The Tribune

By NEIL HARTNELL Tribune Business Editor MORE than 11 years after Mohammed Harajchi's Suisse Security Bank & Trust was put under court supervision, its depositors and creditors have yet to recover a single cent, and are still staring at a collective $19.217 million "potential loss". The main reason they continue to face such a sizeable 'black hole' is because the liquidator has still been unable to recover the $17.717 million that the Harajchis and the bank's management team spirited out of the Bahamas in the days immediately following the Central Bank of the Bahamas' decision to suspend, then revoke, Suisse Security's licence. Raymond Winder, managing partner at Deloitte & Touche (Bahamas), in his third report to the Supreme Court, details another frustrating three years in his efforts to recover the missing funds and return them to Suisse Security's depositors, despite obtaining a Supreme Court injunction preventing Mohammed Harajchi from selling his Paradise Island-based real estate assets. The report, obtained by Tribune Business, describes Mr Winder's efforts over the February 1, 2008, to December 31, 2010, period to retrieve vital assets and bring the liquidation to a close. His main achievement appears to have been to prevent Mohammed Harajchi from selling six land parcels on Paradise Island's southern shore, plus a condominium in Cloisters Estates. Harajchi senior and his son, Michel, had been attempting to realise $25 million from selling those real estate assets, and if the deal had successfully closed they would likely have transferred those funds out of the Bahamas immediately and ceased all connection with this jurisdiction. Mr Winder's report indicates that he is now engaged in something of a 'Mexican stand-off' with the Harajchis. The liquidator has not moved an inch closer to recovering the $17.717 million, but the Supreme Court injunction is preventing Mr Harajchi and his son from realising the full value of the real estate investment. Given that the injunction is likely to remain in place until the allegedly 'missing' Suisse Security assets/depositor monies are returned, it appears that the next move belongs to the Harajchis. They, though, have seemingly been content to allow the stand-off to continue for more than three years, the Supreme Court injunction having been obtained on October 24, 2008. The Harajchis waged a long, bitter campaign to regain Suisse Security's bank licence over a five-year period lasting until 2006. Apart from going all the way to the Privy Council, and losing at all three judicial stages, they started a tabloid newspaper, the Confidential Source, to back their campaign. After helping to finance the then-Opposition PLP to general election victory in 2002, and backing the party in their newspaper, the Harajchis quickly turned their fire on the Christie-led government when it became apparent this was not going to win them back their banking licence. This, and other stunts, made them high-profile figures in Nassau society, but after their Privy Council defeat they wound-up their newspaper and quietly scaled down their Bahamas presence. Other notable findings in Mr Winder's third report are: * Suisse Security's directors and management are still refusing to comply with a 2007 Supreme Court Order directing them to transfer all assets/documents relating to the bank to Mr Winder. * The liquidator has initiated a lawsuit against the Bahamas-based arm of the accounting firm, Pannell Kerr Foster (PKF), alleging that as Suisse Security's external auditor it was "negligent" in failing to uncover, then disclose, in the bank's financial statements that a significant percentage of its assets (depositor funds) were held instead by two Bahamas-domiciled International Business Companies (IBCs). * Just 12.5 per cent of Suisse Security's depositors have submitted claims to the liquidator, despite the bank's accounts stating that total deposits at March 5, 2001, totalled $57.529 million. * Mr Winder and his attorney, Anthony McKinney, had to move quickly to prevent the proceeds from the Village Road Squash Club's sale being transferred to the Harajchis. Mr Winder's report was filed with the Supreme Court in July 2011, but sources close to developments have revealed to Tribune Business there has been no change in the eight months since then. Suisse Security's accounts as at end-December 2010 showed total assets of $23.877 million and total liabilities of $57.594 million, giving a solvency deficiency of $33.717 million - a sum much higher than the $19.317 million loss estimate by Mr Winder. Nevertheless, the Deloitte & Touche (Bahamas) accountant alleged of the Suisse Security liquidation: "The circumstances regarding the assets to be recovered and potential losses totalling $19.317 million remains unchanged.... "I have experienced challenges in the execution of [my duties] because I have been unable to obtain control of all of the bank's assets and records. Specifically, the bank's former directors, management and staff have been uncooperative and have not transferred to me the bank's assets or records in their possession or under their custody." Mr Winder alleged that this was in defiance of a July 16, 2007, Order by Justice Stephen Isaacs