Bahamas broker’s clients: ‘We’ll be left with nothing’

• As liquidators and attorneys awarded $1m-plus costs

• Creditors committee: We won’t recover ‘a single dime’

• Ask: Who benefits? First liquidator pay held on ‘losses’


Tribune Business Editor


Deloitte & Touche liquidators and their attorneys have been awarded over $1m in costs despite clients of a collapsed Bahamas broker/dealer voicing fears this payment leaves nothing for them to recover.

Chief Justice Ian Winder, while acknowledging that he “shared concern” over the fees levied by the accounting firm and Callenders & Co, in a November 20, 2023, verdict ruled that this cannot override “the need for the job to be done properly” in the Supreme Court-supervised winding-up of Pacifico Global Advisors.

He added that such costs were almost inevitable given “the messy nature of a company whose life is brought to an end involuntarily”, and found that Deloitte & Touche could not “be bound” by estimates from Pacifico Global’s first liquidator, Ed Rahming, the Intelisys (Bahamas) founder and managing director, who had estimated the winding-up would incur only a further $558,000 in costs after he stepped down.

Sir Ian thus awarded Deloitte & Touche’s application to be paid $958,000 for work done over the 11 months between end-July 2021 and end-May 2022, with Callenders granted some $218,000 to cover its legal costs. That brought the total payment to $1.176m.

However, the chief justice “deferred” his decision on whether Mr Rahming and his agent should be paid their final $93,265 on the basis that he had “caused losses to the liquidation estate” via an alleged unnecessary currency conversion of fund holdings.

Deloitte & Touche’s application for Supreme Court “sanction” to recover fees and expenses incurred in working on Pacifico Global’s liquidation was opposed by the broker/dealer’s creditors committee, which was also previously at odds with Mr Rahming over his claimed costs.

Sir Ian said Gail Lockhart-Charles KC, the Committee’s attorney, “captured the crux” of its complaints when she asserted in the case of Deloitte & Touche: “If the court approves these fees, what will happen is that there will be no funds to pay any creditors.

“The liquidators would have, between Mr Rahming and the new joint official liquidators [Deloitte], spent all of the assets to pay creditors. Creditors would not get a single penny, and the liquidators would have come in and spent all of the money on their fees.”

This highlights just how the fees charged by liquidators and their attorneys have increasingly become a bone of contention in Supreme Court-supervised winding-ups. This has especially been the case when liquidators have sought to obtain approval for a portion of their costs to be paid from client assets, which are held in trust/escrow and in a fiduciary capacity, and do not belong to the company being liquidated.

Such a scenario has frequently incurred in the case of small broker/dealers such as Pacifico Global, which are insolvent and hold very few assets in the company’s name, thus resulting in little to no funding being available to meet liquidation costs.

Liquidators thus seek to recover a portion of their fees from client assets held in trust or escrow, arguing that they incur costs in securing, marshalling and returning them to their beneficial owners. However, some observers believe trust assets should not have to bear any fees, and that the work involved in reconciling client accounts and paying them out to the owners is relatively minimal.

Sir Ian, in his ruling on the Committee and Mrs Lockhart-Charles’ complaints, found: “Respectfully, the concern for the level of fees is shared by the court and all stakeholders in a liquidation but cannot obviate the need for the job to be done properly.....

“Litigation is expensive and understandably creditors are uneasy with any fee which is levied, but this is the messy nature of a company whose life is brought to an end involuntarily, having to be wound-up by external forces.....

“The fees of the joint liquidators [Deloitte] have been rendered at a discount. I am not satisfied that the liquidation committee has shown how the remuneration of the joint official liquidators was not reasonably incurred. Having considered the fees myself, I cannot say that they have not been reasonably incurred and I sanction those fees in relation to the joint official liquidators and Callenders & Co.”

Sir Ian’s judgment revealed that, with the approval of the $1.176m in fees to Deloitte & Touche and their attorneys, a combined $2.376m has been paid out in fees and expenses when the $1.2m due to Mr Rahming is factored into the calculation. The latter’s award represents a $900,000 reduction on his initial $2.13m claim.

Luca Lanciano, Pacifico Global’s ex-chief operating officer, and now a member of the liquidation committee, alleged in an affidavit that Mr Rahming had estimated it would cost just $528,000 to complete Pacifico Global’s wind-up after July 16, 2021, which is slightly less than half the sum now approved for pay-out by Sir Ian.

“The liquidation committee is gravely concerned that, notwithstanding the knowledge of the serious cost issues in this liquidation, the joint official liquidators have apparently run-up costs far in excess of the estimate provided to the court by the outgoing official liquidator,” Mr Lanciano asserted, while stating he was not challenging Deloitte & Touche’s hourly rates or expertise.

He added that the liquidators had failed to provide a breakdown of their costs, showing how and why they were incurred, and said: “It is further noted that should the approval of the joint official liquidators’ costs be given in the amounts claimed all of the company’s assets will be depleted....

“The liquidation committee is also very concerned that numerous investors have still not received their funds and losses appear to have been suffered due to the outgoing official liquidator [Mr Rahming] improperly converting assets to US dollars from the foreign currency in which they were held at the commencement of the liquidation.”

Mark Munnings, the Deloitte & Touche accountant and partner, countered by asserting that it was impossible for Mr Rahming to give an accurate cost estimate for completing Pacifico Global’s winding-up as he had no idea what lay ahead for his replacements.

Pointing out that he and his agents subsequently had to address some 29 separate issues associated with the liquidation, Mr Munnings added: “The joint official liquidators informed the liquidation committee that we could not serve as joint official liquidators for the approximately $50,000 which was suggested by the Committee’s counsel when the joint official liquidators were first approached to consider taking on this file.”

Mrs Lockhart-Charles, in her submissions on the Committee’s behalf, argued: “The entire process begs the question - does this liquidation exist for the benefit of the liquidators alone? It certainly seems that, at this rate, the creditors will not receive a single dime of the assets of the liquidation because all of this money will have been paid to the liquidators.

“As if this were not bad enough, after the liquidators have taken all of the assets of the company, they will be seeking to dip into trust assets to benefit themselves even further..... In the present case, the entire liquidation will have been of no benefit to the creditors unless the court imposes some semblance of reasonableness and proportionality on the liquidators’ charges.” Sir Ian did not agree.


moncurcool 4 months, 3 weeks ago

Liquidations of companies in this country is a money making mafia business. These people make more on these schemes, and leave nothing for the people who legitimate money is owed to.


Proguing 4 months, 2 weeks ago

Another example of our "robust regulatory regime"....


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