By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
During the year Reynolds lived quietly in far North Dallas, his neighbors had little idea what he did for a living, whether he was married, who drove the various cars often parked in front of his house, or other traits that neighbors tend to notice.
Certainly, the neighbors had no notion that living among them was the former "Secretary of Commerce" for an entire nation--a tiny island in the South Pacific called the Dominion of Melchizedek. Or that the feds were after Reynolds for his part in a scheme to peddle $47 million in bogus insurance policies.
Free on bond for now, Reynolds is due back before the bench of U.S. District Judge Barefoot Sanders on June 6 to be sentenced for his part in the insurance fraud. Reynolds' take from the scam is estimated at a half-million dollars, and he faces up to 10 years in prison.
His is a fate that seems to befall many who have served the government of Melchizedek. The 6-year-old island dominion has spent most of its brief history submerged in allegations of fraud and chicanery, its reputation and character assailed around the world.
Primarily, that is because the Dominion of Melchizedek is an utter fake--fabricated for the use of con men like Reynolds.
The fictitious country was created from whole cloth by a convicted California swindler out on parole. It is a work of twisted inspiration, and has been used by scam artists around the world as a launching point for dubious schemes involving nonexistent banks, bogus securities, and phony insurance companies.
To keep up appearances, the Dominion of Melchizedek maintains a fake "embassy" in Washington, D.C., and has issued fake passports. The country tends to move around a bit, claiming as its territory obscure islands that no one would ever visit, or patches of Antarctica.
It could all be a wonderful and sophisticated joke--Melchizedek even went so far as to declare war on France last year--except that the fake country is spawning mischief and crime around the globe. The proportion of Melchizedekian businessmen engaged in fraud appears to run about 100 percent.
It seems improbable that anyone would be dense enough to swallow a contrivance of Melchizedek's proportions, and most of the various scams tied to the fake country seem to have made little progress. But some banks, insurance customers, and even a couple of legitimate governments have been taken in by Melchizedek-born farces.
"I've never seen anyone make up their own country before," says Assistant U.S. Attorney Floyd Clardy, who pursued the government's case against Reynolds in Dallas. "That takes a lot of brass."
Reynolds is merely the latest scam artist to be caught using the Melchizedek ruse, and it appears he may have been one of the more successful practitioners. Reynolds and his cohorts managed to sell millions in insurance policies issued by a bogus company supposedly domiciled in Melchizedek. With his guilty plea, Dallas joined the likes of Hong Kong, London, Washington D.C., Arizona, Utah, and California as scenes of Melchizedekian fraud.
Reynolds could not be located for an interview, and his court-appointed attorney wouldn't say where he is. Through a bizarre and circuitous route, Reynolds did send word to the Dallas Observer that, despite his guilty plea, he is actually innocent. The plea bargain, he says, "is nothing more than a tactical maneuver to avoid additional headaches and potential costs."
Con men never lack audacity, and the phony dominion rates as one of the most audacious swindles of the decade.
A convicted swindler started it all. Mark Logan Pedley, according to news reports, was found guilty of fraud in both California and Massachusetts in the early 1980s. The California charges involved Pedley's penchant for selling land he did not own. In Massachusetts, it was a peso-conversion scheme that bilked investors out of an estimated $6 million, according to a 1991 article in Forbes magazine.
In 1990, after getting out of prison on parole, Pedley launched his grandest scheme, founding the Dominion of Melchizedek. He named his new country after the biblical priest who blessed Abraham, and gave himself a new name as well--Branch Vinedresser. That name supposedly came from the Bible, too.
Vinedresser is an elusive man. One journalist who succeeded in finding him is William P. Barrett, a writer for Forbes, who began chronicling the Melchizedekian saga in 1991. After tracking Vinedresser down at his California home, Barrett wrote, "Vinedresser looks eerily like popular depictions of Jesus, but talks like a lawyer. He all but admits his moniker is made up, and inspired by the opening verses of John 15: 'My Father is the vinedresser. Every branch of mine that bears no fruit, he takes away...'"
