Directors of council's chosen investment fund raked in over £1 million

EXCLUSIVE by EWAN LAMB

A director of the offshore investment fund which was lined up by Scottish Borders Council (SBC) to finance a £23 million waste treatment plant received £907,000 in fees during his tenure even though the fund itself turned out to be worthless and could not deliver the vital Borders infrastructure project.

This latest revelation concerning the Isle of Man-based New Earth Recycling & Renewables [Infrastructure] fund (NERR) emerged during a Manx court hearing last Thursday when a judge was asked to order former director Michael Richardson and his colleague John Bourbon - Mr Bourbon was paid £138,000 for his involvement with NERR - to be summoned and examined under oath.

Both men have declined requests from Deloitte's, the NERR liquidators, to be interviewed as part of the winding up process of the fund and two of its feeder entities. Premier Investment Opportunities Fund and Eclipse Investment Fund.

The highly complicated liquidation involving the examination of more than 200,000 documents has been ongoing since 2016 - a year after SBC terminated its failed contract with NERR's business partners New Earth Solutions Group. The investigation into NERR's affairs is being paid for by the Isle of Man Financial Services Authority (IOMFSA).

Ironically, Mr Bourbon was once Head of Supervision at the Isle of Man Financial Supervision Commission, IOMFSA's predecessor, then served as Managing Director of the Cayman Islands Monetary Authority from 2000 until 2002. He has previously accused the Manx regulators of mounting a witch-hunt against the managers of the ill-fated fund.

It is understood that the application in the IOM High Court to have both men examined on oath is the first such application to be made in the island.

A report of the court proceedings by Isle of Man newspapers says Deemster (judge) Andrew Corlett was told 3,000 investors had placed a total of £171 million in the NERR fund. But the investigation had so far failed to establish what had happened to the money.

"Last audited accounts at the end of 2014 showed the companies had a net asset value of £200 million. But despite that massive investment, the group of companies had failed and the assets are now zero or near zero, with no likelihood of any return to the investors", the court heard.

Advocate Rob Long, for the liquidators, told the court that neither Mr Bourbon nor Mr Richardson are subject to any proposed proceedings and currently there was no intention to bring proceedings against them.

‘In this case there are no proceedings afoot. They are currently not litigation targets although that may change,’ he said.

Although the liquidators had in excess of 200,000 documents relating to the companies’ failure Mr Long said these only told part of the story.

He said the liquidators wanted to know the ‘thought processes’ of the key individuals in relation to the companies’ promotions, affairs and dealings. ‘There is no other means of obtaining this information. It’s not in the documents,’ he said.

But the advocate for the three companies said the liquidators had failed to demonstrate a reasonable requirement for the information sought in the order.

She said this was an ‘indiscriminate’ application that was ‘carte blanche’ in its scope.

In another interesting twist Isle of Man Newspapers has requested that Deemster Corlett makes a ruling on whether the examination, if it is approved, should be held in public, arguing it is in the public interest to have any proceedings conducted in open court.

Mr Long said the hearing would be held in private, although the section of the appropriate Companies Act used does not specify this. It is for the Deemster to decide one way or the other.

Judgement in the case has been reserved.

When SBC finally ditched New Earth Solutions Group and NERR after squandering at least £2.4 million of local taxpayers' cash the reasons given in a council press release were "project specific issues in terms of technology and funding".

It is only now, three years out from the abandonment of the disastrous venture that the public is beginning to learn why the funding aspect of the rotten deal collapsed. Perhaps there will be further disclosures to come as the liquidators continue their work.

The Borders local authority has repeatedly claimed that it carried out adequate "safety checks" on New Earth Solutions and its financial backers before and after it got into bed with them.

Yet it has since emerged that it was investors' cash from NERR which was used to keep New Earth Solutions from going under during the four years the contract contract was 'live' and long before the Group became officially insolvent. In fact the 'waste management specialists' handed a multi-million pounds contract by SBC owed NERR £39 million by the time both partners went bust.

Disgruntled investors believe NERR's links with Scottish Borders Council and other local authorities gave the fund credibility and assisted those financial advisers who promoted it even though NERR was unregulated and 'high risk' .

Unfortunately all efforts to have an independent investigation carried out into SBC's role in the Easter Langlee waste project debacle have fallen on deaf ears.