Fantasy Island

A Convicted Con Man Creates A Country

The Dominion of Melchizedek is an unusual country. No one lives there, and it doesn't appear on any maps. But it is home to hundreds of banks and other financial institutions. Banking is how the Dominion makes its bread and butter.

According to David Korem, a self-declared prophet who founded the Dominion in 1990, the country's real purpose is religious and spiritual. But some say the country is actually a haven for swindlers and con artists. 60 Minutes II's Bob Simon reports.

"We unofficially claim that all of the earth is under our jurisdiction," Korem says. "We claim that Jerusalem is our homeland."

He claims that Melchizedek is a religious sovereignty, mandated by the Old Testament. The Dominion lays claim to an island in the South Pacific, which is literally below water.

Korem says he isn't sure of the exact spot. "I don't know," he says. "I haven't been there. But I have eyewitnesses that tell me they've been there, and they've seen something above sea level."

Though invisible at high tide, the Dominion does have another home: the country's Web site. Korem's interim seat of power is his computer, in the lower level of his house in California. The site displays the Dominion flag, its constitution and its bill of rights.

Korem says he has appointed at least 100 officials to his ecclesiastical Dominion, awarding them diplomatic and political credentials. One official is the "minister of entertainment."

Korem has so far not succeeded in winning recognition from the United Nations. The Dominion has done a lot better being recognized as a financial center. Korem says it has been home to more than 300 banks. It has had its currency listed on Bloomberg and the Dominion itself is listed in Tax Havens of the World.

The Dominion can be both a financial center and a religious place, Korem says. "They're not contradictory, because as an ecclesiastical sovereignty, we don't believe in taxation," he says.

"I don't think any person unless they believe in the tooth fairy would believe this," says John Shockey, who spent 50 years working for the Office of the Comptroller of the Currency, which oversees banking in the United States. Recently retired, he says the Dominion is a scam. He has tried for the last 10 years to put Melchizedek and its banks out of business.

"[The Dominion] economy is based entirely on fraud," Shockey says. "The business entities that are created are phony. Everything that comes out of this so-called religious organization is phony."

In fact, phony passports, bank charters and citizenships are the real bread and butter of the Dominion. All are available on the Dominion's Web site. Until last year, passports cost $10,000 apiece.

For $1,000, you can create your own insurance company. For $50,000, you can buy a banking license. You can then buy government bonds, as they're called, to put on your bnk's balance sheet. None of these have any real value, but they can create the impression of authenticity.

Who would want this stuff? Con artists.

Usually swindlers need some paper assets to create the impression of financial strength. The Dominion gives con artists a perfect front, says Ed Tomko, a former prosecutor with the Department of Justice and an expert on white-collar fraud.

One of those scammers is Jeff Reynolds, who set up an insurance company called California Pacific Bankers and Insurance. Reynolds, the former Dominion of Melchizedek secretary of commerce, is now serving three years in the Fort Dix Penitentiary for selling more than $40 million worth of worthless insurance.

Korem, though, insists the Dominion is not a haven for con artists. "Of the 300 banks we've licensed, there's only been a handful of them that have gotten into trouble," he says. "Only a couple of them got into serious trouble."

Besides Reynolds, other Dominion officials have run into trouble. Roger Rosemont, the Dominion's ambassador-at-large, was running an investment scheme out of his Dominion bank, Credit Bank International. Impressed with Rosemont's credentials, Lynda and Johann Bohmart gave him their savings to pay for Lynda's health problems by participating in what he touted as a high-yield investment.

"On paper everything looks like this is the perfect guy you can trust," Johann Bohmart says. The couple lost their savings. Hundreds of investors have lost more than $2 million to Rosemont in what appears to have been a pyramid scheme.

A little over a year ago, the Philippine government arrested the Dominion minister of justice for extorting hundreds of thousands of dollars from unemployed Filipinos, promising them passports and jobs in the Dominion. But while Dominion officials have gotten in trouble with the law for Melchizedek-related frauds, Korem has not.

Shockey, though, says that Korem is breaking the law. For several years, the former Office of the Comptroller of the Currency representative has been trying to get the U.S. government to look into the Dominion.

The Department of Justice refused to comment, saying that it is in the middle of investigating. The FBI wouldn't comment, and the IRS directed questions to the State Department, which called the Dominion a fraud and compared Korem to P.T. Barnum.

But the State Department can't prosecute. It could advise the president or Congress to declare war, but that seems unlikely.

Korem says the idea of starting a country originated with his father, who was convicted of fraud. "I think that the last case that he went through was the largest stock fraud case in the history of New Jersey at that time," Korem says, seemingly with
pride.

In fact, both Korem and his father have served time for financial fraud. The pair worked as a team until Korem's father supposedly died about 15 years ago. Some believe he is still alive.

"His father suddenly died very, very suddenly without any prior warning," says Tomko. "[At the time] there was a warrant out for his arrest. His untimely death brought a dismissal of all the outstanding charges."

Both Tomko and Shockey think the elder Korem is still alive, probably in the United States. Korem, however, says that he hasn't seen his father for more than 15 years.
Korem wants to expand the Dominion's offerings. He plans to print stamps and currency, and says he hopes to actually visit his homeland soon. The Dominion's minister of architecture has been drawing up elaborate plans for the island, even if some of the buildings will only be accessible with scuba gear.

But no one is sure how many citizens the country has. Korem says that the Bible counsels against taking a census. He also won't say how much money the country makes selling documents.

Why would a convicted con man agree to so much publicity? Perhaps he has been untouched by the law for so long that he feels invulnerable. Or maybe he just figures that in the vast 60 Minutes II audience, there have to be a few con men looking for a place to set up shop.