By NEIL HARTNELL
Tribune Business Editor
An insolvent Bahamas-based investment advisor has been placed in Supreme Court-supervised liquidation due to its remaining cash balances covering less than 25 percent of its $1m-plus liabilities.
Ed Rahming, the newly-appointed liquidator for Pacifico Global Advisors, revealed that the Old Fort Bay-based firm is “unable to pay its debts” given that its last unaudited financials show it possessed just $244,073 in liquid assets.
Justice Ian Winder approved the Supreme Court-supervised winding up on November 8, 2019, after the Intelisys managing director and his attorney, Simone Morgan-Gomez of Callenders & Co, warned that such a move was urgent given the threat of legal action from Pacifico’s aggrieved clients.
The securities investment adviser’s failure thus represents another potential black eye for The Bahamas as a financial services jurisdiction, given that Pacifico’s customers - most of whom will be high-net worth foreigners and corporate entities - are unlikely to recover all assets and sums due to them even though the company was holding them on trust.
Legal documents obtained by Tribune Business also reveal that Mr Rahming’s decision to terminate Pacifico’s lease at the Offices at Old Fort Bay has provoked a sharp reaction from its landlord, Mosko Realty, whose attorneys described the move as “unilateral and unlawful”.
Mr Rahming, though, said the insolvent firm simply could not afford to see out the remaining 11 months of its lease agreement given that this would cost its creditors $111,000 plus a further $3,000 per month on common area maintenance (CAM) costs.
The Bahamian accountant, who was co-liquidator for Baha Mar, disclosed in an affidavit to the Supreme Court that Pacifico’s troubles first emerged when it wrote to the Securities Commission on September 20, 2019, to inform the regulator its shareholders and directors had decided to immediately wind-up the business.
Arturo Klein, its chief executive, referring to a September 16 meeting between Pacifico’s chief operating officer, Kareem Kikivarakis, and Christina Rolle, the Securities Commission’s executive director, said in a letter: “The directors and shareholders of Pacifico Global Advisors (PGA) have decided that it would be in the best interest of PGA and its clients to be wound-up immediately.
“This decision was largely driven by diminishing revenue streams and increasing challenges of doing business in the jurisdiction. The only remaining objective of the company is to return assets held in custody to its clients.”
Mr Klein, who resigned with immediate effect, said he was “relinquishing all operational control” and that Pacifico staff would be paid their salaries for September 2019. The Securities Commission’s Ms Rolle, in her October 3 reply, approved the voluntary winding-up provided that it became a Supreme Court-supervised liquidation within 14 days.
“On October 3, 2019, my team and I visited the company [Pacifico] and were provided with information including unaudited financial statements showing the balance sheet as at August 31, 2019, a list of payables as at September 30, 2019, and a statement of assets of the company as at September 30, 2019,” Mr Rahming said in his affidavit.
“Based on our review of this information it was apparent that the company is insolvent. The company is unable to pay its debts as they fall due, which meets the definition of insolvency as defined [by] the Act.
“The company’s unaudited balance sheet as at August 30, 2019, showed cash of $244,073 and accrued liabilities of $1.015m. The staff members of the company also advised that there was insufficient cash to pay the company’s current liabilities.”
Mr Rahming’s attorney, Ms Morgan-Gomez, then petitioned the Supreme Court to rapidly approve the court-supervised nature of Pacifico’s winding-up by filing a “Certificate of Urgency” on October 25, 2019.
“I have been informed by the liquidator that various creditors of the company are threatening litigation against the company in attempts to position themselves and their claims ahead of other creditors in the same class,” she warned.
“Once the company is put under the supervision such persons would be estopped from filing litigation against the company based on section 193 of the Companies (Winding Up Amendment) Act 2011. It would also be a savings for the company if the voluntary liquidator did not have to apply to stay proceedings that may be commenced between the filing date of the petition and the hearing of the petition.”
Justice Winder duly granted this request, but Mr Rahming’s efforts to extract Pacifico from its existing lease agreement ran into opposition from the Bahamian realty firm that owns its offices at No.1 Pineapple House on Western Road.
