lines, but on neighborhood switches, routers and the wires into a house.
As Internet traffic moves offshore, it may complicate the task of American intelligence gathering agencies, but would not make Internet surveillance impossible.
“We’re probably in one of those situations where things get a little bit harder,” said John Arquilla, a professor at the Naval Postgraduate School in Monterey, Calif., who said the United States had invested far too little in collecting intelligence via the Internet. “We’ve given terrorists a free ride in cyberspace,” he said.
Others say the eclipse of the United States as the central point in cyberspace is one of many indicators that the world is becoming a more level playing field both economically and politically.
“This is one of many dimensions on which we’ll have to adjust to a reduction in American ability to dictate terms of core interests of ours,” said Yochai Benkler, co-director of the Berkman Center for Internet and Society at Harvard. “We are, by comparison, militarily weaker, economically poorer and technologically less unique than we were then. We are still a very big player, but not in control.”
China, for instance, surpassed the United States in the number of Internet users in June. Over all, Asia now has 578.5 million, or 39.5 percent, of the world’s Internet users, although only 15.3 percent of the Asian population is connected to the Internet, according to Internet World Stats, a market research organization.
By contrast, there were about 237 million Internet users in North America and the growth has nearly peaked; penetration of the Internet in the region has reached about 71 percent.
The increasing role of new competitors has shown up in data collected annually by Renesys, a firm in Manchester, N.H., that monitors the connections between Internet providers. The Renesys rankings of Internet connections, an indirect measure of growth, show that the big winners in the last three years have been the Italian Internet provider Tiscali, China Telecom and the Japanese telecommunications operator KDDI.
Firms that have slipped in the rankings have all been American: Verizon, Savvis, AT&T, Qwest, Cogent and AboveNet.
“The U.S. telecommunications firms haven’t invested,” said Earl Zmijewski, vice president and general manager for Internet data services at Renesys. “The rest of the world has caught up. I don’t see the AT&T’s and Sprints making the investments because they see Internet service as a commodity.”
Hamilton, Bermuda – June 11th, 2008 - LOM (Holdings) Limited (“ LOM”) announced that the Superior Court of Massachusetts has ruled in favor of LOM’s chairman, Donald P. Lines, in his suit against Stokes & Levin, Inc. (“Stokes”), a Massachusetts process serving company, awarding Mr. Lines damages in excess of US$3 million. The Court found that Mr. Lines was never served administrative subpoenas issued by the U.S. Securities and Exchange Commission (“SEC”) in November 2005, contrary to repeated claims by Stokes and the SEC in court documents and in the media.
Judge Robert Cosgrove referred to the “shadow this incident has unfairly cast over his [Mr. Lines] good name,” and added, “To the extent that I can give him that back on behalf of this court, I’m happy to do so.”
In its June 6, 2008 ruling, the court found that “Stokes & Levin did not serve the SEC subpoenas on Mr. Lines in November 2005, that Stokes & Levin willfully, deceptively and unfairly generated a false Return of Service…”. Among other things, the Court found that Stokes & Levin committed fraud and unfair and deceptive acts and practices by falsely certifying that it served Mr. Lines.
The lawsuit arose out of a representation made by the SEC to the United States District Court for the District of Columbia in December 2005, claiming that the “SEC staff personally served Donald Lines” with administrative third party witness subpoenas. The SEC further represented that Mr. Lines and LOM were “flouting” those subpoenas. The SEC made similar representations to the press. The SEC has, to date, failed to correct these false statements.
“An egregious wrong was committed against Mr. Lines. Contrary to the strident public statements made by the SEC suggesting Mr. Lines had been served with SEC formal process, the Court has made an express finding that he was not,” said Henry Sullivan, Mr. Lines’ attorney. “The award to Mr. Lines is exceptional and reflects the seriousness of the injustice done to him. We believe this ruling will restore Mr. Lines' reputation in the business community.”
