A British financier with ties to some of the country's top Conservative Party politicians was indicted yesterday on charges of defrauding 3,000 Americans of $46 million through a mail-order investment scheme.
Alex Hermage, a 450-pound figure who has entertained the cream of British society at his million-dollar estate, was charged with falsely promising to invest the Americans' money in gold bullion, commodities and European currencies.
Instead, according to an indictment returned in Orlando, Fla., Hermage spent the funds on a "lavish life style" that included chartered jets, Rolls Royce and Mercedes-Benz automobiles, an expensive art collection, the 44-acre estate in England and villas in Scotland, France and the Netherlands.
Hermage, 55, is in prison in Winchester, England, on unrelated false-accounting charges. The Justice Department said authorities will seek to extradite him to face trial on the 25-count fraud indictment.
Hermage once hosted a hot-air balloon race attended by a cousin of Queen Elizabeth and a medieval party at which he dressed as Henry VIII.
He was, according to the indictment, "adopting the life style of a rich and successful commodity expert and investment analyst."
Hermage burnished his image by paying Conservative lawmakers generous fees to write for his monthly political journal, Mayflower Digest, according to a report by the British Broadcasting Corp.
He once offered former prime minister Edward Heath $10,000 to speak at one of the many conferences he organized, but Heath told the BBC the fee was never paid.
"I'm certainly not a philanthropist, in the sense that everything I do has to commercially pay its way in the long run," Hermage told the BBC.
Hermage founded the Capirmex Group, an investment firm based in the Cayman Islands. It was the latest in a series of Hermage companies that went bankrupt owing investors large sums, according to the indictment.
Beginning in 1979, the indictment said, Caprimex began peddling various investments, including a "currency-hedge account," that falsely promised an annual return of as much as 35 percent.
Hermage, whose contacts with Conservative politicians reassured British investors, apparently used a similar approach in Florida. Tom Winters, 37, a school administrator from Mt. Dora, Fla., said he was "kind of impressed" by some of the prominent speakers that Hermage listed at his conferences.
Winters said he invested $5,000 in Caprimex after receiving an unsolicited brochure in the mail about four years ago.
"Inflation was running wild, and it didn't seem like too bad an idea to have a few dollars outside the country," he said. He said he understood that "if the dollar was doing badly, they'd put it into francs or marks."
Winters said he received monthly statements showing that his account had grown to $6,400. But he learned otherwise last December when he saw a business magazine "with a picture of a 450-pound guy on the front," which described the firm's collapse.
"I'm not rich, and I can't afford to lose it," Winters said of his investment.
Some investors received what were described as "lulling payments" from Caprimex to assure them their money was safe. But because Hermage was diverting most of the money to his own use, the indictment said, he needed more and more money from new investors to keep the enterprise going.
Hermage faces up to 135 years in prison if convicted on all counts. The case was investigated by the U.S. Postal Service, the Royal Hampshire Constabulary, the U.S. attorney's office in Orlando and the Justice Department's criminal fraud section.