(In Vinedresser's case, the reference to "Father" may mean his real father, David Pedley, also a convicted swindler. The senior Pedley purportedly died in a Mexican prison in 1987, and a coffin containing what was said to be his body was shipped back to the United States. But no officials were allowed to verify the identity of the deceased. Speculation exists that the senior Pedley is still alive.)
Throughout its brief and checkered history, Vinedresser's creation has been cloaked in religious and spiritual trappings. He calls it an "ecclesiastical and constitutional sovereignty based upon the principles of the Melchizedek Bible."
The Observer tried to reach Vinedresser through the Melchizedekian Embassy in Washington. The embassy lists an address at 601 Pennsylvania Ave. N.W., but all the country apparently does is rent a mail drop there. (Ironically, Clardy, the assistant U.S. attorney who prosecuted Reynolds, used to work in that very building. He says he knows there is no Melchizedekian Embassy there.)
The embassy's listed phone number--which Barrett says, from his experience, automatically forwards to Vinedresser's home in California--turned out to be hooked up to a fax machine.
In a brief exchange of faxes, someone named Leah Gholand, the dominion's minister of public relations, provided broad information about the supposed country.
Melchizedek is an artful creation--claiming deep biblical and historic roots, a population of repressed Ruthenians, and land in Polynesia.
"The Dominion's activities are governmental, spiritual, political, educational, humanitarian and commercial," writes Gholand. "References are made to Melchizedek's eternal sovereignty throughout Hebrew and Christian Holy Writ."
The country claims to have three branches of government, an office in Jerusalem, and an Internet site.
What about people? The Dominion of Melchizedek claims to be "spiritually united" with the Ruthenian people, which it says are as many as one million Eastern Europeans "living in the Carpatho and Transcarpathian region bordered by the Ukraine, Romania, Hungary, Slovakia, and Poland." After centuries spent under the rule of others, the Ruthenians are poised for independence, or so says Gholand. Presumably, the freed Ruthenians will then be allies of the Melchizedekians, and maybe a few will even settle in the dominion.
As for land, Melchizedek has bounced around, looking for a spot that doesn't already belong to someone else.
It is now claiming Karitane, an island southwest of Tahiti. "Karitane is reported to include some 14 square miles of paradise with sandy beaches, fresh water, and three hilltops of low elevation," the minister of public relations says, although his phrasing indicates that he himself has not seen the island.
That may be because Karitane is a relatively new home for the country. Melchizedek used to claim as its territory the island of Malpelo, 300 miles west of Colombia. Melchizedek apparently vacated after Colombia insisted that Malpelo really belongs to it.
Just to be safe, Melchizedek also claims as territory the land "90 degrees to 150 degrees west Antarctica," which it says is "the only territory of the dominion that is not claimed by other sovereign states." No other country is yet fighting Melchizedek for its Antarctic claim.
But though Melchizedek lacks land and population, the fledgling country certainly has no shortage of pomp and circumstance. Vinedresser, in correspondence with real countries, styles himself the "minister plenipotentiary" of the movable nation.
The nation claims a lengthy list of officials, including a president, a House of Elders, a prime minister, several ambassadors, and even an organizer of the country's Olympic team. The names of the supposed officials read like a Mad magazine parody--Tzemach Ben David Netzer Korem is the vice president, and G.M.R. Wijbers is the honorary ambassador to the European Union.
The Great Seal of the Dominion of Melchizedek sports a cross and a crown with seven Stars of David on its points. The country claims to have a constitution, and its official languages are English, Hebrew, and Ruthenian.
Vinedresser has corresponded with the United Nations, seeking "observer" status for his nation. He sought, and actually received, diplomatic recognition from the president of the Central African Republic. And in a show of international bravado, the country declared war on France in 1995, taking issue with that country's nuclear-testing program. In the indirect fashion typical of the country, its war declaration was sent to reporters by fax.
