New Earth fund 'a £300 million ponzi scheme'

SPECIAL FEATURE on shocking revelations about Borders council's waste project 'funders'

An international investigator involved in a global probe into the mis-selling of worthless investments to hundreds of UK expats has claimed an offshore fund which was to bankroll a £23 million project for Scottish Borders Council was one of several 'ponzi schemes' used to defraud elderly investors of their life savings.

Australian barrister Niall Coburn, in written evidence to a House of Commons Select Committee inquiry, levelled allegations of "malfeasance or negligence" by the operators of the New Earth group of companies and sub-funds.

The Premier New Earth Recycling & Renewables (NERR) fund, based on the Isle of Man, suffered a catastrophic financial collapse in 2016, and remains the subject of an investigation by liquidators, who says Mr Coburn "cannot find the majority of funds that have 'gone missing'".

The NERR fund featured regularly in these columns from 2015 onwards following the Borders council's decision to abandon a multi-million pounds partnership project with New Earth Solutions Group (NESG) which also plunged into liquidation shortly after the dissolution of its £80 million waste management contract with SBC.

We attempted to discover the reasons for the termination of a deal which was meant to solve the local authority's waste management issues by delivering a state of the art treatment facility at Easter Langlee, Galashiels.

According to a 'strictly private and confidential' document dated March 2013 and uncovered via Freedom of Information, the funding required for the integrated waste treatment and energy recovery facility was expected to be in the region of £23 million.

The default funding solution was to source 97.5% (£22.4 million) of the capital expenditure requirement from NERR. The document states: "This is consistent with the funding solution envisaged at contract award".

And senior officers at SBC were told: "The NERR investment funds have raised over £166 million since launch in 2008. NERR has raised £30 million in the last five months with significant new business being generated in the UK, Europe and Asia".

A consultant's report, paid for by SBC, concluded: "On reasonable assumptions, NERR will hold sufficient cash funds to fully fund the capital costs of the Scottish Borders project in line with the proposed development timetable".

But at the end of the day the council's involvement with the insolvent NESG and the worthless NERR fund cost local taxpayers considerably more than £2 million, much of it handed over to law firms and 'specialists' who obviously did not see through the doomed New Earth partnership.

Mr Coburn, head of Coburn Co-operative Intelligence (CCI), has been a prime mover in the preparation of Class Actions aimed at two insurance giants who are said to have allowed at least half a dozen failed funds, including NERR, onto their respective investment platforms.

The CCI website explains: "Old Mutual International (formerly Skandia International) (OMI) and Friends Provident International (FPI) sold investment products described as “Portfolio Bonds” or “Insurance Bonds” (with specific product names such as the “Executive Investment Bond” and the “Reserve Investment Bond”).

"These investment products are referred to as “Bonds” and were sold to customers all over the world – in particular, expatriate retirees. The capital invested in the Bonds was placed in various funds which have now failed or suffered substantial losses"

Solicitors in London, advocates in the Isle of Man and Queen’s Counsel have prepared both claims which were issued by the Isle of Man High Court and served on both defendants. They are likely to be for a combined total of more than £100 million.

In his written evidence to UK parliamentarians, Mr Coburn said: "This submission gives an outline of two Class Actions undertaken by about eight hundred investors, who lost between £145 million and £200 million. It shows that the illegal operations of two insurers involved in deception, misrepresentation, mis-selling of financial products designed in London to elderly UK investors is hugely under-reported.

"The submission outlines how major companies licenced in the UK have consistently misled elderly savers by failing to disclose the true risk of certain investment products that are dressed up as low risk, but the reality is that they have been deceptive and “fleeced” thousands of UK investors by knowingly not disclosing the true risks. CCI is acting on behalf of approximately 800 international investors who, between 2006 and 2013, purchased unit-linked life assurance bond products in Thailand, Indonesia, Cyprus and UAE (and one couple in the UK) (Bonds).

His investigation showed the majority of the clients were UK elderly retail investors who were expats in various countries or some who resided in the UK and were advised to invest in the Isle of Man and Channel Island jurisdictions. Investors needed to make a minimum investment of £25,000 to £50,000 to be approved for a Bond application. Once a bond was incepted, clients then had access to purchase units in collective investment schemes on a Bond platform.

In specific references to the NERR fund Mr Coburn wrote: ".Between 2008 and 2013, New Earth funds were registered in the IoM in relation to a waste management group of companies, operating in the United Kingdom. New Earth sub-funds were linked to insurance company portfolio bonds available only to “qualifying” investors.

"New Earth was approved by the insurers, in London and the IoM, to be placed onto the Bond platform and recommended to IFAs [Independent Financial Advisors] as intermediaries to the insurers. The IFAs recommended the investment in New Earth and raised approximately £200 million internationally.

"Between 2008 and 2013, New Earth sub-funds were marketed as an opportunity for 'qualifying' investors to profit from landfill diversion and renewable energy. The aim of the company was to provide long term growth by investing directly or indirectly in recycling facilities in the UK. In or about 2013, the New Earth group of companies raised additional capital of between £200 to £300 million via an initial public offering.

"New Earth units were to be sold by intermediaries via insurance company portfolio bonds for “qualifying” investors. However, there were no warnings of the risk to investors and the insurers accepted application forms from retail investors, without any attempt to distinguish between professional and retail investor classification."

On 16 June 2016, New Earth group of companies and its funds went into administration and on 31 August 2016, went into liquidation with Deloitte appointed as liquidator.

"There appear to be serious issues that relate to malfeasance or negligence on the part of the operation of the New Earth group of companies and the sub-funds. The liquidator continues investigations and cannot find the majority of funds that have 'gone missing'. Again, many investors from the UK lost their funds", says Mr Coburn.

He concludes: "The truth is that no professional investors would invest in these funds because they were “ponzi schemes” and so the real target was unsuspecting retail investors with significant or life savings to invest. The truth is these bonds from inception targeted the retail investor market, whereas they should have only been sold to sophisticated investors."