The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamas-based fund administrator has denied relieving a Swiss bank “of any financial responsibility” for a $17.7 million transaction now at the centre of heated litigation in the New York courts.

A June 13, 2013, affidavit by Vincent King, managing director of Swiss Financial Services (Bahamas), alleged that its wire instructions to Societe Generale Private Banking (Suisse) only exonerated it of responsibility for an ‘investment’, not what became an unsecured loan.

And Mr King alleged that the investment agreement he and Swiss Financial executives signed on behalf of The Wimbledon Fund SPC’s (Class TT) portfolio was replaced by a different version agreed between SocGen and the company receiving the money.

The claims are contained amid the latest documents filed in the New York State Supreme Court in the continuing legal battle involving alleged “gross mismanagement” of The Wimbledon Fund SPC’s (Class TT) portfolio, once valued at $100 million.

Swiss Financial Services (Bahamas) was the fund’s administrator, while SocGen acted as its custodian. Numerous Class TT investors, including another Bahamian firm, Lyford Cay-based Old Fort Financial, have sued both firms - and the investment manager and its top executives - on the grounds that their investments were “wrongfully converted” from a multi-billion dollar hedge fund to unsecured promissory notes issued by Swartz IP Services Group.

SocGen, though, has moved to dismiss the complaint against it on the grounds that it merely held bank accounts for The Wimbledon Fund in its role as custodian.

And it is alleging that it was only following the instructions of The Wimbledon Fund and its administrator in transferring the $17.7 million to Swartz IP, while also being absolved of any responsibility for the investment’s outcome.

Swiss Financial executives, Mr King and Benjamin Miller (at the time), served as The Wimbledon Fund’s directors. It is a common practice for fund administrator personnel to serve as Board directors of the funds the oversee.

SocGen, in its motion to dismiss the investor action, alleged that Messrs King and Miller, in a November 16, 2011, letter to it, said their own assessment found the Swartz IP notes to be “suitable for our situation”.

Adding that the letter also exonerated SocGen from responsibility if the investment went sour, the Swiss bank alleged: “SocGen Suisse was the recipient of the instruction lender; it was not the sender of the instruction letter.

“We are at a loss to understand how plaintiffs can in good faith press the allegation..... against SocGen Suisse.”

And the Swiss institution further claimed: “The Fund, acting through its directors, instructed SocGen to execute the transactions at issue.

“The directors of the Fund, having been accused by the investors of the same wrong alleged against SocGen Suisse, and having explicitly instructed SocGen Suisse to wire the money for the two investments in the notes, cannot now turn around and sue SocGen for following their instructions.”

The two investments in Swartz IP were for $12.2 million and $5.5 million, respectively, but Mr King refuted SocGen’s account.

Recalling the deal’s origins, he alleged that The Wimbledon Fund’s investment manager, Weston Capital Management, had advised the fund in fall 2011 that the ‘swap transaction’ with Swartz IP would generate a higher return than its traditional hedge fund investments.

The investment manager’s “proven track record” convinced Mr King and his fellow The Wimbledon Fund directors to approve the deal.

But Mr King alleged that as the transaction turned out to be an ‘unsecured loan’, as opposed to an investment, SocGen was not relieved of responsibility.

And he further claimed that, unbeknown to Swiss Financial Services (Bahamas) or The Wimbledon Fund’s directors, the agreement the latter signed had been replaced by “a different version” agreed between SocGen and Swartz IP,

A Weston executive was alleged to have said the new version was used to allow SocGen “to collect certain fees” in its capacity as The Wimbledon Fund’s custodian.

“SocGen unquestionably played an important role in the Swartz IP transaction, which has resulted in the complete loss of the Fund’s assets in excess of $17 million,” Mr King alleged.

“The Fund and its investors have lost their entire investment value as a result of the wrongful and irresponsible acts of Weston and SocGen, who were responsible for preserving and protecting the Fund’s assets, rather than turning them over to an entity affiliated with Albert Hallac’s joint venture partners without any collateral or security.”