About LOM
LOM is a publicly-held, international financial services company, providing a complete range of investment services and products through its regulated subsidiaries in Bermuda, Bahamas and Grand Cayman. In business for 15 years, LOM today has over $1 billion in client assets under administration and provides brokerage, asset management, and corporate finance services to its high net-worth individual and institutional customers in over 75 countries around the world. The parent company, LOM (Holdings) Limited, is publicly listed on the Bermuda Stock Exchange (symbol LOM BH). The consolidated group is debt-free and has shareholder's equity of over $21 million.
Contact: media@lom.com
The LOM Group of Companies is pleased to announce additional new talent joining the team in recent months.
David Barker has taken on the lead role with our trade desk commencing in February. David comes to us with 20 years of trading experience with the Bank of Bermuda, RNB of New York, T.W. Securities and other firms conveying a wealth of additional experience and organization to LOM's securities desk.
Kenny Foggo recently joined the operations department and is training under the guidance of senior manager Howard Daniels in a settlements administration role. Kenny brings a history of teaching to his new position and we are pleased to see him embracing the learning experience with LOM.
Arantxa Mayers has completed her college education and is taking up an initial challenge with the Group as a Client Relationship Management administrator . She will be supporting Investment Advisors in the firm, with a special focus on LOM's Savings Plan and Retirement Savings Plans for local and expatriate clientele.
Malik Showers has recently returned to our IT department in a Network Administrator role. We welcome his excellent staff support while our technical systems evolve to maintain LOM's high standard of customer support.
In addition to the local Bermudians noted above Tanya Kramarska is utilizing her expertise in the securities industry to assist the LOM sales force. Previously Tanya worked with Assante Capital and Scotia McLeod and will be supporting our senior investment advisors here in Bermuda.
Rounding out the exciting new changes we now have Matt Earle on board as an Internet Marketing Specialist. Matt's contributions can be seen on LOM's new website and includes new innovations to provide constant updates on LOM's Blue Book tracking local companies, online mutual fund fact sheets and a video introduction on LOM's employment pages.
"LOM had a very good year and these results reinforce our confidence in LOM’s ability to perform well in a dynamic global economy. Our performance is a tribute to the way we have repositioned our company over the past several years, as well as the hard work of our employees," said Scott Lines, LOM president and chief executive officer.
The group’s overall balance sheet remains extremely strong with cash levels at $8.5 million or 33% of total assets. In addition, the balance sheet remains debt free.
The firm also confirmed its semiannual $0.07 dividend which represents a 40% increase from the same period in 2007.
More information can be found in the shareholders letter, appended below, and the unaudited financial results available on the web at www.lom.com/financial-statements.
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2007 Letter to Shareholders
April 16, 2008
Dear shareholder:
2007 proved a very difficult environment for global equity markets. The year witnessed rising inflation, strong commodity prices, the implosion of the US housing market and the knock on effects to debt instruments associated with that sector. Returns were modest in nominal terms and flat or negative in inflation adjusted terms. The US market rose 3.6%, UK 3.8%, Germany 3.5%, France 1.6% and Japan fell 10.5%. The strongest performing major market was Canada which rose 7.3% on the back of strong oil and commodity prices. Since the end of 2007 most global equity markets have suffered double digit percentage declines.In last year’s shareholder letter we outlined our view that the potential for the unwinding of the Yen carry trade would become a significant factor in the performance of global markets in late 2007 and through 2008. Indeed, such is happening, and as a result asset valuations across the economy and around the world are under review. A year ago we feared that the unusually low real borrowing costs had allowed a massive increase in asset prices. Asset prices were afloat on an ocean of cheap credit and that tide has turned. Despite swinging cuts to short term interest rates by the US Federal Reserve aimed at avoiding a collapse in the US housing market and financial system, the price of “risk” continues to rise.The US$ has depreciated substantially over the year. During the first quarter of this year that decline has accelerated to an extent that threatens the global finance system. Despite the Dollar’s waning influence, over 80% of all global financial transactions are priced in US$. Any further acceleration in the Dollar’s decline would threaten to undermine global trade. Additionally, the weakness of the Dollar has caused funds to flow into hard and soft commodities resulting in dramatic increases in basis foodstuff prices. This, in turn, is pushing headline inflation numbers up around the globe and impeding the central bank’s ability to reduce interest rates to ward off economic weakness.Thus, we have reached a point where it has become in every major country’s interest to stabilize the US$. We believe that the rest of this year will see increasing co-ordinated government and central bank currency intervention aimed at a US$ rally.Furthermore, the toxic mortgage and asset-backed paper that is causing such problems in the US banking and broking sectors is a global virus infecting all major financial institutions. Global credit contraction will impact growth in all major economies and we expect to witness interest rate cuts in the UK and Europe as a result.The massive central bank injection of liquidity into the world’s global financial system will prove positive for equities for the balance of the year. However, over the longer term this liquidity boost will cause the emergence of significant inflationary issues that will need to be addressed in 2009 and beyond.
