Friday, 4 August 2017

Premier fund liquidator liquidated!

EWAN LAMB reports on a potentially groundbreaking Manx court judgement

The provisional liquidator of a debt-ridden Isle of Man investment fund has been relieved of his duties by a judge who then replaced him with an insolvency practitioner nominated by a director of the Group which managed and promoted the bankrupt fund.

It is just the latest twist in the seemingly never ending saga of Premier Group (IOM) Ltd. (PGIOM), the offshore financiers picked out by Scottish Borders Council to bankroll a £21 million waste treatment facility via another of Premier's subsidiaries, New Earth Recycling & Renewables [Infrastructure] Ltd., now also penniless and in the liquidation process.

PGIOM itself has also gone bust while the fund at the centre of the latest controversy is the equally insolvent Eco Resources Fund (ERF) which persuaded investors to put their cash into bamboo plantations in faraway Nicaragua and South Africa.

While both funds were operational the directors of PGIOM, which controlled them collected generous management and promotional fees running into many millions of pounds. The Premier bosses included John Bourbon, a former head of the financial regulatory authority on the Isle of Man.

Last year the current Financial Services Authority (FSA) appointed Gordon Wilson, of CW Consulting, as the controller, then provisional liquidator of ERF which has around 190 investors and was valued at $61 million. It was later revealed that ERF had only £12,000 in the kitty while carrying debts of £2.7 million.

Mr Wilson, in an interim report, raised concerns on a number of fronts and suggested ERF should be dissolved as quickly as possible. He applied to the High Court on the Isle of Man for an order confirming who should be liquidator and deemed official receiver of Eco.

In a witness statement in support of his application, Mr Wilson said: ": "In my opinion, as can be seen from the evidence and the concerns that I set out in my Interim Report there are a number of matters that need to be addressed. It is imperative to objectively get to the bottom of what has happened. 

"I consider that I am best placed to do this and I have the support of the FSA who brought the Claim to wind up [Eco]. I have been involved with [Eco] since June 2016 as Adviser, Controller and Provisional Liquidator and I am in a position to move forward with the liquidation."

But in a separate application Mr Bourbon, who is described as a creditor of Eco, sought the appointment of Mr Michael Simpson of PricewaterhouseCoopers as liquidator.

Mr Bourbon alleged that  Mr Wilson's involvement with Eco had led to a deterioration of Eco's position and would continue to do so and the prospect of any meaningful recovery for Eco's members would almost certainly be lost if Mr Wilson continued to be involved.

Mr Simpson had the benefit of greater resources and capability at his disposal; the overwhelming majority of Eco's creditors and 100% of those members with voting powers were against the appointment of Mr Wilson as liquidator and would welcome the appointment of Mr Simpson.

Counsel for Mr Wilson warned the court that the "rescue package", which appeared central to the application of Mr Bourbon was virtually identical to that which was on the table in 2016 when Mr Wilson stood down as controller of Eco but remained as adviser. 

There were continuing concerns over the involvement of Sustainable Asset Lending Limited ("SAL") - an American finance company involved with the operators of the bamboo plantations - and there was a significant conflict for those making the application (in particular Mr Bourbon) to appoint Mr Simpson and those supporting him.

Mr Wilson had the full backing of the FSA. Their counsel told Deemster David Doyle (the judge) "The FSA continues to have confidence in Mr Wilson's capabilities and his ability to wind up Eco; The evidence has failed to explain how there would be a return for investors by a possible refinancing. The FSA shares Mr Wilson's concerns in respect of the proposed refinancing both in terms of its credibility and also the extent to which it will benefit investors rather than those behind SAL".

Chiva Arthurs, the lawyer representing Mr Bourbon called for Mr Simpson's appointment as liquidator. She said: "The interests of the investors should be considered and a liquidator should consider all options. SAL (the entity which has foreclosed on the plantation companies) is not prepared to deal with any entity associated with Mr Wilson.

"Mr Simpson will have the co-operation of and an untarnished relationship with Troy Wiseman [founder of EcoPlanet Bamboo, the plantation operators] and will have the option of a restructuring or refinancing exercise and creditors could be paid off immediately. A speedy liquidation, as envisaged by the FSA, would mean that the Isle of Man would find itself the focus of a failed investment scheme which would do little for its reputation."

Of course readers should remember that Premier's NERR fund can only be regarded as a "failed investment scheme" with more than 3,250 'shareholders' plus Scottish Borders Council ending up as losers after liquidators Deloitte confirmed there would be no return for NERR's creditors.

Ms Arthurs made a number of claims regarding Mr Wilson's involvement with Eco before stating:"Mr Wilson has aligned himself too closely with the FSA and the FSA's approach to the liquidation and he shares the FSA's lack of appetite to consider, with an open mind, any refinancing/restructuring proposals which may benefit creditors and investors; Mr Simpson has no previous involvement in Eco and will start from a blank canvas".

Deemster Doyle then issued an order that Mr Simpson and not Mr Wilson should be confirmed as liquidator of Eco.

The judge said: "I am concerned over Mr Wilson's previous dealings with, and experience of, Eco and those associated with it such as Mr Bourbon and Mr Wiseman.

Mr Wilson plainly has some significant "baggage" in respect of his previous dealings with the FSA in respect of Eco and those connected with Eco. . I am not persuaded that the appointment of Mr Simpson will incur unnecessary additional costs or unjustifiable further delay."

According to the Deemster the fact that Mr Simpson was Mr Bourbon's choice did not lead the judge to conclude it was inappropriate to appoint Mr Simpson. He was not persuaded that there was a reasonable perception of bias in respect of Mr Simpson."There is no suggestion that Mr Simpson will simply be Mr Bourbon's puppet."

And Deemster Doyle concluded: "It may well be that the liquidator will conclude that it is not realistic to proceed by way of restructuring/refinancing and that the liquidation should be concluded swiftly, but these are essentially matters for the liquidator. The conduct of a liquidation (even a liquidation in the public interest) is not a matter for the FSA, it is a matter for the liquidator.

"He who pays the piper does not call the tune in liquidations, including public interest liquidations. Mr Simpson is an extremely experienced liquidator and I am sure he will waste little time and costs in reacting speedily and robustly if he thinks the offers of assistance are not credible or worth proceeding with." 

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