The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A BISX-listed company’s principal yesterday warned “it’s not over yet”, even though his two-year legal battle with US federal regulators has taken another step towards resolution.

Julian Brown, Benchmark (Bahamas) president and chief executive, confirmed that he and the company’s main subsidiary, Alliance Management, had made progress in seeking to settle a Securities & Exchange Commission (SEC) lawsuit against themselves.

Although SEC attorneys have agreed the terms of a proposed settlement with Mr Brown and Alliance over their alleged involvement in a $400 million financial fraud, the agreement has yet to be approved by the regulator’s commissioners.

The Bahamian duo are hoping that the settlement, which is couched in the typical language of them “neither admitting nor denying the allegations” against them, will be reviewed - and approved - by the SEC’s top executives during the 2016 fourth quarter.

“We’re one step closer, but it’s not over yet,” Mr Brown told Tribune Business. “But I think we’re pleased to get to this juncture. It’s a process and we’re pleased with where we are. We’re just waiting to see the conclusion of it.”

A final settlement with the SEC would end more than two years of uncertainty for Benchmark (Bahamas), Mr Brown and their several hundred Bahamian shareholders, who have nervously watched the legal process play out amid concerns over a significant financial impact.

“It’s been a while,” Mr Brown acknowledged, with the SEC action against himself and Alliance having been launched in August 2014. “We’re happy we’re at this point, and we wait to see what develops from here.

“We wait to see what the results will be. It’s [the proposed settlement] in for review and comment, and then to sign-off if they [the SEC] agree. We are where we are, and wait to see what the future brings.”

Mr Brown declined to comment on the details of the proposed settlement with the SEC, given that it has not received final approval.

Any deal will likely also require the approval of the northern Illinois federal court, where the case against himself and Alliance has been filed. A ‘status hearing’ on the matter has been set by the court for October 7, 2016.

Mr Brown and his international broker/dealer have always vigorously denied, and defended, allegations that they facilitated a global ‘Ponzi’ scheme by Nikolai Battoo and his BC Capital Group.

They last year listed 19 defences to the SEC action against them, with the duo arguing that any “wrongful conduct” was outside their control.

Demanding a jury trial over the claims, they denied that they “knowingly or recklessly” assisted any fraud.

And they pledged that they “at all material times complied with applicable Bahamian laws, rules and regulations” as a licensee of the Securities Commission of the Bahamas.

The crux of the SEC’s case was that Mr Brown and Alliance allegedly helped to facilitate the international scheme perpetrated by Battoo.

The US regulator claimed that the Bahamian defendants misled investors by suggesting they were the independent custodian for the BC Capital funds, whereas these monies were all directly in Battoo’s hands.

And it also claimed that Alliance “helped him hide the massive losses by sending out bogus account statements that fraudulently overstated the value of investor assets by more than $148 million”.

However, Mr Brown and Alliance in their defence argued that Battoo directed them to send BC Capital financial statements to the Illinois-based auditors for an investor in the scheme.

And they maintained that the SEC, and US federal securities laws, have no “extraterritorial effect” and therefore cannot touch them in the Bahamas.

“Defendants acted in good faith at all material times and did not directly or indirectly induce or cause the acts” complained about,” Mr Brown and Alliance alleged in their defence.

Denying any “intentional prior wrongful conduct”, the Bahamian duo added: “Defendants did not receive ill-gotten profits, did not act unlawfully, acted in good faith, and investors did not suffer from their alleged conduct.....

“The alleged wrongful conduct was committed by individuals or entities over whom defendants had no control.”

The liquidators for the Bahamian end of Battoo’s scheme, though, previously suggested in reports to the Supreme Court that they believed Alliance had ‘a case to answer’ in relation to BC Capital.

However, the PricewaterhouseCoopers (PwC) accountants, Kevin Cambridge and Gowon Bowe, have been unable to launch legal proceedings of their own due to a lack of funding.

They said: “As previously reported, the joint official liquidators maintain their strong opinion that legal action in respect of a number of previously identified courses of action should be pursued against Alliance to compel Alliance to return the company’s $5 million in Alliance’s preference shares (which itself may not be a realisable asset); complete the registration of the company’s marketable securities and surrender the same to the joint official liquidators; and grant the joint official liquidators access to certain Battoo-controlled accounts where the joint official liquidators believe that investor funds may have been diverted.”