The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Receivers have been forced to serve legal proceedings on a Paradise Island resident accused of committing a $22 million fraud via Deputy Prime Minister Philip Davis’s law firm, Tribune Business can reveal, as they seek to recover $7.1 million allegedly transferred to the Bahamas.

Documents obtained by Tribune Business show that KPMG was forced on July 4, 2012, to serve its Statement of Claim against Jeffrey Pogachar via Davis & Co, the law firm that has represented him and his wife, Paola Lombardi, in Bahamian legal proceedings.

Neither Mr Davis nor his law firm have done anything wrong in the case, having merely acted on behalf of clients, and while Davis & Co is continuing to represent the duo in ongoing Court of Appeal proceedings, the Deputy Prime Minister is no longer involved with it or his firm by virtue of his government role.

KPMG’s statement of claim, filed in January this year with the Ontario Superior Court of Justice, but only served now, is collectively seeking $7.3 million worth of damages against Pogachar and Lombardi, plus four Bahamas-incorporated International Business Companies (IBCs) they allegedly controlled.

The four IBCs - Amarcord International, Fallsview, Lexington Consulting and FHC International - were all alleged to have played a role in using, and dissipating, some $7.092 million that was allegedly transferred to the Bahamas from Pogachar and Lombardi’s Canada-based New Life Capital scheme.

Amarcord and Lexington were alleged to have been created to help “defraud New Life of its assets”, while Fallsview and FHC were created to hold ownership of a $1 million Bahamas government bond and $2.6 million Ocean Club condo, respectively. Both assets are supposed to have been purchased with funds derived from the alleged New Life fraud.

The statement of claim revealed that all four IBCs were registered at the Dowdeswell Street offices of Berencia Isaacs & Associates, a Bahamian accounting firm. There is nothing to suggest it has done anything wrong in relation to the New Life affair.

Other details contained in the statement of claim include:

• KPMG was able to secure the Bahamian government bond and sell it for $957,458, a 4.3 per cent discount to its $1 million face value, and 7 per cent loss on the $1.03 million purchase price.

• Some $74,000 held in an account in Lombardi’s name at Commonwealth Bank has been frozen.

• The receiver has incurred $115,000 in costs maintaining Condo A1-4 at Paradise Island’s Ocean Club Residences and Marina Phase I, which the duo spent $2.646 million to acquire.

The latter statement, though, contradicts the November 30, 2011, ruling by Justice Neville Adderley, who found that due to a “material non-disclosure” by KPMG, the receiver could not take possession of the bank accounts and condo assets, and both Pogachar and Lombardi were to be allowed to return home. That decision is currently being appealed to the Court of Appeal.

In the newly-served statement of claim, KPMG alleged that Pogachar and Lombardi moved to Nassau/Paradise Island in August 2008, just after the transfer of some $7.093 million to Lexington’s bank account at CIBC FirstCaribbean International Bank (Bahamas) had been completed.

After obtaining a Norwich Order from the Bahamian Supreme Court on October 27, 2009, requiring CIBC FirstCaribbean to produce Lexington’s banking records, KPMG alleged that some $6.873 million was transferred to an account at the same bank belonging to Amarcord, another IBC.

While another $181,633 was used to purchase luxury watches from Little Switzerland in the Bahamas, Amarcord’s bank records detailed what happened to the $6.783 million.

Of that sum:

• $1.03 million went on the purchase of Bahamian government bonds with a $1 million face value, which were “ultimately held in a custodial account with EFG Bank & Trust (Bahamas).

• $2.646 million went to the Lennox Paton law firm to purchase the PI condo.

• Another $23,260 went to the Bahamian firm, Dias Fine Woodworking, to acquire a medicine cabinet, shoe cabinet, dining table and closet.

There is nothing to suggest that either Lennox Paton, Dias or EFG have done anything wrong in relation to the New Life affair.

While not in possession of the Little Switzerland watches, KPMG said it had made progress elsewhere.

“The Bahamian bond was purchased by Amarcord on or about August 6, 2008, and held in Amarcord’s account at FirstCaribbean until it was transferred to an account at EFG in the name of Fallsview in or about September 2009,” the statement of claim alleged.

“The receiver was able to secure and sell the Bahamian bond, and received proceeds in the amount of $957,458.”

The Ocean Club condo, though, has not been sold and title remains with FHC.

“Since it took possession of the Bahamian condo, the receiver has incurred costs to date in the approximate amount of $115,000 on account of fees and other costs related to the maintenance of the Bahamian condo,” the statement of claim alleged.

“The receiver will continue to incur these costs until such time as the Bahamian condo is sold.

“The receiver has subsequently frozen approximately $74,000 in a bank account held in Lombardi’s name at the Commonwealth Bank, Nassau, Bahamas.”

KPMG alleged that prior to further recoveries, New Life’s 600 investors were facing a $5.503 million shortfall in the more than $7 million that the two Paradise Island residents had transferred to the Bahamas.

New Life group’s business was in the viatical and life insurance settlement industry.

The group purportedly acquired life policies from their holders by paying an amount greater than the cash surrender value, but lower than the face value. New Life took over as the policyholder, paying the premiums and receiving the full face value when the settlor passed.

It raised the $22 million from investors to finance policy purchases, and pledged that 80-85 per cent of the funds raised from selling the securities to them would be used for this purpose.

The Ontario Securities Commission has already found against Pogachar and Lombardi, a verdict they are appealing.