Vinedresser has printed up all the frilly paperwork that no country should be without, such as passports, securities, and bank charters--even money. And therein lies the true substance of Melchizedek.
For scam artists around the world, credentials from the bogus country have become like fool's gold. Obtain the credentials, find a fool, and the swindle is on.
The primary undertaking of Melchizedek--and Vinedresser--has apparently been to churn out fake companies and paperwork, obscuring frauds behind layers of overlapping fiction. Bogus auditing companies set up by Vinedresser vouch for equally bogus banks and insurance companies supposedly chartered in the Dominion.
Vinedresser sells the country's fake documents to other con men. He is, Clardy says, something like a wholesaler of fancy paperwork that other swindlers then can use to ply their schemes. "Think of Vinedresser as the hub, and they're [other con artists] the spokes in the wheel," Clardy says. "Vinedresser's like giving franchises for the dominion, and then each of them becomes an independent operator."
Melchizedekian credentials have been popping up around the globe ever since Vinedresser founded his nation. Various schemes share a simple underpinning: If someone is gullible enough to believe that Melchizedek exists, they'll also swallow the fake companies, stocks, and bank accounts supposedly blessed by the tiny dominion.
"It is very devious," says Nancy Ayoob, a senior staff counsel for the California Department of Insurance who has had run-ins with the fictional country. "There have been certain Caribbean islands and other small countries that have become safe havens for [shady] companies...but when you go another step and create a country--that's another hurdle for us."
Shortly after establishing his country in 1990, Vinedresser placed an ad in the Wall Street Journal offering charters from an unidentified, tax-free sovereignty, according to a 1991 Forbes article. For fees ranging from $2,000 to $10,000, Vinedresser would provide packets of paperwork that would seem to have value only for nefarious ends.
Dallas con artist Jeffrey H. Reynolds III bought into the scheme early, his later indictment indicates. Starting in the early 1990s, Reynolds began selling insurance underwritten by a company he supposedly controlled. The company, California Pacific Bankers and Insurance Ltd., was chartered in Melchizedek. Reynolds' claim that his company had more than $450 million in assets had been "verified" by an auditing company that, believe it or not, was also chartered in Melchizedek.
But it would be several years before Reynolds was finally indicted for his scheme. In the meantime, commerce borne of the fledgling nation began percolating all over the place. And the Melchizedekians proved to be an inventive lot.
In 1991, Vinedresser himself teamed up with a partner and began trying to sell stock in a company that claimed to own 10 percent of the world's oceans. The company, Currentsea, boasted that its ocean holdings were worth more than a trillion dollars--and announced it would start reaping the sea's bounty by imposing a fee on companies pumping oil from beneath the ocean floor. The company, according to Forbes, issued its own currency through the Banco de Asia, one of Melchizedek's fictitious banks. After Forbes exposed the company's outrageous behavior, the Securities and Exchange Commission shut down trading of the company's stock.
But about the same time, Vinedresser and the Banco de Asia were surfacing at the very seat of the U.S. government, in Washington D.C. A mini-scandal erupted for the always-beleaguered D.C. government in early 1991 when it became known that the city's Corporations Division allowed Vinedresser to incorporate four shell banks to do business in the district. They included Banco de Asia, Express Bank, Traveler's Bank, and Prudential Bank. All were set up by Vinedresser and were subsidiaries of a company headquartered in Melchizedek, according to 1991 stories published in the Washington Business Journal. The banks supposedly tried to raise money by using fake Melchizedekian securities as collateral for millions of dollars in loans from real banks. The scheme was apparently shut down before it got far.
