DOUGLAS SHEPHERD reports
One of two bankrupt investment funds whose bosses were involved in a disastrous waste management contract in the Scottish Borders, is now mired in allegations of mismanagement, potentially disturbing conflicts of interest, and stands accused of "significantly letting down investors".
A hard-hitting report from the provisional liquidator of the Isle of Man-based Eco Resources Fund (ERF), which collapsed last year with debts estimated at £2.8 million and which left shareholders with nothing, includes new information concerning the demise of the ERF which 'invested' in bamboo plantations in Nicaragua and South Africa.
A similar investigation - said to be extremely complex - is continuing into the affairs of the equally bankrupt New Earth Recycling & Renewables [Infrastructure] fund (NERR) which also recorded financial deficits running into millions of pounds.
Both funds were managed and controlled by Premier Group (IOM) Ltd.,which also happens to have gone 'belly-up'. Full reasons for NERR's failure are not expected to emerge before September at the earliest. This was the investment vehicle which was meant to fund a £21 million waste management facility for Scottish Borders Council, and the failure to deliver the project left local taxpayers with a bill of at least £2.4 million.
Meanwhile, back in "bamboo-land" the ERF, like NERR, cannot even afford to pay for its own liquidation. The fees of the insolvency specialists now probing the useless fund will be met by the Manx Financial Services Authority. Some creditors, investors and shareholders believe there should be a criminal investigation into the running of the two funds.
So far as ERF is concerned, liquidator Gordon Wilson - he was previously an adviser to the fund - has already submitted a number of confidential reports to the authorities, and extracts from those documents have now been made public.
Mr Wilson explains: "We submitted a preliminary report as adviser in July 2016. In short, we reported that the fund was at the top of a complex structure, arguably an overly complex structure, the entirety of which had been in financial difficulties for some time. We concluded that it was desirable, and seemingly in the interests of all concerned, to undertake a restructure."
At that juncture Mr Wilson's appointment was upgraded to controller of the fund with the aim of putting the new structure in place along the lines of his suggestion by negotiating with all of those who had an apparent financial interest in the underlying assets.
However, the report reveals: "That was not possible for a variety of reasons and having concluded we could not, as controller, materially improve the situation for the fund's investors, we reported our findings to the authority in August 2016. Our controller position was then terminated and we were re-appointed adviser. Control of the fund passed back to the board."
Three months later ERF's directors reached the conclusion that the fund could no longer continue "by reason of an excess of liabilities over assets",
Mr Wilson reports on a meeting of the fund's investors in December at which a resolution for Eco's liquidation was put to a vote. The resolution failed because a majority of investors who voted were against liquidation.
The liquidation report states: "There are around 33.7 million Eco shares in issue and votes were received from holders of 16.8 million of them; i.e. around 50% of investors voted. That was enough to make the meeting quorate. However, we feel that it is nonetheless significant that half of the investors in the fund did not vote.
Of the 14.6 million votes against liquidation, 9.577 million were associated with Troy Wiseman's Eco Bamboo Group. Mr Wiseman, described as an American entrepreneur, runs the businesses which manage the bamboo plantations.
A further 1.41 million votes were associated with an individual named Paul Feldman. Mr Wilson explains that both men are associated with a US company called Sustainable Asset Lending (SAL) which is understood to effectively own the plantation assets after making finance available.
"Of the 3.16 million ex Wiseman/Feldman votes against [liquidation], some 2.736 million were from one shareholder, a Mauritius-based insurance company", says the report. "We have recently spoken to that investor who explained to us that they had not apparently seen the investor communications nor had they any appreciation of the fund's financial difficulties.
"Rather they had approached Mr Wiseman who had shared a 'favourable financial projection' with them. On that basis, they voted against liquidation thinking a better outcome would be achieved. It is therefore apparent that the votes cast by and the related actions of Messrs Feldman and Wiseman, two individuals with a vested interest in SAL (therefore an arguable vested interest in the fund not succeeding in any action against SAL) have significantly swayed the liquidation vote.
"We believe that this calls into question the legitimacy of the vote outcome as a proxy for the views of the wider investor group".
MORE ON THIS STORY TO FOLLOW....
Meanwhile you can read a comprehensive analysis of the trials and tribulations of ERF and the Eco Bamboo 'empire' on the Redd Monitor website at http://www.redd-monitor.org/