easily Bermuda's clean reputation can be dented.

Over the years Bermuda has escaped much of the bad publicity experienced by other centres as a result of company managers aiding and abetting fraudsters, crooks and others involved in skulduggery and financial malpractice because of its practice of insisting on disclosure of beneficial ownership of companies.

But Bermuda-registered company Valmet is at the centre of the trial of Robert Brennan, a 57-year-old ex-financier, who is charged with bankruptcy fraud and money laundering.

Valmet is a trust and company fiduciary services firm with a Bermuda holding company and offices in various locations around the offshore world. Valmet was bought by Bermuda insurer Mutual Risk Management at the beginning of this year.

Until this week Valmet's website gave an office address and telephone number in Hamilton. It said the managing director of the Bermuda office was Jan (Janet) Katz, who comes from the Isle of Man. However the telephone number was not in service and a spokesman for Hemisphere, Mutual's subsidiary, said Ms Katz had been in Bermuda for a few weeks' project amalgamating the two companies' client bases and had left again.

Valmet has claimed Bermuda is its centre of operations, but for all practical purposes the Isle of Man has always been the main operational base. A phone call to Neil Wilkinson, who is listed as the company's main contact, in the Isle of Man elicited the information that Ms Katz was now resident in Bermuda and was not in the Isle of Man.

A spokesman for MRM then called and said Ms Katz had gone to "a christening''.

Following this newspaper's enquiries, the Valmet website no longer lists Bermuda or Ms Katz as part of its operations.

Valmet's known head, Peter Bond from the Isle of Man, is the chief prosecution witness at Mr. Brennan's trial in New Jersey. He has been granted federal and state immunity from prosecution for his part in Mr. Brennan's alleged misdeeds in return for giving evidence.

Mr. Brennan is the former head of First Jersey Securities, a "boiler room'' operation where sales people sold low price stock by cold calling potential clients in the 1980s.

In 1995 the US Securities and Exchange Commission won a $75 million judgment against Mr. Brennan and his defunct company after a judge found he had defrauded investors.

Three weeks later Mr. Brennan filed for bankruptcy. But prosecutors say he illegally failed to disclose $4 million in municipal bearer bonds he held at the time.

Mr. Bond told the court that a few weeks prior to Mr. Brennan filing for bankruptcy he called Mr. Bond, with whom he had already had dealings at Valmet over time, to one of his homes in New Jersey. He handed over a black pilot's case filled with $4 million in tax free municipal bearer bonds and told Mr.

Bond to hang on to them for the time being. Under instruction Mr. Bond sold the bonds in 1996 through the Bank of Scotland, one of the banks where he had opened an account for Mr. Brennan, and bought stocks. Through buying and selling the value increased to $20 million. This money was in the Bank of Scotland and referred to as "the pot''.

Before this, in the early 1990s, Mr Bond had set up three family and philanthropic trusts for Mr. Brennan in Gibraltar, lodging about $22 million.

Bankruptcy trial exposes Island to bad publicity Mr. Bond told the court he had set up 30 dummy companies to use funds from the trusts and another 23 dummy companies to spend money from the $20 million pot.

He described how in 1996 Mr. Brennan had $12 million from the trusts and $10 million from the pot to purchase and refurbish two cruise ships.

Mr. Bond also described how he came to Bermuda to meet Mr. Brennan to receive instructions. He was instructed to make myriad loans, investments and other payments from the two money sources over the years.

The last meeting in Bermuda that the court was told of was in October, 1999.

But the court also heard of other episodes from Valmet's past, such as involvement with Benex International, a Russian company at the centre of a federal investigation into the possible laundering of billions of dollars through the Bank of New York. Mr. Bond denies that any payments he made for Benex were money laundering.

Valmet and Mr. Bond were also involved with Menatep Bank, which in fact once held 20 percent of Valmet, another Russian firm under investigation for money laundering.

Robert Mulderig, chairman and chief executive officer of Mutual Risk Management, said they were aware of these problems with Valmet at the time of purchase but they felt it was an excellent business and that it would benefit from being part of a larger organisation.

"We view this as a business dating from the time of our purchase and we believe we will be able to put in controls to manage it,'' he said. "For all of this type of industry controls that seemed proper five to ten years ago seem lax now. By today's standards, controls are significantly more comprehensive and we can bring in proper compliance.'' At the time of going to press The Royal Gazette was unable to speak to Ms Katz, but she does now have voicemail at Hemisphere's office in Hamilton.

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