High cost of NERR fund failure

by OUR BUSINESS STAFF

The Manx financial services regulator has declined to tell us how much a seven-year investigation by liquidators into the worthless New Earth Recycling & Renewables [NERR] investment company cost even though the cash came from the Isle of Man's tax-funded Treasury.

And critics have claimed the failure of the island authorities to hold to account those responsible for the loss of £220 million of investors' money demonstrates serious shortcomings in the supervision of offshore funds like NERR. A number of legal actions have been raised by angry shareholders seeking millions of pounds in compensation.

NERR and its UK business partner New Earth Solutions Group (NESG) were selected by Scottish Borders Council in 2011 to deal with the region's domestic rubbish. But the arrangement collapsed five years later with both NESG and NERR insolvent and the council left with egg on its face and its waste management policy in tatters. The fiasco cost local taxpayers well over £2 million.

As we exclusively revealed this week the NERR liquidators have told the Isle of Man Financial Services Authority (IOMFSA) there is no realistic chance of recovering any of the money ploughed into the fund by 3,250 investors. In 2019 the investigation failed in a bid to have directors of NERR examined on oath when the individuals concerned simply refused to be questioned. Over its lifetime the fund paid millions of pounds in management and promotion fees to those in charge.

In a lengthy if relatively meaningless statement posted on its website, IOMFSA stated: "The joint liquidators of New Earth Renewables and Recycling (Infrastructure) PLC (‘NERR’) have stated their intention to apply for the liquidation process to be terminated and the company dissolved. 

"NERR, part of a group of funds managed by The Premier Group, was wound up in 2016 by the High Court in the Isle of Man. Joint liquidators were appointed to investigate the reasons for the company’s failure in order to determine whether liability could be attributed to any party and if viable claims could be brought. Funding of the liquidation costs is provided by the Isle of Man Government via the Isle of Man Financial Services Authority, which acts as a conduit for the Treasury and the administrators of the liquidation process. 

"The funding arrangement is subject to continuous review on the understanding that it can be withdrawn at short notice. A point has been reached in the liquidation process where the provision of additional taxpayer funding is not in the public interest, other than as required to bring the liquidation to a conclusion. Detailed legal advice provided to the joint liquidators has concluded that further action would most likely be unsuccessful."

The statement included additional notes which explained: " Specialist, Qualifying and Qualifying Type Experienced Investor Funds – the Authority’s remit for such schemes is to register them, receive notifications of changes and supervise their appointed Isle of Man functionaries. Access to such funds is only available where investors confirm that they meet the fund type’s minimum entry criteria. This includes a statutory certification that they have read the scheme’s offering document and understand and accept the specific risks associated with this type of fund, including the loss of a significant proportion or all of the sum invested."

When we asked how much the marathon liquidation of NERR had cost, IOMFSA's spokesman told us: "The Authority cannot confirm the costs associated with the liquidation. In response to an FOI request submitted in 2019 it was determined that the information is exempt from disclosure under paragraph one of schedule 5 of the Financial Services Act 2008."

That Freedom of Information request had been lodged by media outlet Isle of Man Today which has covered the NERR collapse over several years. IOM Today asked:

"1) Please can you supply details of the costs borne by the IoM taxpayer to date in connection with the following companies linked to the Premier Group Isle of Man: New Earth Recycling and Renewables (Infrastructure) and its two feeder funds Premier Investment Opportunities Fund and Eclipse Investment Fund; and, Eco Resources Fund and its subsidiaries ERF Ltd and EcoPlanet Bamboo IoM.

2) Is the taxpayer funding the liquidation costs of any other company linked to, or promoted by, the Premier Group (IoM)? If so, which ones and how much has been expended to date?"

In response, IOMFSA claimed the information requested was exempt from disclosure. The Authority quoted from the Financial Services Act, which “restricts the disclosure of certain information including information which relates to the business or other affairs of any person’ and breach of this restriction is a criminal offence”.

So, how much might the NERR liquidation have cost with insolvency experts able to claim hundreds of pounds per hour for their services?

Not Just Sheep & Rugby investigated the sums claimed by the NESG insolvency team, NERR's brothers in bankruptcy. According to documents filed at Companies House, New Earth Solutions Group and its associate New Earth Solutions Facilities Management's terminators racked up costs of £401,560 from their appointment in June 2016 to completion of the process in July 2017...just over a year.

If the same annual rate is applied to the seven-year liquidation of NERR (2016-2023) without any allowance for inflation, then a figure of £2,810,920 emerges. But no-one will ever know whether that 'rough' estimate is accurate.