Sunday, 13 September 2015

Bamboo and bamboozlement!

With Scottish Borders Council about to be given the "all clear" by external auditors KPMG for their handling of the disastrous waste management contract with New Earth Solutions, DOUG COLLIE catalogues more disturbing information about the offshore consortium chosen to bankroll the abandoned deal.

Four years after commissioning a contractor, and an investment fund based in a tax haven to build a waste management facility at Easter Langlee, investigations by officials at Scottish Borders Council confirmed the firm's technology was not fit for purpose while their funder was incapable of financing the project.

The devastating conclusions from this overdue bout of so-called due diligence carried out earlier this year resulted in the abandonment of the project contract with New Earth Solutions (Scottish Borders) Ltd, but not before millions of pounds were squandered on the failed venture.

SBC had obviously been sufficiently impressed by NES and its financial partner, Isle of Man-based Premier New Earth Recycling and Renewables (Infrastructure) PLC (known as NERR), when the original contract was signed in March 2011. So were rigorous checks made into the background of the two organisations at that time?

Were councillors and officers aware, for instance, of the links between NES (Scottish Borders) Ltd, NERR, and a collection of other Premier Group funds investing in a diverse range of real estate and commodities, among them bamboo plantations in Nicaragua and South Africa?

At least one director of the council's contractors - David Whitaker - is also a board member of Premier Group and finds time to serve as a director of several funds in that group's portfolio. Management shares in the NERR fund are held by Premier Group Distribution Inc, a British Virgin Islands company part owned by a trust of which Mr Whitaker is the major beneficiary.

According to NERR's promoters (Premier Group) the Fund had assets of over £100 million by 2012 and net assets of £200 million in 2013. But Premier Group warned during 2014 that up to £150 million would be required to develop planned waste treatment facilities including the one involving SBC. The sum needed was "well beyond the capacity of the fund without substantial external finance".

Dealings in NERR were suspended in February of this year, only days after the Borders contract collapsed in complete disarray. Investors and shareholders continue to make strenuous efforts to rescue their cash while Mr Whitaker and his colleagues mastermind the planned split of the New Earth Solutions businesses into separate entities.

NERR may have been incapable of providing cash for the Easter Langlee facility, but its six directors and various other administrators and a custodian [?] have been collecting lucrative fees along the way.

Literature promoting NERR to potential investors shows the extent of payments and rewards being taken from the fund. Administrator Moore Fund (Isle of Man) is entitled to a minimum annual fee of £75,000 while Premier's involvement as promoter guarantees them up to five per cent of subscription monies for shares plus a performance fee.

The custodian - BNP Paribas Securities, of St Helier, Jersey - receives a minimum of £40,000 per annum while each of NERR's six directors plus two members of the investment committee pick up at least £15,000 each - a grand annual total of £120,000 because the fund has assets of more than £100 million. All fees are payable even if the fund is suspended.

The arrangements at NERR are mirrored in several other investment funds controlled and managed by Premier Group.

In the case of Premier EcoResources Fund, which appears to have more than $36 million riding on the success of several bamboo plantations in Central America and the eastern cape of South Africa, the fees are even more generous than those emanating from NERR. Again the management shareholder is Premier Distribution Inc, registered in the tax haven of British Virgin Islands.

The bamboo forests, which represent the fund's underlying assets, are not producing income at the present time and will not do so until the first harvest set to take place towards the end of 2015. Meanwhile the fund's listing on the Channel Islands Securities Exchange was suspended in May 2015. 

The latest financial statements reveal there has been a "disappointingly high" level of redemption requests from investors, and the directors have closed the fund to redemptions until the liquidity position improves, possibly in 2017. But a further $15 million will be required to guarantee success.

Fees paid to the manager, administrator, custodian, promoter, directors, investment committee members together with sales and marketing costs are stated in two separate currencies, and add up to £87,000 and $2.67 million respectively. But the net asset value of the fund is "less than £5 million".

Individual payments included management and promotion fees of $90,906 and $585,071 to Premier Group. Those sums represent a massive increase from 2013 when the management fee was $21,740 and the promotion fee totalled $233,138. Moore Fund picked up an administration fee of $121,339 ($52,450 the previous year) while sales and marketing expenditure increased from $905,897 to $1,843,371. In addition, individual directors were rewarded with pay-outs of £12,500.

There isn't enough space here to set out details of at least  five other Premier Group funds and their affiliated fees.

Premier Property Options Fund recorded a total loss of £1.389 million in 2011 - the year SBC signed their original deal with New Earth Solutions and NERR. The Premier Balanced Fund racked up fees of £170,758 in a single year while the Premier Diversified Property Fund's accounts for 2014 reported a net loss after tax of £13.6 million with redemptions from the fund deferred.

Meanwhile the Premier Portfolio Fund, in the year to October 2014, sustained a total comprehensive loss of £531,150 but disbursed total fees of £206,000. And the Premier Low Risk Fund with nine sub-funds including with-profits endowment policies handed out £373,000 in fees to Premier Group and others.

A representative of a group of investors now attempting to extricate their cash from NERR joked: “Perhaps SBC could rekindle their relationship with Premier Group with a view to developing a waste plant powered by bamboo shoots!”

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