By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Bahamian liquidators for an alleged multi-million dollar international fraud have been blasted by a British Virgin Islands (BVI) judge over a “remarkable” and “gratuitous” agreement with a BISX-listed broker/dealer.
The Eastern Caribbean Supreme Court ruling, delivered on March 20,2013, found that the ‘assignment’ by Alliance Investment Management of its investments in four hedge funds to PricewaterhouseCoopers (Bahamas) accountants, Kevin Seymour and Kevin Cambridge, and their fellow US receiver, Brick Kane, did not make them creditors of the funds.
The judgment, which has been obtained by Tribune Business, said the BC Capital Group liquidators could not become creditors of the BVI-domiciled funds, through the Alliance Investment Management assignment, because they did not have that status when the funds were placed into liquidation on October 11, 2012.
Mr Kane had been attempting to remove the BVI funds’ liquidators on the grounds that they had been appointed by BC Capital Group’s former principal, Nikolai Battoo.
Alliance Investment Management, the broker/dealer subsidiary of BISX-listed Benchmark (Bahamas), had acted as custodian for BC Capital, which was its largest client.
With the BC Capital Group empire being placed into court-supervised liquidation around the world, Julian Brown, Benchmark/Alliance’s president and chief executive, earlier this year signed an agreement assigning the broker/dealer’s rights in four BVI funds over to the PwC Bahamas accountants and Mr Kane.
This agreement, though, did not sit well with the Eastern Caribbean Court. In refusing Mr Kane’s application to remove the BVI liquidators, the court found the assignment was designed “have the effect of making [Messrs Kane, Cambridge and Seymour] a creditor of each of the four BVI funds... and thus would confer upon [them] standing as a creditor to oppose the liquidators’ application”.
The Judge added: “I was shown a draft of the proposed assignment. I accept, of course, that it is only a draft, but it is a remarkable document for all that.
“It purports to be a gratuitous equitable assignment to the US receiver and his Bahamian co-liquidators of all outstanding redemption requests which the service provider [Alliance] might have in relation to each fund, and of all unredeemed share capital to which the service provider might be entitled.”
The assignment also handed over to the Bahamian liquidator “all unpaid professional or referral” fees due to Alliance Investment Management from each fund.
However, the Eastern Caribbean court ruled that the Bahamian liquidators would still not become creditors of the four funds, as Alliance never had such status or rights itself.
While it would have required Alliance Investment Management to pay over any distributions received from the winding-up, the court ruled that the Bahamian liquidators could not become creditors in their own right because the funds had previously been put into liquidation.
“It could not, by assigning it, turn the receiver and his colleagues in the Bahamian liquidation into persons who had claims against the funds as at October 11, 2012,” the Eastern Caribbean Court ruled.
Earlier, in their first report to the Bahamas Supreme Court on the BC Capital Group liquidation, the PwC accountants and Mr Kane criticised the “substantial intermingling/commingling” of its assets by Alliance Investment Management.
The liquidators alleged that this had helped to conceal the $27.564 million overdraft run up by BC Capital Group’s principal, Nikolai Battoo, who they claimed had benefited from $29 million worth of “questionable payments/withdrawals” from his scheme.
And the liquidators, in their March 28, 2013, report that has been obtained by Tribune Business, alleged that Alliance’s two principals were “unable to provide satisfactory explanations” for what were termed “inconsistences”in investment statements sent to BC Capital Group clients.
The two principals named in the report were Alliance’s president, and Benchmark chief executive, Julian Brown, plus vice-president Avril Elcock-Major.
Messrs Cambridge and Seymour also alleged that an investigation into hedge fund investments, purportedly held by the Bahamian broker/dealer on behalf of BC Capital Group and its clients, indicated their value was overstated by “at least $45 million” on portfolio statements issued by Alliance.
And the PwC duo also claimed that Alliance was refusing to provide supporting documents for more than $7.1 million withdrawn from its omnibus account at CIBC FirstCaribbean International Bank (Bahamas), seemingly for Battoo’s benefit.
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