LOM’s profits in 2007 showed substantial increase over 2006.
2007 full year profits for LOM Holdings were US$2.48 million or 38 cents per share
Assets under administration grew 15% to $1.134 billion
Return on equity was 11.3%
Revenues were up 29% to US$16.5 million
Operating costs rose 26% to US$14 million
The group’s balance sheet remains extremely strong with our cash levels at $8.5 million or 33% of total assets.During the course of 2008 LOM will be implementing a new back office and client accounting system that will enable us to bring additional services to our customers. Thus, for the balance of 2008 we will find it very difficult to reduce costs to any meaningful extent. Additionally, the group will continue to face high professional fees due to legal costs related to our single ongoing litigation matter.
LOM’s focus will continue to be to win new customers and assets and keep our performance standards at “best in market” levels.
At the end of 2007 LOM’s book value per share on a fully diluted basis was US$3.41. During the year our share price on the Bermuda Stock Exchange traded between a low of $3.25 and a high of $4.00.Our regular half yearly dividend of 7 cents per share will be paid on June 1st to shareholders of record on May 16th. Our annualized payout this year is 14 cents, a 16% increase on our previous annual dividend of 12 cents per share.On behalf of the Board of Directors I would like to extend our thanks to our customers, employees and shareholders for their support and loyalty over the past year.
Scott Lines
CEO
LOM (Holdings) Limited
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About LOM: The LOM Group is an offshore international financial services company, providing a complete range of investment services and products through its regulated subsidiaries in Bermuda, Bahamas and Grand Cayman and a marketing office in London, England. In business for over 15 years, LOM today has over $1 billion in client assets under administration and provides brokerage, asset management, and corporate finance services to its primarily high net-worth individual and institutional customers in over 75 countries around the world. The parent company, LOM (Holdings) Limited, is publicly listed on the Bermuda Stock Exchange (symbol LOM BH). The consolidated group is debt-free and has shareholder's equity of over $25 million.
Located a short distance southeast of Florida, The Bahamas was one of the first offshore jurisdictions to offer trust services. Over the years, the bank, trust and wealth management sector continues to prosper and is now a leader among offshore jurisdictions. Responsible government and pioneering policies have succeeded in making The Bahamas one of the most stable and innovative financial centers in the world. In addition, Nassau’s strategic location offers convenient flights to Europe, North America and the Caribbean.
“LOM’s move to Nassau reiterates our commitment to the Bahamas” General Manager Craig Lines added, “Over the last seven years we have developed a strong working relationship with a number of financial intermediaries in Nassau and it made sense to relocate. Our unique investment products and responsive service to financial professionals are a key part in providing wealth management and asset protection solutions”
About LOM:
LOM Securities (Bahamas) Limited is a wholly owned subsidiary of LOM (Holdings) Limited. Address: Centre of Commerce, 1 Bay Street, Nassau Bahamas
Phone: (242) 323-0032
Email: info@lom.com
LOM (Holdings) Limited is a publicly-held, offshore financial services company, providing a complete range of investment services and products through its regulated subsidiaries in Bahamas, Bermuda, and the Cayman Islands. In business for over 15 years, LOM today has over $1 billion in client assets under administration and provides brokerage, asset management, and corporate finance services to its high net-worth individual and institutional customers in over 75 countries around the world. LOM (Holdings) Limited is listed on the Bermuda Stock Exchange (symbol LOM BH). The consolidated group is debt-free and has shareholder's equity of over $21 million. Find out more about LOM offshore financial services.