One of the fake banks' officials was a man from Phoenix named Steve Peterson, also coincidentally an ambassador for Melchizedek. Peterson, a lifelong swindler, was establishing his own fake companies in Arizona, sometimes using a firm chartered by the dominion. Peterson, who pleaded guilty to fraud and theft charges in Arizona three years ago, recently fled the state while on parole and is wanted by authorities.
In 1991, Melchizedekian banking also sought to establish a foothold in Indiana. An outfit called Asia Pacific Bank Ltd. applied for, and received, permission from the Indiana Secretary of State's office to do business there. The bank was, of course, chartered in Melchizedek. It attracted little attention, because it apparently did not do anything for several years. It was ultimately thrown out of the state in 1994, although the bank had no identifiable customers and no complaints had been filed against it.
Yet another emissary of Melchizedekian banking surfaced in Hong Kong in the summer of 1995. Gerhard Bacher, a 22-year-old Austrian, began making the rounds of Hong Kong banks claiming to be a "crown prince" of Melchizedek. He gave his name as Prince Gerald-Dennis Sayn-Wittgenstein-Hohenstein, according to the South China Morning Post, and managed to open two accounts in legitimate Hong Kong banks, one of them by using a check drawn on a Melchizedek bank for $318,890. Bacher was arrested and sentenced to six months in prison.
While Hong Kong authorities were tracking Bacher, Scotland Yard was looking into an outbreak of Melchizedekian banking in England. In 1995, a group calling itself Inner Sanctum began offering astronomical returns on high-yield investments. Money received from customers was supposedly to be deposited in accounts at Swiss Investment Bankers. The bank was chartered in Melchizedek. The Inner Sanctum was barred from doing further business.
About the same time, according to The Times of London, another English company began offering bank charters for sale, saying they were from a foreign country, which promised that buyers could own the banks and would face no taxes and be promised total anonymity. The banks all had official-sounding names like Wales Bank & Trust and the Geneva Merchant Bank. Where they were chartered? Melchizedek, of course.
But the worldwide outbreaks of Melchizedekian finance were mere brush fires compared to what was going on in California, where a scheme unfolded that ultimately earned Jeffrey H. Reynolds III of Dallas a 20-count indictment on federal fraud charges.
At the tender age of 25, Jeffrey Reynolds was dubbed "your quintessential confidence man" by Forbes magazine. That was six years back, when Reynolds had been indicted in Dallas for writing $11,000 in bad checks and was being investigated by the Securities and Exchange Commission for possible stock fraud. Reynolds was running an investment company from Houston and claimed to have a personal net worth of $300 million.
Reynolds, his later indictment indicates, apparently was one of the early opportunists who latched onto the idea of a fake country and saw its possibilities. He bought a packet of credentials in 1990, according to Forbes, and set about becoming a model citizen--not only making Melchizedek his home country, but styling himself as the country's secretary of commerce.
Beginning sometime in 1990, Reynolds began operating several companies that used variations on the name "California Pacific Bankers and Insurance," according to federal prosecutor Floyd Clardy. One of the companies, California Pacific and Bankers Inc., was incorporated in Texas, and Reynolds ran his businesses out of an office on Preston Road in Dallas.
The various companies sold many different types of insurance and surety bonds, mostly to high-risk customers. Independent brokers sold the policies, which were peddled in California, New York, Canada, and the Caribbean. Apparently no policies were sold in Texas.
For about two years, California Pacific claimed Melchizedek as its home country, but in 1993 Reynolds moved his companies to Aruba. The move might have had something to do with the curiosity of the California Department of Insurance.
In early 1993, the Orange County Register discovered that Reynolds' company was selling automobile policies in California without a valid insurance license. The fact that California Pacific claimed to be chartered by a fictitious island nation also aroused suspicion, and the company was under investigation by the California Department of Insurance, the paper reported.
One customer duped by the phony company, in fact, had been the government of Orange County, which would later become notorious for fiscal mismanagement when it invested heavily in high-risk derivatives and was forced to file for bankruptcy.
