The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The chief executive of a BISX-listed company faces a grilling from liquidators investigating an alleged multinational fraud, who are seeking information on a series of multi-million dollar transactions involving his company.

Documents obtained by Tribune Business reveal that PricewaterhouseCoopers (PwC) Bahamas accountants, Kevin Cambridge and Kevin Seymour, are seeking Supreme Court Orders requiring Julian Brown, head of publicly traded Benchmark (Bahamas), to provide detailed answers to some 30 questions on his company’s dealings with the insolvent BC Capital Group.

The liquidators also want Mr Brown, and Avril Elcock-Major, vice-president of Benchmark’s broker/dealer subsidiary, Alliance Investment Management, to subject themselves to an ‘oral examination’ relating to BC Capital Group.

Of particular interest to Benchmark’s 735 Bahamian shareholders will be answers to questions about the nature of BC Capital Group’s $5 million preference share investment in the BISX-listed company.

The PwC liquidators want Mr Brown and his ‘number two’ to disclose details about the ‘in kind’ payment BC Capital Group paid to Alliance for that investment, which accounts for 100 per cent of Benchmark’s preference shares.

They want the Benchmark executives to disclose the nature of the company’s obligation to BC Capital Group that gave rise to this deal, and - perhaps crucially - want them to provide documents proving the transaction had the approval of Bahamian regulators.

Elsewhere, the PwC duo want Mr Brown to answer whether $5 million in transfers between different Alliance accounts involved funds the Bahamian broker/dealer had been holding for BC Capital Group.

These transfers, which took place between March 2003 and June 2012, were made between Alliance’s omnibus and operations accounts, and the reason behind these moves is under scrutiny.

The liquidators also want confirmation that Alliance received $100 million sent to it in late January 2005 by BC Capital Group’s principal, Nikolai Battoo, and how these funds were used.

Messrs Cambridge and Seymour want the Benchmark/Alliance executives to disclose if the companies’ $8.6 million doubtful debts provision, as at year-end 2011, relate to BC Capital Group.

They also want them to provide details on Alliance’s $48.7 million ‘sums owed to customer balance’, likely in a bid to find out how much of this is due to BC Capital Group.

Finally, the liquidators want to know if Alliance was involved with “asset verification procedures”, conducted on BC Capital’s investment funds, by multiple accounting firms, including Bahamas-based Baker Tilly Gomez.

Mr Cambridge, in an affidavit filed with the Supreme Court on February 19, 2013, said the questioning/interviews with Mr Brown and Mrs Elcock-Major were vital to “progress” the BC Capital Group liquidation.

Describing Alliance, which is based at the British Colonial Hilton’s Centre of Commerce on Bay Street, as a “significant professional services provider” to BC Capital Group, Mr Cambridge alleged the Bahamian broker/dealer was hired to execute securities trades, plus handle subscriptions and redemptions, from the latter’s investment funds.

Alliance’s role was chiefly that of BC Capital Group’s broker/dealer and custodian, as detailed by Mr Cambridge, who alleged that “substantial cash assets” belonging to the insolvent investment scheme were placed in the Bahamian company’s omnibus accounts at Royal Bank of Canada and CIBC FirstCaribbean International Bank (Bahamas).

“The first examinee, Alliance’s president [Mr Brown], has informed the joint official liquidators that the BC Capital entities were Alliance’s principal and largest customers, and that a portion of Alliance’s indebtedness (due to customer balance) is said to be owed to the BC Capital entities,” Mr Cambridge alleged.

“While the joint official liquidators do not know the value of such portion of Alliance’s due to customer balance owed to the BC Capital entities, it is to be noted that Alliance’s most recent audited financial statements, as at December 31, 2011, shows Alliance’s due to customer balance in the sum of $48.7 million.

“The joint official liquidators verily believe that a significant portion of that due to customer balance is owed to the BC Capital entities.”

While the PwC accountants and their US co-liquidator, Brick Kane from Robb Evans Company, have been reconstructing BC Capital Group’s financial statements and records, Mr Cambridge said Alliance’s senior executives were “material and relevant persons” to the investigation to the roles they played.

He added that they were likely to possess “certain documents” important to the liquidation.

There is nothing to suggest that Mr Brown, Mrs Elcock-Major and, for that matter, Benchmark, Alliance and their other executives have done anything wrong in relation to the BC Capital Group affair.

BC Capital Group and its entities acted as the manager, and managing companies, for the Private International Wealth Management (PIWM) and Private International Wealth Management - Insurance (PIWM-I) investment schemes run by their principal, Mr Battoo.

Battoo’s $5 million investment in Benchmark/Alliance, via two preference share issues, was vital to the their health.

The significance of the preference share issues is that they boosted the capital base of both Benchmark and Alliance at a critical time, helping both to get back into positive net worth territory. Without these capital injections, they were suffering from a solvency deficiency, where total liabilities exceeded total assets.

An earlier report by Mr Kane to the US courts alleged: “On June 11, 2010, and December 1, 2011, BC Capital Group obtained Alliance Class ‘A’ non-voting preference shares in the amounts of $2 million and $3 million, respectively.

“These were not cash transactions, and are described in the notes to Alliance’s audited financial statements as ‘in-kind transactions’. The joint official liquidators are currently reviewing the transactions giving rise to Alliance’s obligation to BC Capital Group.”

The letters sent by Mr Brown to Mr Battoo describe the preference share issues as “free of all brokerage fees and commissions”. The first $2 million tranche had a five-year maturity deadline, at end-June 2015, although Alliance was able to redeem them at any point after one year, while the second $3 million block was only redeemable at the Bahamian broker/dealer’s choosing.