LOM is authorized to purchase shares from time to time in the open market, or privately negotiated transactions, or block trades. The number of shares ultimately repurchased, and the timing of the purchases, will depend upon market conditions, share price, and other factors. LOM currently has 6,355,500 shares of Common Stock outstanding.
"These stock repurchases demonstrate our confidence in the company and its future and represents our commitment to enhance value for shareholders," said Malcolm Moseley, Executive Vice President and Chief Financial Officer of LOM.
The stock repurchase will be funded using LOM’s available cash. As of December 31, 2007 LOM had cash and cash equivalents in excess of $9 million and zero debt.
About LOM (Holdings) Limited
LOM is a publicly-held, international financial services company, providing a complete range of investment services and products through its regulated subsidiaries in Bermuda, Bahamas and Grand Cayman. In business for nearly 15 years, LOM today has over $1 billion in client assets under administration and provides brokerage, asset management, and corporate finance services to its primarily high net-worth individual and institutional customers in over 75 countries around the world. LOM is publicly listed on the Bermuda Stock Exchange (symbol LOM BH). The consolidated group is debt-free and has shareholder’s equity of over $21 million.
Find out more about LOM's offshore financial services offering here.
HAMILTON, BERMUDA, Jan. 22 – LOM (Holdings) Limited today announced that on January 21, 2008 it purchased 40,000 of its own shares for cancellation at an average price of $3.85 per share.
The Company is authorized to purchase shares from time to time in the open market, or privately negotiated transactions, or block trades. The number of shares ultimately repurchased, and the timing of the purchases, will depend upon market conditions, share price, and other factors. The Company currently has 6,382,000 shares of Common Stock outstanding.
"The stock repurchase authorization demonstrates the confidence of our Board and Management and the strength of our balance sheet and cash flow. It is consistent with our strategy of providing value to our shareholders while maintaining flexibility to continue to invest in future growth opportunities," said Scott Lines, President and Chief Executive Officer.
The stock repurchase will be funded using the Company's available cash. As of December 31st, 2007, the Company had cash and cash equivalents in excess of $9 million and zero debt.
About LOM (Holdings) Limited
LOM is a publicly-held, international financial services company, providing a complete range of investment services and products through its regulated subsidiaries in Bermuda, Bahamas and Grand Cayman. In business for nearly 15 years, LOM today has over $1 billion in client assets under administration and provides brokerage, asset management, and corporate finance services to its primarily high net-worth individual and institutional customers in over 75 countries around the world. The parent company, LOM (Holdings) Limited, is publicly listed on the Bermuda Stock Exchange (symbol LOM BH). The consolidated group is debt-free and has shareholder's equity of over $21 million.Find out more about LOM Offshore Financial Services
"Observer is absolutely right. The Bank of Bermuda Centennial Trust was created on the 100th anniversary of the Bank. Around that time Midland Bank the largest shareholder of the bank decided to sell its shareholding and the Bank bought back the shares which were placed in a trust. On 100th anniversary, the Bank made a gift to the people of Bermuda, the Bank of Bermuda Centennial Trust whose purpose and income was to be used for the people of Bermuda. Donald Lines was the mastermind behind this idea and deserves a lot of credit. It was a huge gift. Of course it also provided a relatively compliant shareholder for the management of the bank.
When HSBC took over the Bank, the Centennial Trust became more independent from the bank since it no longer owned the bank's shares. I think that independence may have been one of the requirements of the sale so that HSBC could not assume control and ownership of these funds.
HSBC's contribution to the trust is probably pretty minimal. They may forego fees, salaries and expenses in managing the trust but I don't think they have contributed any funds to it.
So if you are going to thank anyone for this charitable trust it is the former shareholders of the bank and Donald Lines."
Posted by slick on 19.10.06 at 13:47
Hamilton, Bermuda, December 20, 2007 - LOM (Holdings) Limited (Bermuda Stock Exchange: LOM BH) announced today that it intends to vigorously contest charges filed by the United States Securities and Exchange Commission (“SEC”) against LOM, several of its subsidiaries, and its President, Scott Lines (collectively, “LOM”).
