• Over sand mining investment by Slovak citizen he had never met
By NEIL HARTNELL
Tribune Business Editor
A Bahamian businessman has lost his breach of contract claim against Royal Bank of Canada (RBC) after it refused to clear a $22.11m investment in his aragonite export venture by a Slovakian citizen he had never met.
Justice Diane Stewart, in a March 24 verdict, ruled that the Canadian-owned bank was fully justified in refusing to process the transfers to Larry A. Ferguson’s merchant account because the Visa card company rejected the transactions on the basis they exceeded the cardholder’s agreed limit.
She also found the account was “not being used for the purpose” for which it was established, given that it was supposed to facilitate a vacation rental home business, and the balance had never previously exceeded $16,000, while the investment by a foreigner had not received Central Bank and other necessary government approvals.
The judgment reveals that Mr Ferguson initiated legal action in November 2016 after RBC refused to honour a series of payments made to his account by Boris Plavala, a Slovak citizens, and reversed the transactions after they were “flagged as suspicious and fraudulent”.
The payments were made by a series of 21 transactions, each worth $990,000, made to Mr Ferguson’s merchant account which was in the name of his vacation rental business, Coastal Winds. Another payment was also received for $168,000, and another $990,000 was transferred to a separate account in the name of Store Away Ltd, an entity in which Mr Ferguson was also a shareholder.
“The plaintiff claimed that the transfer was to have represented a non-obligatory investment in the plaintiff’s aragonite business of sand harvesting and exporting,” Justice Stewart noted of Mr Ferguson’s position. “The sum was facilitated by 23 force posted transactions from the Visa card of Boris Plavala who had agreed to provide the plaintiff with the funds without him having to repay him.”
Some $20.958m was credited to the Coastal Winds account, and $990,000 to that of Store Away, before RBC deemed the transactions questionable, then reversed them and refused to honour them. Setting out Mr Ferguson’s case, Justice Stewart wrote: “The plaintiff submitted that he had always been a good customer of the defendant and that there was never any allegation of fraud against him.
“The stellar relationship was no doubt the reason he maintained a business relationship with the defendant for upwards of 30 years, and what led the defendant’s compliance department to quickly approve the change of his profile for him to receive the sum.” He also pointed to the fact that RBC had not reported the $22m-plus sum as suspicious to the Financial Intelligence Unit (FIU) or Financial Crimes Investigation Branch of the Royal Bahamas Police Force.
Mr Ferguson and his attorneys also pointed to a March 4, 2021, letter from the latter’s head, Chief Superintendent Matthew Edgecombe, in which he wrote in relation to the Plavala transfers that “no criminality of any kind was found in this matter. We are of the opinion that this is a civil matter”.
RBC, though, in its defence, asserted: “The plaintiff had advanced a somewhat bizarre case that he elected to obtain an investment of over $20m by virtue of a credit card transaction using the credit card of a person whom he had never met before to be deposited to an account which was not designated for such a purpose.
“It was perplexing that such an investment would be accepted by credit card. Merchant transactions attract significant credit card fees. In this case, the fees would have amounted to $838,320 if the transactions had cleared. A wire transfer would have cost a fraction of that sum. The plaintiff had been advised of a more efficient method of transferring the funds.
“The plaintiff was out of his depth and had little knowledge of the nature of the alleged investments or of the individual who was to provide the funding. He stated that he had never met Mr Plavala and relied almost exclusively on Mr [Derek] Smith to facilitate the transaction... His account under the name Coastal Winds was for a vacation rental business and there was no indication that he utliised the account for investment purposes.”
RBC said exchange control approval from the Central Bank was also required from such a major investment, while each $990,000 payment had exceeded the $250,000 limit on Mr Plavala’s card. This prevented the transactions from being processed, and Visa sent such a signal to RBC, which never received the funds.
The Canadian-owned bank said “another factor which made the transactions suspicious”, apart from the fact there were 22 payments of exactly the same sum value just below $1m, was the fact they were conducted when Mr Ferguson’s point of sale credit/debit card machine was offline via a technique called “force posting”.
This enables someone to manually enter a fictitious authorisation code, which bypasses the authorisation normally requested from the cardholder’s bank, but triggers the receiving bank into advancing monies to the recipient’s account pending settlement from Visa.
Mr Ferguson had also said he was a shareholder in an entity called Nassau Island Company, and his account was used for the benefit of this firm. Two other entities mentioned were Tarmax Investments and Sigma Management Ltd, but no evidence was provided relating to them and RBC argued that nothing was produced to support the businessman’s contention that the funds were to be used as an investment in his sand mining operation.
Internet research by Tribune Business suggests that Nassau Island Company is really Nassau Island Development Company. Previous court rulings have identified its president and chief executive as a “Larry Ferguson”, and there is also a LinkedIn page naming a Larry Ferguson as vice-president of Nassau Island Development.
And the EY accounting firm’s probe into the Water & Sewerage Corporation, carried out under the former Minnis administration, named Nassau Island Development Company as the contractor for the Gladstone Road Wastewater treatment plant project that had endured significant cost overruns. Some 4,999 shares in Nassau Island Development Company were said to be held by the company’s principal, Anthony ‘Larry’ Ferguson.
Meanwhile, Justice Stewart said the agreed facts showed Mr Ferguson had written to RBC two days before the monies were received, asserting that he would be receiving a 350m euro transfer to his account and that he needed access to those funds. However, RBC placed a hold on the account after a fraud alert was triggered, Visa declined to settle the transactions and Mr Plavala’s bank in Slovakia informed it they were fraudulent.
The judge, in her verdict, said: “The plaintiff claims that the sum was sent from Zuno Bank by Mr Plavala as an investment for his sand mining business. He has provided corporate documents of an unrelated company in support of this of which he is an officer.” However, Mr Plavala was never called as a witness, no Central Bank approval was obtained and “not much was explained about the sand mining business”.
Given this, Justice Stewart found RBC was justified in determining that the transactions were suspicious. They were inconsistent with previous account activity, and also also inconsistent with the merchant terms of service agreement between Mr Ferguson and the bank that allowed the former to accept credit and debit card payments for his business via a point-of-sale terminal.
As a result, she dismissed the breach of contract claim.
TalRussell 2 months, 1 week ago
RBC's sniff hound --- Should've been loaned out to the colony's locals --- Held the responsibility for monitoring the activities of Comrade Samuel Benjamin Bankman-Fried, --- Yes?
rosiepi 2 months, 1 week ago
Who was this guy’s attorney- Derek Smith? The depth of the culpability for this foolishness, the attempted money laundering is equalled by the stupidity in exposing his client/ plaintiff to criminal jeopardy by revealing such. But this is the Bahamas so he was (is) saved by his government’s refusal to take up the matter in their duty to police the criminality of money laundering activity.
Commenting has been disabled for this item.