Two men who last year set up one of Bermuda's most ambitious international companies have been accused of fraud in the United States.

Dr. Gilbert Beinhocker and Mr. Gregory Plunkett are alleged to have misappropriated millions of dollars of funds.

They are being investigated by many angry investors in their various schemes, including Kuwait's royal family.

The Kuwaitis are part of a group claiming to have lost almost $2 million. "We trusted large amounts of money to these parties but fear it could all be gone,'' said their US representative Mr. Waseem Kabarra.

"We're currently taking legal advice. We're very frustrated with the whole affair.'' American Mr. Harold LaValley and his associates successfully sued Dr.

Beinhocker and Mr. Plunkett for approximately $2 million.

Mr. LaValley warned: "If anybody is contemplating any kind of investment with these guys, I suggest they had better think twice.

"They had better just look at their track record and see if they have ever been successful with anything.'' Some investors were sceptical about the future of American Russian Cosmos which Dr. Beinhocker and Mr. Plunkett formed in Bermuda last year.

They plan to rake in billions of dollars in revenue from the joint US/Russian project by creating and operating a satellite telecommunications system over the former Soviet Union.

"My first thought was one of sympathy for those poor Russians,'' said Mr.

Albert Roeper, of Pennsylvania, who claims to have lost $25,000.

"They will eventually see those air castles and phone systems turn to ashes of despair, through no fault of Messrs. Beinhocker and Plunkett, of course.

"My next thought was for the Bermudians, many of whom I have met, liked and worked with over the years, sterling characters all.

"Unless they are immediate associates of Messrs. Beinhocker and Plunkett, my cry to them is `caveat emptor' (let the buyer beware).

"They may find their sterling tarnished and their metal turned to dross. But, alas, they say there's one born every minute.'' The 60-year-old Boston-based financiers have been doing business in Bermuda for more than 20 years.

Local investors include Bermudian Dr. Raymond Smith and Mr. Jim Todd, who is believed to have invested $2 million with them and is a shareholder in ARC.

Dr. Beinhocker has a degree in nuclear physics and churchgoer Mr. Plunkett is said to include the Cardinal of Boston among his friends.

They have a history of being sued by former business associates, mostly in the New England area, inquiries by The Royal Gazette have revealed.

Over the past five years, Dr. Beinhocker, Mr. Plunkett and related companies have lost at least four legal battles.

One of the most damning judgments against them was dished out by the Superior Court of the State of New Hampshire in September, 1989.

The court found them guilty of "breach of fiduciary duty and oppressive conduct'' towards Mr. LaValley and other minority shareholders in Newport Investments.

Newport had been formed specifically to take over ailing Regal International, which manufactures rubber parts for oil and gas wells.

Regal is one of the smallest companies listed on the New York Stock Exchange and has been in serious financial trouble for several years. "Fifty percent of Newport Investments was to be owned by our group and fifty percent was to be owned by the Plunkett and Beinhocker group,'' said Mr. LaValley.

"But Beinhocker gained two more shares than me, immediately threw me off the Board and he and his friends took control over our investment. That's what my lawsuit was all about.'' Mr. LaValley said he received $750,000 from the action but said he did not get back any of the $200,000 he had paid in legal fees, which are not usually awarded by US courts. He claims he is still owed another $112,500.

In a separate action, Mr. LaValley's partners successfully sued for more than $1 million and were also awarded costs of $42,500 -- less than half their legal fees.

"We believed these guys were straightforward, had a plan for running Regal better than its previous owners and were going to turn it into something,'' said Mr.

LaValley.

"After a couple of years, it became obvious to me that once they had gained control of Regal International they had no plan and they, in effect, wanted to milk it.'' Mr. LaValley said he recalled that one meeting was called so Dr.

Beinhocker and Mr. Plunkett could present investors with a "salary expert'' to recommend pay increases for the pair.

It was after he began to protest about their activities that Mr.

LaValley claims to have been kicked off the Newport board.

Former Regal president Mr. Vijay Dandapani said: "It was not a very pleasant experience dealing with Beinhocker and Plunkett. They would travel everywhere first class and bill it to the company. I ended up resigning.'' In 1983, American businessman Mr. Michael Rubin sold a company he had run successfully for 20 years to Dr. Beinhocker's Excalibur Ventures and watched it go out of business six years later.

Massachusetts-based Paragon Plastics manufactured plastic screw caps and roll-on deodorant balls for clients such as Gillette and Procter & Gamble.

After selling Paragon when he reached 60, Mr.

Rubin was asked to stay on and run it on a management contract.

"Paragon continued to make a profit every year that they were the owners,'' said Mr. Rubin.