“The complaint filed by the SEC presents a disturbingly distorted portrayal of a bona fide financing transaction in which LOM participated nearly five years ago,” said Malcolm Moseley, CFO of LOM. ““We are deeply frustrated by the SEC’s action today, and look forward to having an opportunity, after nearly five years of investigation, to challenge the SEC’s allegations and demonstrate that LOM and its agents operated at all times in the best interests of our clients. LOM welcomes the opportunity at long last to be able to present its side of the story in an adversary proceeding before a neutral judge.”
The SEC has alleged that LOM, a Bermuda-based broker-dealer, violated U.S. securities laws in connection with trading, in January and February 2003, of shares of Sedona Software Solutions, Inc. and, in 2002 and 2003, of shares of SHEP Technologies, Inc. The SEC’s complaint alleges that LOM attempted to manipulate the prices of Sedona and SHEP Technologies stock, and thereby violated various provisions of the securities laws, including Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934. Among other things, the complaint seeks an injunction against future violations of the securities laws, as well as a penny stock bar.
“The SEC’s allegations relate to LOM’s bona fide efforts to arrange financing for the acquisition and operation of several mining properties in Canada and Central America in February 2003,” said Moseley. “Today’s charges reflect the SEC’s fundamental misunderstanding of the transactions at issue. After the SEC suspended trading of Sedona stock, these same mining assets were acquired by various Canadian public companies, which successfully operated them. The SEC’s allegations relating to trading in SHEP Technologies likewise concern LOM’s legitimate business dealings.” LOM’s primary regulator – the Bermuda Monetary Authority (“BMA”) – has thoroughly investigated the conduct described in the SEC’s complaint, and concluded its investigation in 2005 on an entirely different basis, pursuant to which LOM agreed to make managerial changes, improve its internal controls, and committed to further enhance its compliance regime and management structure.
“LOM does not expect that the filing of these charges will have any bearing on our operations, our clients, or the viability of the firm. We are hopeful that this development marks the beginning of the conclusion of a matter that should have been concluded long ago,” said Moseley. LOM will, in its vigorous defense of this matter, prove that not only are the SEC’s charges legally and factually unsound, but that they also are part of a longstanding pattern of harassment against LOM and its officers. LOM will show that the SEC has acted inappropriately by failing to correct a number of materially false statements made in court filings, despite being provided with evidence to the contrary by LOM.
“It is unthinkable that the SEC would ever treat a U.S.-based broker-dealer the way that it has treated LOM. The SEC has targeted LOM despite our efforts to uphold the highest standards of responsible corporate citizenship and compliance,” said Moseley. “LOM welcomes the opportunity to clear its name and to defend itself against the SEC’s unmeritorious claims.”
About LOM
LOM is a publicly-held, international financial services company, providing a complete range of investment services and products through its regulated subsidiaries in Bermuda, Bahamas and Grand Cayman. In business for 15 years, LOM today has over $1 billion in client assets under administration and provides brokerage, asset management, and corporate finance services to its primarily high net-worth individual and institutional customers in over 75 countries around the world. The parent company, LOM (Holdings) Limited, is publicly listed on the Bermuda Stock Exchange (symbol LOM BH). The consolidated group is debt-free and has shareholder's equity of over $21 million.
“I’m delighted to say that 2007 was another good year for LOM, marked by continuing efficiency and financial achievements,” said Scott Lines, President, LOM Holdings . “With our very solid balance sheet, and our projected 2007 earnings, LOM is in a good position to continue to reward our shareholders even as we invest for growth.”
About LOM (Holdings) Limited
LOM is a publicly-held, international financial services company, providing a complete range of investment services and products through its regulated subsidiaries in Bermuda, Bahamas and Grand Cayman. In business for nearly 15 years, LOM today has over $1 billion in client assets under administration and provides brokerage, asset management, and corporate finance services to its primarily high net-worth individual and institutional customers in over 75 countries around the world. The parent company, LOM (Holdings) Limited, is publicly listed on the Bermuda Stock Exchange (symbol LOM BH). The consolidated group is debt-free and has shareholder's equity of over $21 million. Find out more about LOM at http://www.lom.com
Thanks in part to this growing industry, the Bahamas today enjoys a per-capita gross domestic product of $12,600óamong the highest in the Caribbean. Unemployment stands at around 7 percent, inflation is restrained to under 2 percent, and the economy showed net growth in 2001 despite a slowdown in tourism resulting from last year's terrorist attacks. The outlook for the Bahamian economy is positive,said Julian W. Francis, governor of the Central Bank of the Bahamas. We are able to benefit from our history of a continuous presence as a major financial center.
