Grenada CIP Developer Caught on Camera Promoting Illegal Discounts: CIU InvestigatingJuly 23, 2020
In a circular released yesterday, Percival Clouden, head of Grenada’s Citizenship by Investment Unit (CIU) informs stakeholders that his unit is investigating a case of illegal discounting involving a scheme to immediately buy back from the CIP investors the shares of an approved real estate project.
The announcement comes a few weeks after a recording from a China-based, publicly available webinar surfaced on social media. In it, a representative of a CBI-approved property developer is clearly heard openly admitting to – even boasting about – what, according to the CIU and Grenadian law, is a criminal offense. See the video below.
An agreement issued by the developer to agents, seen by IMI, outlines how the scheme worked. Agents would receive US$110,000 (from the initially paid US$220,000) as a rebate from the developer immediately upon approval of the application. The agent, in turn, would decide how much of the rebate to pass on to the investor.
Such an arrangement implies that the developer – if, indeed, intending to construct anything at all – would have only a quarter of the intended capital available for construction. It appears highly unlikely that any developer would proceed to build a resort on such a thin capital basis, which implies that this may not only be a case of illegal discounting but also the defrauding of the government of Grenada.
Several facets of the case amount to criminal offenses: First, the promotion of a discounted offer for Grenadian citizenship is, in itself, illegal. Second, any buyback or rebate that takes place prior to the statutory five-year holding period is also a violation of the CBI Act.
The Unit states in its circular that, following its investigation, “appropriate action will be taken based on the findings,” and that such action could include “the revocation of approval as a Section 11 CBI project.”
The Unit has so far not commented on what will happen to the citizenships of those applicants already-approved under this scheme.
See the circular reprinted in full below:
Illegal discounting of Investment Amount for Applications under Section 11
It has come to the attention of the Grenada Citizenship by Investment Committee that there is aggressive promotion of a share buyback arrangement with a substantial reimbursement to the purchaser, via the marketing agent, immediately post the applicant obtaining their citizenship. This practice is effectively providing a discount to the amount required to be invested by applicants under Grenada’s CBI Programme, so that such investment amount falls below the minimum qualifying investment prescribed by Regulations under Section 11 of the Grenada Citizenship by Investment Act (as amended) (“Grenada CBI Act”). Furthermore, it is understood that this process is inducing applicants to invest amounts below the qualifying investment stipulated by Regulations under Section 10 of the Grenada CBI Act for the National Transformation Fund. The Unit is currently conducting an investigation into the matter, and the appropriate action will be taken based on the findings. This could include the revocation of approval as a Section 11 CBI project.
The Committee hereby advises all Marketing Agents and Local Agents that actions which discount the qualifying investment below the minium amount prescribed by the Laws of Grenada, are illegal and in breach of the Grenada CBI Act and Regulations.
Additionally, the Committee hereby advises that any intended buybacks and or rebates on an investment by an applicant in an approved project may only be permitted after the statutory 5-year period, for which the investment must be held. Furthermore, no payments for such buybacks or rebates are permitted until after the statutory 5-year holding period.
Take note that any buyback or rebate prior to the said statutory 5-year holding period is illegal.
All stakeholders are advised that the Government of Grenada will not tolerate the actions described herein. These illegal actions undermine the success of the National Transformation Fund which is vital to the economic interest of Grenada; and further undermines investment in legitimate Section 11 approved projects which are intended to stimulate priority sectors within the State of Grenada.
Please be guided accordingly.
[Signed, Percival Clouden, Chief Executive Officer]
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