directing them to do this. He added that he had prepared written questionnaires to be issued to Suisse Security's former management, but "I was only able to serve two members... due to invalid addresses on file. It should be noted that the information obtained from the two individuals was futile". Elsewhere, Mr Winder said he had initiated legal action against PKF for alleged "negligence" relating to its Suisse Security audit for the year September 30, 1999, to September 30, 2000. "Specifically, the defendant (PKF), who audited the bank's financial statements, erroneously stated in its report to the Central Bank that assets belonging to the bank [were held by it, when they] were in fact being held two International Business Companies, namely Suisse Security Investments and Suisse Security Holdings," the liquidator alleged. Because the Central Bank and Mr Winder were unaware of the two IBCs' existence when Suisse Security's licence was suspended, a 'window of opportunity' was created for the Harajchis to transfer the assets they held out of the Bahamas. Some $5.541 million was held by Suisse Security Investments, and $12 million by Suisse Security Holdings. Together, these account for almost all the assets outside Mr Winder's control, and the liquidator confirmed: "I have identified that $17.717 million remains under the control of the bank's management. The assets belong to the bank's clients and its related companies." But, despite Suisse Security's records as at March 2001 indicating that it had 2,070 deposit accounts valued at $57.529 million, Mr Winder said he had received just 385 claims worth $47.278 million. Of these, the liquidator said he had accepted 206 claims worth a collective $27.309 million, but had to-date rejected the remaining 176, valued at $19.969 million. Mr Winder said these were rejected because clients had either failed to follow his instructions or had not provided documents to back-up their claims. He had, though, reserved $12.956 million as a contingent liability, should some of the rejected 176 claims challenge his decision in the Supreme Court. As for Suisse Security's former 105 securities trading clients, less than 25 per cent - just 24 - have filed official claims with Mr Winder. Three have seen securities worth $575,115 returned to them, with the liquidator holding some $4.568 million belonging to other clients as at December 31, 2010. Meanwhile, Mr Winder alleged that Suisse Security's management and shareholders had run-up a $14.709 million overdraft as at the time the bank was placed into liquidation. Securities held on their behalf were valued at $4.605 million, and dividends paid on these - amounting to $85,363 - will be used to reduce the overdraft. Then there was the saga of the Village Road Squash Club. Mr Winder alleged: "In September 2007, my attorney informed me that he was alerted that property known as the Village Road Squash Club was purportedly being sold by a company known as MED Holdings Enterprises. "I was also advised that MED was ostensibly owned by Samantha Harajchi, the wife of Michel Harajchi, Mohammed Harajchi's son. From the research conducted, we discovered that MED was incorporated by Mohammed Harajchi, and is possibly beneficially owned by Mohammed Harajchi, with Samantha Harajchi being only a nominee." Mr Winder added that attorney Derek Ryan, and Ryan & Co, who had represented the Harajchis in the Suisse Security matter and acted as the bank's secretary, were representing MED in the sale. And he alleged that Ryan & Co, knowing full well the Suisse Security liquidation and proceedings against Mr Harajchi, had sought a Supreme Court declaratory Order in September 2007 over who owned funds derived from the Village Road Squash Club sale. "In response to this, along with the knowledge that a substantial amount of the bank's assets remained outside of my control, and possibly outside the jurisdiction of the Bahamas, I initiated an application for an injunction restraining Ryan & Co from issuing the proceeds of sale of the Village Road property to anyone until further ordered," Mr Winder alleged. This, along with a penal order was granted, and Mr Winder further sought to obtain the remaining Village Road sales proceeds until all funds due to Suisse Security were accounted for and no "shortfall" due to the Harajchis remained. The Supreme Court ordered that the remaining $270,000 sales proceeds balance be transferred to an account under the joint control of Mr Winder's attorneys. In the event, Ryan & Co transferred just $122,338, alleging that the difference was due to legal fees payable to him for acting in the property's sale. A further $510,000, the remaining balance from the Village Road sale, was also supposed to be located as per the Supreme Court Order, but it is unclear if this ever happened. Mr Winder, meanwhile, said he was informed by attorney Jennifer Mangra on December 17, 2010, that the action against MED over the Village Road property had been dismissed by the Court of Appeal. She demanded that the $122,338 be paid over to Samantha Harajchi. "This matter is still pending, as the injunction granted to me as the official liquidator remains in place and was not the subject of the above noted appeal," Mr Winder alleged.