"But that, and the fact that volume was growing, didn't make a difference because more money was being taken out than was being put in. "A lot of monies were diverted out of the company. They milked the company of the funds it needed to survive.'' When he began to complain, he said he was sacked -- one year before his contract was due to run out.

"I sued them and they paid me about $100,000 just before we were due to go to court,'' he said.

"Before that, they had threatened they were going to go to court and teach me a lesson.'' In October, 1991, US company boss Mr. Ruben Aragon received $420,000 in an out-of-court settlement of an action he brought against Regal.

Part of Mr. Aragon's action alleged "defamation and intentional infliction of emotional distress'' by Dr. Beinhocker, according to Regal's 1991 annual report.

Mr. Aragon told The Royal Gazette : "I would never do business with them again. My involvement with them has left me with a very bitter taste.

"They accused me of a lot of wrongdoing and I had to sue them to get satisfaction.'' One of the conditions of the settlement was that Mr. Aragon could not talk publicly about the action, he said.

At least three more civil lawsuits involving Dr. Beinhocker and Mr. Plunkett are currently pending in the US.

A group of Bermuda-related investors are suing them for civil fraud and breach of fiduciary duty in the US District Court of Massachusetts. Led by Mr. Jeremy Fitzpatrick, who grew up in Bermuda, they are seeking to recover approximately $750,000.

Mr. Fitzpatrick alleges that he, his family and friends provided all of the capital for an investment company called EPA -- and were left with no control over it.

"All the investors were issued with non-voting preferred stock and Dr.

Beinhocker issued himself with all the voting common stock,'' alleges Mr.

Fitzpatrick.

"I'm embarrassed that I have allowed myself to get into a position where my only recourse has been to initiate legal action.

'' A court document filed in December alleges that Dr. Beinhocker and Mr.

Plunkett wrongfully claimed "compensation and reimbursements'' from EPA. It also alleges: "On numerous occasions between 1989 and the present, Beinhocker and Plunkett made deliberate misstatements of fact, and failed to advise the preferred shareholders of the critical facts, all of which had the effect of defrauding EPA and benefitting Beinhocker and Plunkett personally.'' Among the plaintiffs in the action are Field Nominees and Murdoch & Company, the nominee holding companies of the Bank of Butterfield and the Bank of Bermuda, respectively.

In a separate case at the same court another American, Mr. Robert Bolen, is seeking more than $2 million in damages against Dr. Beinhocker and two co-defendants for alleged unpaid consultancy work.

In a court document, Mr.

Bolen alleges that Dr. Beinhocker fraudulently deprived him of commissions and other income for his own benefit.

Mr. Bolen claims that he and his, son, Tom, spent four years developing Dr.

Beinhocker's business volumes in the US but were never paid what they were allegedly due.

Businessman Mr. Richard Gockelman is seeking $50,000 against Excalibur Ventures, an investment company controlled by Dr. Beinhocker and Mr. Plunkett.

The businessman has filed a writ accusing Excalibur of consumer fraud, alleging that he was deliberately misled about how money he invested in the firm would be used. "My faith in people will never be the same again after dealing with them,'' said Mr. Gockelman, who is a senior manager with a large US corporation.

However, not everyone Dr. Beinhocker and Mr. Plunkett have done busines with is unhappy with them.

In Bermuda, Dr. Smith, who is understood to have suffered heavy losses, said: "I have no complaints about them.'' Mr. Todd, an American living in Paget, added: "I have some investments with these people. I've known them for a couple of years. I'm not really that involved with them.'' Mr. Al DiNicola, of Massachusetts, did not believe the horror stories from other investors. "It sounds like you have guys making noises because they have some investments which did not turn out well,'' he said.

"Mr. Plunkett has been my broker for years and years. I have well over half a million dollars invested. I don't find anything amiss or suspect anything amiss.

"I don't know everything that's going on. I'm not supposed to. I have faith in Gregory Plunkett. I've known him probably 20 years.'' He added: "I've not yet made any money, but nor am I very ready to say I've lost it all yet.'' Mr.

Douglas Richards, a Manhattan lawyer, described both men as "very fine people'', although his law firm has sued them for unpaid legal bills.

"Investments are sometimes unprofitable,'' said Mr. Richards. "Life in the early nineties has not been as profitable for Gil and Greg as it had been before that.

"Maybe they have some people who were investors with them who're not very happy. So does everyone else.'' However, it is a different story for many American investors, who have set up an informal organisation known as "The Network'' to gather and pass on information. Some investors said they may ask the Securities and Exchange Commission and/or the National Association of Securities Dealers to investigate the financiers.

schemes.

*l