The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The head of a BISX-listed company yesterday told Tribune Business that it had “not been impacted at the moment” by its broker/dealer subsidiary becoming embroiled in an alleged $140 million investment fraud.

Julian Brown, president and chief executive of Benchmark (Bahamas), confirmed when contacted by this newspaper that Nikolai Battoo and BC Capital Group had been clients of Alliance Investment Management, which had provided custodian-type services to their claimed scheme.

Battoo and BC Capital Group, plus a number of affiliated companies, were last month charged by the US Commodities and Futures Trading Commission (CFTC) with perpetuating a fraud on at least 250 investors.

A US receiver has been appointed for BC Capital Group and its affiliates, while Bahamian accountant James Gomez has been named the liquidator for its assets in this nation.

US court documents, which have been obtained by Tribune Business, reveal that Alliance Investment Management played a key role in the scheme, providing BC Capital Group with office space, account facilities and allowing group entities to share its phone and fax numbers.

There is nothing to suggest that Mr Brown, Alliance, Benchmark or their staffs have done anything wrong in relation to the BC Capital Group affair, and they have not been charged or named as defendants in the US courts.

But documents filed in the northern Illinois district court on September 6, 2012, detail how Alliance Investment Management’s Nassau headquarters was used as the ‘office’ for two key BC Capital Group entities, BC Panama and BC Hong Kong.

These two entities were described as the ‘manager’ and ‘financial investment adviser’, respectively, in materials used by BC Capital Group to solicit investments.

“BC Panama and BC Hong Kong are both shell companies,” the CFTC alleged. “Battoo subleased a section of office space from Alliance Investment Management, a Bahamas-registered broker/dealer, to use as BC Panama’s and BC Hong Kong’s ‘office’.

“BC Panama and BC Hong Kong shared telephone and facsimile numbers with Alliance. Battoo and other employees, agents and principals of the BC Common Enterprise would occasionally use Alliance’s office for meetings with pool participants and investment advisors.

“However, no employee, agent or principal of the BC Common Enterprise operated from Alliance’s office on a full-time basis,” the CFTC added.

“One Florida-based sales agent of the BC Common Enterprise testified that he went to the ‘office’ in the Bahamas on several occasions, but never met anyone who worked there for the BC Common Enterprise. Instead, Alliance staff would receive mail and forward it unopened to Battoo.”

When contacted by Tribune Business about the BC Capital Group situation, Mr Brown said it was not presently affecting Benchmark (Bahamas).

“It is not impacting us at the moment,” he responded. “It’s nothing to do with Alliance, other than what you’ve seen; they’re a client of ours.”

Confirming that Alliance and Benchmark were doing “whatever we’re supposed to do” in terms of co-operating with regulators and receivers/liquidators, Mr Brown agreed that the episode was unfortunate for his business.

“True, I would say that for sure,” he said when this was put to him.

“They were clients of ours, and we provided services for them, yes. I’d really wish not to comment on it because the matter is before the courts with the liquidation going on.”

The CFTC is alleging that BC Capital Group induced investors to place funds with commodity pools called Private International Wealth Management (PIWM).

Some $140 million was said to have been invested in these pools since 2003, but the CFTC is claiming that Battoo and BC Capital Group had engaged in “a four-year series of misrepresentations and omissions” to hide mounting losses from 2008.

Assets and investments were overvalued, and BC Capital Group also avoided returning funds to investors.

“Since at least January 2003, pool participants sent funds, directly or through offshore companies with the intent of investing in the PIWM portfolios, to an account in the name of BC Panama at Alliance,” the CFTC alleged.

Documents sent to investors by BC Capital Group alleged that all assets were “held in segregated accounts with Alliance Investment Management”, described as “the BC Common Enterprises’s broker/dealer in the Bahamas”.

And the CFTC added that witness testimony alleged that funds held in accounts at Alliance Investment Management, purportedly belonging to investors, had been used to pay the mortgage on a Florida townhome owned by a company supposedly controlled by Battoo.

John Wilson, the McKinney, Bancroft & Hughes attorney and partner, who is acting for Mr Gomez, the Bahamian liquidator, told Tribune Business that the BC Capital Group liquidation would be “a test case” for the recent liquidation-related amendments to the Companies Act.

Mr Gomez is set to petition Chief Justice, Sir Michael Barnett, on November 1, 2012, that BC Capital Group and BC Capital Group International’s liquidations be placed under the Supreme Court’s supervision.

Mr Wilson said this would involve the winding-up of a foreign company under Bahamian law. “This will be a test, complicated and interesting,” he added.

While the BC Capital Group entities were domiciled in Panama, Mr Wilson said investigations to-date indicated they used the Bahamas as their “main base of operations”.