On May 2, the opposition Progressive Liberal Party (PLP) regained control of the government in a major election ups et. The PLP led the Bahamas to independence from Great Britain in 1973 but was thrown out 10 years ago amid charges that then-Prime Minister Lynden Pindling had taken bribes from Colombian drug smugglers. The allegations against Pindling were never proven, but they caused a major rift with the United States that was not entirely healed until the change of government in 1992.
PLP leader Perry Christie, who defeated Tommy Turnquest of the ruling Free National Movement (FNM), has vowed to lead a government for all Bahamians and that no one need fear victimization.
Christie replaces the FNM's Hubert Ingraham, under whose long tenure the Bahamas has become one of the wealthiest countries in the Caribbean, thanks to offshore banking and tourism.
Even today, despite a downturn in Caribbean tourism after Sept. 11 and strong indications that the Bahamas has once again become a major drug trans-shipment point for Colombian cocaine the country continues to attract a flurry of foreign investment.
The biggest single project in the Bahamas is the $800 million Atlantis Paradise Island, a large resort owned by South African entrepreneur Sol Kerzner. Kerzner's company, Sun International Hotels, recently spent $450 million to double the size of the property, which now has more than 2,300 rooms and ranks as the Caribbean's largest island resort. It also boasts a casino that is the largest in the world outside of Las Vegas.
Not all investment projects are related to tourism. A joint venture between Hong Kong's Hutchison Port Holdings Group and the privately owned Grand Bahama Development Co. has so far invested $160 million in a Freeport container terminal, while a unit of El Paso Energy Corp. of Texas is talking about spending tens of millions of dollars to construct an 88-mile gas pipeline between Freeport and South Florida.
Philip Miller, deputy director of the Bahamas Investment Authority (BIA) in Nassau, the capital, says that in a typical month, he assesses up to 25 foreign business proposals, each one representing an average $10 million in investment. Some 90 percent of all proposals win full approval within six weeks.
Since its establishment in 1993, the BIA, which bills itself as a one-stop shop for investors has managed to attract investments totaling $2 billion, mainly from the United States and Western Europe. The agency, a division of the Prime Minister's Office, no longer considers investments of under $250,000. Prospective investors must also show evidence that they can finance their projects.
Although tourism accounts for 50 percent of the Bahamas' gross domestic product, the financial services industry is in second place, at around 15 percent, employing more than 4,200 Bahamians and generating more than $400 million annually. Having established itself as a leading offshore financial center in the 1970s, the country's offshore banks and mutual funds now handle around $350 billion of other people's money. It is also a key operational base for many of the world's most recognized and respected banking and financial organizations.
We have proximity to the major financial centers of the world,said Owen Bethel, president and general manager of Montague Securities International. We also have a professional infrastructure, with all the major accounting firms, a wide selection of law firms, and a number of well-heeled financial institutions.
Montague Securities, which manages more than $70 million in assets, provides services ranging from the formation of international business companies (IBCs) to portfolio asset management and securities trading. The most important banks operating in the Bahamas are Citibank, Scotiabank, SG Hambros and the Royal Bank of Canada. In August, the local subsidiaries of two other prominent multinationalsóBarclays Bank and Canadian Imperial Bank of Commerce (CIBC) announced plans to merge, pending Bahamian government approval.
The new bank, to be known as First Caribbean International Bank (FCIB), would be the largest bank in the Bahamas and one of the most powerful in the Caribbean, with assets topping $80 billion. Barclays and CIBC would each own 45 percent of the new bank, and executives plan to sell the remaining 10 percent to investors throughout the Caribbean. The FCIB will operate from 15 countries, hold 800,000 bank accounts, and employ more than 3,000 people.
