By NEIL HARTNELL
Tribune Business Editor
Some 28 per cent of Montaque Capital Partners’ $5.351 million receivables are owed by related parties in which its former principals, Owen Bethel and Edison Sumner, have continuing involvement.
Documents filed with the Supreme Court by liquidators for the insolvent Bahamian broker/dealer allege that $1.495 million of that figure is owned by four entities in which Mr Bethel and Mr Sumner, or both, continue to hold ownership and management interests in.
A forensic accounting report on Montaque Capital partners’ fall into court-supervised liquidation, completed last June but only made public this month, showed 85.7 per cent of that $1.495 million – some $1.28 million – was allegedly owed by Mode Iles.
That is the company which organizes Mr Bethel’s Islands of the World fashion week event. Of the remainder, $134,788 was alleged to be owed by Internet Protocol (IP) Solutions International, the company seeking to establish a ‘triple play’ communications infrastructure and operation throughout the Bahamas,
Mr Sumner, who owned a 5 per cent equity stake in Montaque Capital Partners, and is now the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, remains IPSI’s chief executive.
And Bahamas FilmInvest International, an entity once used by Mr Bethel to spearhead an ultimately unsuccessful deal to acquire the former Bahamas Film Studios project in Grand Bahama, was also said to owe $71,705.
Ed Rahming and Kenneth Krys, the KRyS Global accountants who are acting as Montaque Capital Partners’ liquidators, alleged that the company was also owed $1.231 million by its affiliate, Montaque Corporate Partners.
“We were advised that Corporate paid the operating expenses of [Montaque Capital Partners],” the liquidators alleged. “Based on the company’s financial records as at September 30, 2011, this account had a debit balance (amount owed by Corporate to the company) of $1.231 million.”
Montaque Corporate Partners had allegedly been responsible for paying its affiliate’s vendors and clients, plus paying related parties and vendors/clients using funds “sourced by” Montaque Capital Partners.
These dealings accounted for some $668,165 in transactions between October 1, 2010, and September 30, 2011, according to the liquidators. And, over the same period, Montaque Capital Partners made $186,742 in payments on behalf of its other affiliates. Of the latter sum, more than half – some $108,530 – was paid on behalf of IPSI.
The liquidators alleged that they were still investigating all these dealings to determine if they were “legitimate transactions” and had “commercial justification”.
The allegations were contained in a batch of documents filed with the Supreme Court by Messrs Rahming and Krys, prior to going before the Supreme Court today in a hearing to determine how the liquidation will be funded – and they and their various attorneys paid.
Giving a summary of work done to-date, Mr Rahming, in a March 5, 2013, affidavit, said the liquidators had confirmed current contact details for 83 per cent of Montaque Capital Partners’ 673 listed accounts.
They had also sorted through 80 boxes of documents on the company’s affairs, and “taken an inventory of stock certificates held in the company’s vault with an estimated market value of $424,933”. Most of these certificates, Mr Rahming added, had been traced to individual owners.
Disclosing that KRyS Global had agreed to discount its standard compensation rates by 20 per cent to work on the Montaque Capital Partners liquidation, Mr Rahming said the liquidators had delayed seeking a determination on how they were to recover their costs because they first had to determine whether assets belonged to the broker/dealer or its clients.
He said their investigations determined that virtually all the cash and securities held in Montaque Capital Partners’ various accounts were being held on trust for clients, with the broker/dealer acting in a fiduciary capacity.
“The only asset belonging to [Montaque Capital Partners] is an investment in Convergen Inc which, while being recorded as worth $30,000 on the company’s books, is unlikely to be realised since Convergen Inc is currently inactive and its shareholder, David Aubel, non-cooperative,” Mr Rahming alleged.
“On the other hand, the total value of the assets held by the company for its customers as of January 31, 2013, is $7.6 million, comprising $6.3 million at brokers ($4.4 million in securities net and $1.9 million in cash); $91,475 cash in bank, and securities in the company’s vault valued at approximately $1.2 million.”
Set against alleged ‘Proofs of Debt’ worth $17.4 million, it would appear that Montaque Capital Partners is insolvent to the tune of almost $10 million. How much this gap is closed will depend largely on whether the liquidators can recover the $5.35 million owed by customers and related parties, and if they can prevent Canadian broker, Macquarie Private Wealth, from retaining $3.5 million of the $7.6 million already identified.
Of the assets currently under the liquidators’ control, Mr Rahming said $1.389 million worth of securities, and $92,909 in cash, were in the Bahamas. Cash in accounts with Scotiabank and the now-closed Gibraltar Global Securities had been transferred to accounts at Royal Bank of Canada.
A further $800,000-plus in Canada-based assets were in the liquidators’ possession, plus $858,000 in the US. Mr Rahming said recovering assets held in Switzerland was “not cost effective”, as the costs of obtaining the court order demanded by Clariden Leu exceeded the $13,129 held,.
Noting that Montaque Capital Partners had operated 95 brokerage accounts, 75 of which were in the name of one customer and the remainder in multiple clients’ names, Mr Rahming said all actions in the liquidation to-date had been for their benefit.
Dividing the liquidation’s costs to-date into three categories, the liquidators are proposing that sums equivalent to 15 per cent of each client’s total assets be retained to fund further costs incurred post-January 31, 2013. This would create a $500,000 reserve from all assets not held at Macquarie.
These funds would help cover ‘general liquidation costs’, which to end-January 2013 totalled $1.706 milion. Mr Rahming alleged that the costs would be borne by each client’s assets in proportion to their total holdings.
With the $39,997 in Canadian costs, the liquidators recommended to the Supreme Court that these be borne by customer assets held in that nation, again in proportion to their individual weighting. And the $391,172 in expenses incurred in trying to secure the Macquarie assets are to be borne proportionately by their owners once they become available.
“The allocation of costs to the available assets – other assets and Canadian assets (excluding Macquarie) – would result in 100 per cent (75 per cent plus 25 per cent, respectively) of the liquidation costs to January 31, 2013, being paid at this time,” Mr Rahming alleged.