In 1992, according to the Register, Orange County accepted a $73,000 bond from California Pacific to guarantee construction of a county fire station. The contractor hired to build the fire station went bankrupt, but the surety bond from Reynolds' company proved worthless. More than $200,000 in claims has never been paid.
When California regulators began poking around in California Pacific's business, it became clear the companies were a sham, says Nancy Ayoob of the state's Department of Insurance.
Reynolds, according to his indictment in Dallas, claimed the companies had assets of $3,750,000. Assets are fundamental for an insurance company--to ensure that the company can pay out claims made by policyholders.
In fact, Ayoob says, Reynolds' companies had no assets at all. "We were never able to determine that they were financially sound or had a license to do business," Ayoob says. "They never gave us one piece of paper that proved an asset, although we were repeatedly asking them for it."
Then there was the Melchizedek problem. When state regulators began probing Reynolds' ties to the fake country, Ayoob says, Reynolds moved his companies to Aruba. But that didn't make them any more legitimate. "They started the ball rolling with Melchizedek and then kept bouncing it from island to island," she says.
California regulators barred Reynolds from doing any further insurance business in their state. Since the department lacks the authority to pursue criminal charges, Ayoob says, it passed its information about Reynolds and Melchizedek along to the FBI.
Because Reynolds was working out of Dallas, the case ultimately landed in the Northern District of Texas. In January of this year, Reynolds was indicted on 20 federal fraud counts for his insurance dealings. According to Clardy, Reynolds' companies sold policies with a purported value of about $47 million. Reynolds' share of the premiums paid by customers came to an estimated $500,000.
In many cases, Ayoob says, customers may have had no idea they were buying insurance from a company chartered in a fictitious country. The policies--many of them for boats--were offered through independent agents, and customers may not have looked closely at the fine print on the policies.
The scheme was already flagging by the time Reynolds was indicted, Clardy says, but the Dallas con man did not go down without a fight.
Initially, Reynolds decided to be his own lawyer, not generally a smart move for someone facing 20 federal fraud charges. Eventually, Reynolds agreed to let federal public defender Mick Mickelsen be appointed as his attorney.
Reynolds mounted a spirited, if unusual defense. Part of it consisted of an effort to convince U.S. District Judge Barefoot Sanders that Melchizedek really is a legitimate country. "The Dominion of Melchizedek has typically been considered an ecclesiastical sovereignty. It has published a bible which may be purchased through most any major bookstore," Reynolds argued in one court brief.
Noting that the country had been recognized by the Central African Republic, Reynolds asserted that "the existence of the Dominion of Melchizedek is not dependent upon recognition by the United States government."
Reynolds even included news articles, specifically clips from Forbes explaining the country's fraudulent roots, in an attempt to show that the dominion was to be taken seriously.
To further bolster his argument, Reynolds provided the court with a 1993 legal opinion written by Kenneth Kirk, an attorney from Austin, which purports to explain why Melchizedek is a legitimate nation. In the opinion, Kirk explores the various notions of sovereignty, and contends that Melchizedek is a legitimate entity.
"Just as Rome was not built in a day, nor will the dominion complete its momentous task of establishing a new nation except over the course of years," Kirk wrote in his opinion. "Slowly, it is expected that the dominion will gain credibility and even formal recognition among the world's nations and institutions."
Contacted by phone, Kirk apparently had no interest in discussing his legal research on sovereignty. He reacted brusquely to the mention of Melchizedek, saying, "I really don't have any comment on that, but I appreciate your calling," and then hung up the phone.
Reynolds' insistence that Melchizedek is real proved troublesome for prosecutor Clardy. While any rational person might conclude the country is fake, Clardy realized he might actually have to prove it in a court of law. In preparation for bringing Reynolds to trial, Clardy says, he had lined up a geographer from the U.S. State Department to attest to the country's nonexistence.