Although the economic prognosis for the country is good, the Bahamas must, in the short term, overcome several challenges. Tourism suffered both as a result of the Sept. 11 terrorist attacks and a fire one week earlier that destroyed Nassau's historic Straw Market and adjoining properties, causing $75 million in damage. And in November, Hurricane Michelle hit the island nation, resulting in an estimated $120 million in losses.
The government must also respond to the Organization for Economic Cooperation and Development (OECD) initiative against money laundering and offshore tax havens in which the Bahamas was listed with 34 other countries considered to be encouraging the movement of funds from developed countries to low-tax or no-tax jurisdictions. It was also cited, along with 14 other countries, for having weak monitoring or regulatory systems with regard to money laundering or drug trafficking.
Following publication of the OECD blacklist, the Bahamas legislature approved 11 laws aimed at, among other things, making it more difficult to form shell companies or use the country to launder drug money. Said Bethel, It's now easier to open a bank account in New York, Miami or London than in the Bahamas, in terms of documentation and verification of your source of funds.
To demonstrate its commitment to respond to the OECD initiative, the Central Bank of the Bahamas has revoked the licenses of 55 out of 410 offshore banks engaged in money laundering, causing offshore-company registrations to tumble by 70 percent.
I think we have satisfied the international community with the policies we're pursuing, said Francis of the Central Bank.
The effort to remove the Bahamas from the OECD blacklist has already prompted one of Bermuda's leading offshore groups, Lines Overseas Management Ltd. (LOM), to establish a Freeport sales office. LOM provides wealthy clients with services to invest in all types of securities instruments and already operates in Bermuda, Guernsey and the Cayman Islands.
We used three criteria in determining where to establish an additional office: stability of jurisdiction, potential for growth in the financial services industry, and quality of life for LOM personnel, said Craig Lines, general manager of LOM's Freeport sales office. Grand Bahama, and specifically Freeport, meets all of these criteria.
Scott Lines, managing director, added: We believe that the Bahamas, and specifically Freeport, will enjoy significant economic growth over the next 10 years, and LOM plans to be at the forefront in assisting the development of their financial services industry.
The two-year-old Bahamas International Securities Exchange (BISX) already lists 13 local stocks with a combined market capitalization exceeding $1.7 billion. The Bahamas is unique in terms of capital markets,said Keith Davis, chief legal and compliance officer at BISX. From day one, our capital market has been driven by the private sector.
Experts predict that the government's privatization efforts, such as the planned sell-off of state entities, including the Bahamas Telecommunications Corp. (Batelco) and the Bahamas Electricity Corp., will help boost the economy. Though a minimum price has not yet been set, the comp any is awaiting government approval to divest itself of 49 percent of its shares and is hoping that large telecom companiesósuch as British Telecom, AT&T and Japan's KDDówill be interested in bidding for them.
The government will offer an exclusivity period of three years to make Batelco more attractive to potential buyers and to prepare the telecommunications sector for the influx of competition in the liberalization process. The partner buying into the company would be allowed a three-year period to get the company up and running to another level, without having to be concerned about competition,said Batelco President Michael Symonette.
Although not nearly as important to the local economy in dollar terms as Batelco, the country's ship registry businessósupervised by the Bahamas Maritime Authority (BMA)óranks third in the world behind Panama and Liberia and is much better known. Cruise ships want to be associated with a quality register, and we have the largest concentration of cruise ships in the world, said BMA Director John Mervyn Jones.
Established six years ago, the BMA is based in London where 90 percent of all its ship registrations take place. It also maintains offices and agencies in the Bahamas, Tokyo, Seoul, New York and Athens. Interestingly, the bulk of cruise ships belonging to four of the world's leading cruise linesóRoyal Caribbean, Disney, Cunard and Carnivalóare registered in the Bahamas. In addition, the Lucaya Harbor cruise facility has undergone a $10.6 million upgrading program and can now welcome more than 600,000 cruise passengers a year.
While revenue from the ship registry business comes to $8 million, a rather modest amount compared to the overall services sector,said Jones, it gives the Bahamas a very high profile in international shipping.
