The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A well-known Bahamian banker is alleging that he has been personally defrauded of $200,000 over a Chinese real estate investment.

Steven Mackey, a former senior executive with EFG Bank & Trust (Bahamas), has joined a lawsuit seeking a collective $2.3 million in damages.

Mr Mackey, now principal of his own broker/dealer, MIP Bahamas, has been added as a plaintiff to an amended lawsuit filed against investment promoter, Benny Ping Wing Leung, and his company, First Toronto Realty.

The revised action, which was filed in the southern New York federal courts on February 19, 2016, lists Mr Mackey and three Bahamas-domiciled companies as plaintiffs.

The action is similar to the initial lawsuit that was filed in October 2015, although the amount of damages being sought has increased from $1.5 million to $2.3 million.

Tribune Business’s report on the original action revealed how Mr Mackey’s former employer, EFG Bank & Trust (Bahamas), played a “liaison” role by introducing its client account holders to Leung and his proposal.

The latest New York filings, in common with the first, again allege that Leung and his company, Cathexis Ltd, in late 2009 introduced EFG Bank & Trust (Bahamas) to a proposed investment in a 36-storey office/retail development in the Chinese city of Ningbo.

“Leung, individually and as a principal for Cathexis, introduced to EFG Bank & Trust (Bahamas), a private bank, an investment proposal for its account holders for a property being developed and constructed in Ningbo, China,” the action claimed.

EFG “invited Leung to its Bahamian office to present his investment opportunity” in early 2010, where he allegedly claimed that his family owned 100 per cent of the project, called Titan Tower, through a web of holding companies.

Leung allegedly told EFG his net worth was greater than $100 million, and that the project already had $60 million in financing.

The investment opportunity, the documents alleged, had arisen because Leung claimed one of his friends - an initial investor - was selling his interest for $4 million.

“Upon completion of his presentation, EFG conveyed all the representations and material provided by Leung to its clients, including Segue, Urbacon and Mackey, as potential investors in the project,” the latest lawsuit alleges.

“Based on Leung’s representations regarding the project, his own interest in the project, the lack of contingencies and the substantial profit margin to cover the investors’ participation, certain of EFG’s clients, including Segue, Urbacon, Mackey and the predecessor holder to Taupita, participated in the offering, investing a total of $3.75 million of the $4 million invested.”

Taupita Investments and Segue Corporation were corporate plaintiffs in the initial action against Leung, while Urbacaon Buildings Group Corporation has joined Mr Mackey in being added as a plaintiff.

Leung, in his response to the first lawsuit, alleged last year that Taupita and Segue were ‘nominee’ entities for EFG, and that the Bahamian bank was ‘hiding’ behind the as “the real party of interest”.

Still, the revised lawsuit alleged that Cathexis and Leung agreed to pay Mr Mackey and the corporate investors a 15 per cent interest return on promissory notes (equivalent to bonds).

“Segue invested a principal amount of $250,000, Urbacon invested a principal amount of $350,000, Mackey invested a principal amount of $200,000, and Taupita’s predecessors in interest invested a total of $1.5 million,” the court documents alleged.

Leung claimed that Titan Tower had a $120 million valuation, producing a purported report by CB Richard Ellis (CBRE) to support this figure. And he was said to have promised that investors would rank ahead of his family in the creditors queue.

Leung allegedly promised to repay the principal within two years, with interest to be paid in April 2011 and 2012. The note payments were allegedly guaranteed by a company called Sirius Asia V Partners.

The first lawsuit alleged that Sirius was also a client of EFG Bank & Trust (Bahamas), and was controlled by Leung and First Toronto, but no mention of this was made in the February 19, 2016, action.

“Investor funds totalling $3.75 million, representing the aggregate principal amount paid by the investors, were deposited into an account Cathexis held with EFG, who had agreed to act as banker to each of the investors who held accounts with EFG, including Segue, Urbacon, Mackey and Taupita’s predecessor in interest,” the new action alleges.

“From this account, EFG then transferred the funds to, among others, First Toronto and Sirius Asia V Partners.......

“Leung represented that these funds would be invested into the project. Upon information and belief, at all material times, Leung had access to these accounts and directed where the funds were sent. In its role as banker, EFG was to act as liaison between Leung and the investors.”

But, unknown to Mr Mackey, the other investors and EFG, Titan Tower was fully completed in December 2010.

And the initial interest payment was not made on April 2011, with Leung blaming the delay on the wait for Chinese government building permits, occupancy and fire safety certificates.

While the first interest payment was made “four months late, and in three instalments” by August 2011, the second payment and return of all investor principal did not occur by April 2012.

`This, too, was blamed on permit delays. The second interest, and return of principal, payment was extended until December, with Leung providing “updates” to investors via EFG Bank & Trust (Bahamas).

Five days after reporting that the necessary approvals had been received, “Leung did a complete reversal and advised EFG to inform the investors that, despite his initial representation, additional funds were needed from them to obtain” a Certificate of Fitness for Titan Tower from the Chinese authorities.

Leung alleged that the sum required was $5 million. Mr Mackey and the other investors, via EFG Bank & Trust (Bahamas), declined to pay, and Leung steadily reduced his demands to $1.5 million, then $1 million and $500,000 - while providing no documents to justify his position.

Leung then travelled to the Bahamas in November 2013, where he met with investors at EFG Bank & Trust (Bahamas) in a meeting that produced no satisfactory answers.

The final extended deadline for repayment, December 31, 2013, was again missed,and Mr Mackey and the corporate investors are alleging they have lost “their entire investment” plus interest.

They then claimed that Leung’s “circle of fraud” was completed on September 8, 2014, when the developer alleged that a ‘third party’ had paid the money he was seeking.

As a result, Mr Mackey and the other investors now ranked below this ‘payor’, plus contractors, banks and the Chinese companies in the creditors’ queue, implying that it was “unlikely” they would “ever receive payment”.