The Kingdom of Tonga has admitted to losing millions of dollars that it made selling passports to Asians after an American whom the king appointed as his ‘‘court jester’’ invested the money in a mysterious company that later disappeared.

In the last week, two cabinet ministers have been forced to quit over the scandal as the new deputy prime minister, Clive Edwards, conceded that $26 million, held by the Tonga Trust Fund in a Bank of America account, had been lost.

The money was taken out of the bank in June 1999 and put into Millennium Asset Management in Nevada.

At the time, it said, a Bank of America employee, Jesse Bogdonoff, became the Trust Funds advising officer, just after King Taufaahau Tupou IV issued a royal decree declaring him the court jester.

The fund owed its origins to the late 1980’s when a Hong Kong businessman, George Chen, won royal approval to sell Tongan citizenship and special passports mainly to Asians, with a particular eye on Hong Kong Chinese who were worried about its handover to China.

Mr. Chen put the money into a checking account at the Bank of America after the king refused to keep it in Tonga, saying the government would only spend it on roads.

At the time, Mr. Bogdonoff was working at the bank, and by his own account in a company newsletter, ‘‘he stumbled onto millions of dollars inexplicably invested in a checking account.’’ He persuaded the king to allow him to invest the money.

Millennium was established on March 25, 1999, and the fund was moved into it on June 21. The government statement concluded, though, that Millennium no longer exists and that the $26 million dollars, plus an additional $11 million estimated to be accrued interest, was gone.

'’Some common questions being asked by the general public in Tonga today include: Why did the trustee deposit so much of our Foreign Reserves in such a suspicious company?’’ the government said.

Agence France-Presse, The Money Is All Gone in Tonga, And the Jester’s Role Was No Joke, The New York Times, 7 Oct. 2001

Added to diary 18 May 2018