"evidence of how some clients have become dissatisfied with the liquidation's progress."

September 23, 2010

Published On:Thursday, September 23, 2010

By NEIL HARTNELL

Tribune Business Editor

By NEIL HARTNELL

Tribune Business Editor

A client of a former Bahamian broker/dealer, which collapsed after sustaining a $25 million trading 'black hole', has alleged it is suffering "loss and damage" as a result of the liquidator's failure to date to return some $277,735 of its assets. It is also vigorously denying the liquidator's claim that it wrongly received $562,987 from the broker after it was placed under Supreme Court-supervised liquidation.

Andrew Crosbie-Jones, a director of Bahamas-based financial institution, The Private Trust Corporation, in an August 16, 2010, affidavit filed in the Supreme Court to support a summons filed on behalf of Ingelby Holdings, alleged that Caledonia Corporate Management's liquidator had failed to justify why he had not returned the company's assets. Nor had he produced documentary evidence to back his conclusion that Ingelby had received a 'preference' through the $562,987 payment.

The affidavit, which is supporting a summons seeking a Supreme Court order requiring liquidator Anthony Kikivarakis, the Deloitte & Touche (Bahamas) partner, to transfer a mix of cash and securities that Caledonia held on Ingelby's behalf, is evidence of how some clients have become dissatisfied with the liquidation's progress. Mr Kikivarakis did not return a phone message left by Tribune Business at his office.

Mr Crosbie-Jones, giving evidence in The Private Trust Corporation's capacity as trustee of the trust that owns all Ingelby Holdings' shares, alleged: "It was the hope of Ingelby that this matter could be resolved without requiring Ingelby to issue a summons to compel the official liquidator to transfer its assets.

"The official liquidator's failure to do so and to provide evidence to Ingelby justifying his refusal to do so is causing Ingelby loss and damage. The assets held by the official liquidator are currently valued at approximately $277,735."

He further alleged: "The $562,987, which the official liquidator alleges was received by Ingelby after Caledonia was placed into liquidation, were not assets managed by Caledonia. These were assets held in a separate account in Ingelby's name, and which account the former officers of Caledonia were signatories, and at no time were these assets administered by Caledonia. Caledonia has no authority to deal with these assets.

Method

"In respect of the $5.909 million that was allegedly transferred, the same method of holding these accounts was used, and they at no time constituted assets under the management or control of Caledonia."

Mr Crosbie-Jones alleged that Mr Kikivarakis had not met with Ingelby's attorneys, Alexiou, Knowles & Co, "to explain his concerns" regarding the return of Ingelby's assets, or the conclusions he had drawn in previous reports to the Supreme Court.

Describing Ingelby as a fiduciary client of Caledonia, Mr Crosbie-Jones added that the company had complied with Supreme Court orders to pay 2 per cent, followed by an additional 8 per cent, of its assets into escrow accounts to fund the liquidation.

That meant the official liquidator retained 10 per cent of its assets.

After Mr Kikivarakis allegedly failed to tell Mr Crosbie-Jones why Ingelby's assets had not been transferred as promised, Alexiou, Knowles & Co sent the liquidator a letter on August 26, 2009, demanding that this happen and that he "give an explanation" for why this had not happened. Legal action was also threatened.

In his September 1, 2009, response, Mr Kikivarakis alleged that Ingelby had received the $562,987 after Caledonia was placed into liquidation on February 12, 2008.

He also expressed concern that "the beneficial owner of Ingelby was a preference shareholder of Caledonia, and received a number of payments prior to the date Caledonia was placed into liquidation. It was necessary for him to meet with the beneficial owner of Ingelby prior to approaching the Supreme Court for the release of assets held on behalf of Ingelby".

In response on September 22, 2009, Alexiou, Knowles & Co asked the liquidator to "identify the payments allegedly received, the dates the payments were received, and to whom the payments were made" in relation to the $562,987. They purportedly received no response.

Further correspondence was exchanged, including an alleged October 15, 2009, letter asking for a meeting to discuss Mr Kikivarakis's concerns regarding this and the alleged $5.909 million that was sent to five former Caledonia clients after the firm was placed into liquidation.

Caledonia collapsed into liquidation after suffering an almost-$25 million trading loss, which resulted when Jitney, its Canadian correspondent broker, sold off assets to cover an overdrawn margin loan balance that was not collateralised by the client who had created the 'hole' in question.

That overdrawn balance was in an account operated nominally by a Ron Wyles, whose trading activities were directed by George Georgiou, a Canadian who has since been of securities fraud in.

Much of the fraudulent activity was allegedly directed from the Caledonia account.

Jitney ended up selling off assets belonging to Caledonia clients other than Wyles/Georgiou because they were all pooled in one omnibus account with it, with no segregation. The duo had allegedly been engaged in short-selling, a high-risk trading strategy supposedly collateralised by so-called 'penny stocks', and incurred substantial losses that eventually sunk Caledonia.