The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian companies battling to recover assets lost in a $400 million financial fraud are experiencing “financial stress” themselves because they have not been paid almost-$1 million due for two years’ work.

Court documents obtained by Tribune Business reveal that a battle between receivers/liquidators in other countries has prevented the Delaney Partners law firm and PricewaterhouseCoopers (PwC) from being paid for their work on the BC Capital Group international ‘Ponzi’ scheme.

Filings by the US receiver in the northern Illinois federal court reveal that Delaney Partners, the law firm headed by former attorney general, John Delaney, is owed some $311,967 for work performed between March 1, 2013, and April 30, 2015.

They are representing PwC (Bahamas) and the US receiver, Robb Evans, in the liquidation of BC Capital Group’s Bahamas-based assets. PwC is itself owed some $649,176 over the same period, making the combined debt owed to the two professional services firms almost $1 million.

Robb Evans, which was appointed co-liquidator of the Bahamas-based assets by the Supreme Court, alleged in a July 2015 court filing that together with PwC it had reconstructed the financial flows from 71 BC Capital accounts that were “maintained” by Alliance Investment Management.

“Each firm has performed its work since March 2013, or over two years, without the payment of any fees,” Robb Evans told the Illinois court.

“This has led to hardship and obstacles for each of the firms to complete their duties. The inability to pay these professionals is resulting in financial stress for each firm.”

The Bahamian companies have not been paid due to the dispute between Robb Evans and the British Virgin Islands (BVI) liquidators for a group of investment funds, into which BC Capital money was flowed, over who controls these assets.

One of the BVI liquidators, Hadley Chilton, told Tribune Business in December 2013 that the US receiver was attempting to “usurp” the remaining assets in those funds, even though they were properly appointed liquidators working for the islands’ courts.

Yet Robb Evans has been seeking court orders in the US and Guernsey that all the BVI-domiciled funds’ assets, which are located at EFG Bank in Guernsey, be turned over to it.

These assets, from which Delaney Partners and PwC are supposed to be paid, remain in dispute and unavailable for use in the continued absence of a court ruling.

And, not surprisingly, the BVI liquidators are opposing their use to pay the Bahamian companies, describing it as “unreasonable” to use these monies to cover their fees and costs.

Mr Chilton and his fellow BVI liquidator, John Greenwood, alleged in a July 9, 2015, court filing that it was “quite remarkable” that Robb Evans was seeking to cover the Bahamian costs from the disputed assets.

This was because one of the entities in liquidation in the Bahamas, BC Capital Group International, was not a defendant in the US court proceedings.

“The receiver has offered no explanation (or legal support) for why such fees are - or ought to be - compensable,” the BVI liquidators alleged. “The BVI liquidators are aware of no precedent (or legal support) for such a request.

“Unless the receiver can establish a legal basis for such payment, the payment of fees and costs related to the Bahamas liquidation is unreasonable and should not be permitted.”

Robb Evans was quick to respond, alleging in a July 22, 2015, court filing in the US that its appointment as joint liquidator with PwC was designed to protect all Bahamas-based assets of BC Capital Group - especially documents located at Alliance Investment Management, the BISX-listed subsidiary of Benchmark (Bahamas).

This resulted in the US receiver getting access to documents “essential to the forensic analysis” of the Ponzi scheme.

PwC was able to save Robb Evans the cost of sending its own people to the Bahamas, and the US receiver added: “The fees related to the Bahamian proceedings and the analysis of the Alliance documents benefited the receivership estate and are fully compensable.

“Moreover, the joint official liquidators’ fees have already been approved by the Supreme Court of the Bahamas.”

Alliance and its chief executive, Julian Brown, are defending a Securities & Exchange Commission (SEC)lawsuit brought against them over their alleged role in facilitating the BC Capital scheme, which was masterminded by Nikolai Battoo.

Tribune Business previously revealed that of the $217.1 million investor funds received by Alliance, just $83 million - some 38.2 per cent - was invested in a series of eight British Virgin Islands (BVI) domiciled hedge funds controlled by Battoo.

“Battoo misappropriated approximately $45.7 million (21.1 per cent) for his personal use and paid approximately $18.3 million (8.4 per cent) to parties related to him,” Robb Evans had alleged.

“For every $100 received from the investors, just $38.23 was invested in Battoo-operated/controlled funds, $21.05 was paid to or for Battoo, $8.43 was paid to parties related to Battoo, and $7.37 was spent for other purposes.”