Meanwhile, in just four years of operation, Freeport Container Port Ltd.óa subsidiary of Hong Kong-based Hutchison Port Holdings Group (HPH)óhas become one of the Caribbean's leading trans-shipment hubs.
The 88-acre port, constructed in three distinct phases, represents an investment of $165 million. There are advantages in being a dedicated trans-shipment port,said the port's general manager, Michael Sandpearl. This means we can build it as we want, without having the restrictions that other ports that have grown from handling bulk and general cargo usually posess.
The port project began five years ago as a 50-50 venture between HPH and the Grand Bahama Port Authority Ltd., which controls much of Freeport. But in mid-October, HPH bought out its partner's stake in the venture for an undisclosed amount.
Separately, HPH owns a 50 percent stake in Grand Bahama Airport Co. Discussions are now under way to establish an air-cargo hub for relay operations alongside the nearby container port, as well as an ambitious Grand Bahama Sea/Air Business Center on 780 acres of land between the seaport and the airport.
The center would provide a variety of warehouses and factory units tailor-built to meet the specific requirements of potential users. This could help speed air and sea intermodal trans-shipment for the region, with maximum security and minimum bureaucracy in a tax-free trade zone, while offering extremely cost-effective alternatives for companies selling in the U.S., Central and South American markets,said Sandpearl.
In positioning itself as a trans-shipment hub, Freeport has taken the lead over rival San Juan, Puerto Rico, which is vying to become a trans-shipment center for cargo moving between North and South America. Other competitors for the trans-shipment business include the Panamanian port of Manzanillo, Jamaica's Kingston and Santo Domingo in the Dominican Republic. Currently, two customers, Mediterranean Shipping Co. of Switzerland and Maersk Sealand of Denmark, account for 90 percent of the port's business. But Freeport is especially attractive to U.S. companies. It offers an abundance of land, tax incentives, lower labor costs, English-speaking workers, and proximity to major Florida ports including Port Canaveral, Palm Beach, Port Everglades and Miami.
Geography is everything,said Sandpearl. We're ideally situated on the main routes between Europe, the Gulf of Mexico, Panama, and the east coasts of North and South America, as well as the Caribbean.
Larry Luxner is a regular contributor to The Washington Diplomat.
Ask Scott G.S. Lines what his Bermuda-based international financial services company has to offer the European high net worth investors and he’ll answer: "American efficiency and offshore flexibility".
As Managing Director of Lines Overseas Management (LOM), Scott Lines is responsible for the overall management of The LOM Group which employs 70 professionals and has offices in Bermuda, The Bahamas, Grand Cayman and Guernsey that offer High Net Worth Investors access to every major world market.
The company was formed by Scott and his brother Brian back in 1992 with the support of their father Donald Lines, a former President and CEO of The Bank of Bermuda, who now acts as chairman of The LOM Group.
"We are a truly offshore company that provides a one-stop shop for High Net Worth Investors," says Lines. "Our systems and infrastructure are similar to many of the Geneva style private banks."
LOM Limited in Bermuda handles custody, clearing, trading and administrative services for the group’s affiliated companies. LOM Asset Management Limited provides discretionary investment management and proprietary research to a range of in house S&P "AAA" rated money market funds, fixed income funds, equity and hedge funds from the same location and LOM Capital Limited handles corporate finance and Bermuda Stock Exchange listing services.
"Providing an array of services for the High Net Worth Investor", say Lines who worked as a mutual fund manager for The Bank of Bermuda before jointly founding The LOM Group. "We are very specialized in what we do, which is our competitive advantage". LOM owes its growth to its expertise and the support of its clients. The company is traded on the Bermuda Stock Exchange (LOM BH) and the consolidated shareholders equity is over 23 million US dollars. The Company is audited by PriceWaterhouseCoopers and has professional indemnity insurance underwritten by several Lloyds syndicates.
"We match A1 world standards", says Lines. "We ably combine top rate onshore services with superb offshore advantages. We are flexible and very quick to act. Visit our financial services website and take the first step toward furthering our acquaintance".