It was trickier to prove that the island of Malpelo--which Melchizedek still claimed when Reynolds launched his scheme--really belonged to Colombia.
Clardy says he had to ask the U.S. State Department to ask the Colombian Embassy to ask the government in Colombia for a document proving that the island belonged to that country. The process took months, and Clardy got his document, in Spanish, just days before Reynolds was supposed to go to trial.
"It sounds ridiculous, but it's a chore trying to prove it," Clardy says.
Mickelsen, Reynolds' public defender, says Clardy may have engaged in a little overkill. Mickelsen and another attorney who helped him prepare for the trial eventually switched courses and argued that the issue of Melchizedek should be kept out of Reynolds' trial. Since Reynolds had moved his companies to Aruba, they argued, Melchizedek was a red herring.
On April 8, the argument became moot. After several months of fighting, Reynolds threw in the towel and pleaded guilty on two counts. The government agreed to dismiss the other 18. Clardy, naturally, believes Reynolds was finally persuaded to plead because of the strong case marshaled against him.
Mickelsen won't say why his client decided to cop to the charges. He does allow that defending Reynolds was made difficult by his client's unwillingness to turn over information--such as the names of potentially favorable witnesses.
During his dealings with Reynolds, Mickelsen says, his client still maintained that Melchizedek was legitimate, though he wasn't a fanatic about it. "He's not delusional," Mickelsen says. "On a theoretical level, I don't know if anyone is sincere about this thing."
For its part, the government of Melchizedek seems to be publically distancing itself from Jeffrey Reynolds, although it clearly is still in contact with him.
In a faxed response to the Observer, information minister Gholand wrote that Reynolds "has no connection or relation to the dominion other than [as] a 'friend.'" Curiously, Gholand then went on to discuss the charges against Reynolds in detail, and wrote, "I understand Jeff will send you a press release."
Sure enough, Reynolds did fax the Observer a lengthy "Press Release and Public Statement" with no phone number on it that might reveal its place of origin. In the fax, Reynolds maintains that he is innocent, and only pleaded guilty because the deck was stacked against him in Sanders' court.
Reynolds maintains that the government was planning to use documents as evidence against him that he only provided after receiving a narrow promise of immunity from the government. Clardy says the immunity only applied to the act of producing the documents. Sanders apparently felt the same way, and was going to allow the prosecution to use them in Reynolds' trial.
Reynolds says that ruling made it impossible for him to mount a reasonable defense at trial. Sanders had also rejected requests from Reynolds that prosecutors not bring up their evidence suggesting Reynolds had failed to file tax returns for several years.
"The rulings of Judge Sanders were not going to enable me to put on any form of reasonable defense--accordingly I was compelled to seek another avenue," Reynolds wrote in his statement to the Observer. "Please understand that a battle may have been conceded, but the war is far from being over."
Under the terms of his plea bargain, Reynolds retained the right to appeal Sanders' ruling on the immunity issue.
In his 11-page statement, Reynolds himself never mentions or alludes to the Dominion of Melchizedek. Instead, he maintains that his insurance companies were legitimate, and that it is the U.S. government that is out to get him.
"Mr. Reynolds has been subjected to multiple investigations by agencies of the United States government for more than 10 years with such inquiries and investigations bordering upon, if not outright becoming, a matter of harassment, forcing Mr. Reynolds to incur significant legal cost and emotional duress which contributed significantly towards the destruction and end of his marriage," the statement reads.
Reynolds' ability to turn a phrase seems to trickle down from the very seat of the Melchizedekian government. His rhetoric springs from the same vein as that of information minister Gholand.
Asked, by fax, why his country seems to spawn so many scams, Gholand responded with all the indignation one could possibly muster in a fax.
"Any USA federal or state official that claims [Melchizedek] is fictional also says in his heart that the kingdom of heaven is fictional," Gholand says. "Nevertheless, we have the right to believe in both the kingdom and its dominion as it has unfolded on earth.