“The lease agreement is for a term of two years beginning October 1, 2018,” Mr Rahming alleged. “The lease required a security payment of $27,000 plus VAT (totalling $30,240), monthly rent payments of $9,000 plus VAT ($10,080) and quarterly maintenance fees of $8,000 to $12,000 inclusive of VAT and prorated per rentable square foot (approximately $3,000 per month)/”
While Pacifico’s payments were up-to-date through to end-September 2019, the Bahamian accountant informed Mosko Realty, as owner and landlord, on October 25, 2019, that the company would be vacating the premises and terminating the lease by that month’s end.
“The landlord’s attorneys are Maillis & Maillis, who communicated that the landlord is demanding payment of the equivalent of the rent for the unexpired residue of the lease term - 11 months under the lease agreement,” Mr Rahming alleged.
“This amount is approximately $111,000. While it is my intention to ensure that the legislation is complied with as regards the landlord’s claim at the appropriate time, and I note that the landlord is holding the last month’s rent and security deposit of $18,000, I do not believe that this liquidation can afford to pay monies for the unexpired residue of the lease term.
“I also noted that the monthly common area maintenance fees (CAMS), which Pacifico has to pay for the premises, are approximately $3,000 and does not include electricity and cable. Pacifico cannot afford to pay these monies for the balance of the lease. I expect all outstanding CAMS due as to October 31, 2019, to be deducted from the security balance held by the landlord.”
Mr Rahming proceeded with the lease termination at end-October to save these costs, and also obtained Supreme Court approval to immediately sell Pacifico’s office equipment and furnitures - assets he valued ay between $10,000-$15,000 - rather than incur $1,000 per month in storage fees.
Alexander Maillis II, the attorney representing Mosko Realty, warned Mr Rahming that his client would not agree to a lease termination unless all outstanding utilities and maintenance charges were paid, and a sum equivalent to 11 months’ rent settled.
“We can identify no provision in the lease which empowers the tenant to terminate in the manner being proposed by you,” Mr Maillis wrote. “In the circumstances, it is a matter for the discretion of the landlord as to whether and, if so, upon what terms to allow your company to ‘terminate’ the lease.
“Your unilateral and unlawful attempt to terminate now exposes the company to the liability to pay the rent for the unexpired residue of the lease - a period of 11 months. There are also outstanding (and continuing) utilities and maintenance fees, all covered by the lease, which are the responsibility of the tenant.
Mr Klein, Pacifico’s chief executive who is said to be based in Switzerland, was alleged by Mr Rahming to own 100 percent of Pacifico despite there being two shareholders. While he holds a 25 percent equity stake directly in his own name, the 75 percent balance belongs to an entity called Valora Investments, which was alleged to be holding its interest on Mr Klein’s behalf.
Thomas Coughlin, who resigned as a Pacifico director on May 27, 2019, was supposed to be replaced by Alessandra Irasema Calcagno Jaramillo, but her appointment was never approved by the Securities Commission before the winding-up.
Other Pacifico staff included Vanasha Nadia Shearer-Butler, who was the firm’s compliance officer and money laundering reporting officer, plus Daren Charles Seymour, who was listed as a trading and advisory representative, and discretionary management representative.
Welwyn Ltd, Pacifico’s corporate secretary, was a nominee company “managed and controlled” by the corporate services arm of the Lennox Paton law firm. And Valora’s signatory appears to have been Peter Fletcher of the Holowesko, Pyfrom, Fletcher law firm. There is nothing to suggest any of those persons or entities named have done anything wrong in relation to Pacifico.
Pacifico Global Advisors is seemingly the latest small broker/dealer or investment advisory firm to collapse and be placed under court-supervised liquidation. Tribune Business has extensively reported over the past decade on the failures of companies such as Caledonia Corporate Management, Owen Bethel’s Montaque Capital Partners, and Tillerman Securities, plus the decision by Gibraltar Global Securities to cease operating under pressure from legal actions and probes by US and Canadian regulators.
All these companies, as well as Pacifico, appear to share common characteristics in that they were all small, independent firms without a large parent network to provide distribution access to clients. And all seem to have been controlled by a single, or small group of like-minded, shareholders and managers.