The Tribune

By NEIL HARTNELL Tribune Business Editor CREDITORS of an insolvent Bahamian offshore bank are in line to recover less than seven cents ($0.07) of every dollar owed to them after the Supreme Court refused to give the liquidator leave to appeal a ruling, admitting a $330 million claim, to the Privy Council. The 10th report to the Supreme Court by Baker Tilly Gomez accountant and partner, Craig A. 'Tony' Gomez, is an unwelcome Christmas present for Leadenhall Bank & Trust creditors, as it shows they stand to recover only 6.8 per cent of the sums owed to them. The low recovery ratio is due to the fact that former senior justice John Lyons ruled in favour of admitting a $330 million claim from victims of a US-based 'ponzi' financial fraud to the list of Leadenhall creditors, something Mr Gomez had opposed. The development, though, is a victory for victims of the 'Cash 4 Titles' ponzi scheme, a Georgia-based financial fraud which, although now shut down, suckered investors into placing money with a scheme that loaned low income borrowers funds to purchase vehicles. The 'Cash 4 Titles' victims had alleged that Leadenhall, which was part of the Cash 4 Titles financing structure, was "part of a common scheme of fraudulent conduct, specifically a scheme to misappropriate the funds invested by the Class members in the Cash 4 Titles Enterprise". They obtained a $330.228 million US court judgment against Leadenhall and, through the efforts of their Bahamian attorneys, Peter Maynard & Company, succeeded via the Supreme Court in overturning Mr Gomez's rejection of their claim. The liquidator failed in his bid to overturn Justice Lyons' ruling in the Court of Appeal, and with the Supreme Court refusing to grant leave for a Privy Council appeal, has no choice but to admit the $330 million claim. That has left Leadenhall facing some $357 million in liabilities (sums due to creditors), and only $24.241 million in assets to repay them. Those assets consist of $20.122 million in cash, but some $3.458 million consists of loans receivables, and another $336,148 is accounts receivable. The fear now is that the low recovery rate could turn out to be something of a 'black eye' for the Bahamian financial services industry, as it might encourage some Leadenhall clients to 'bad mouth' this nation's reputation. Elsewhere, Mr Gomez's report disclosed that he had discussed with Evans & Co, his attorneys, taking legal action against Leadenhall's former management. And he also noted that his former attorneys, Callender's & Co, formally applied for leave to appeal the Court of Appeal's Cash 4 Titles ruling to the Privy Council without instructions from himself or the Supreme Court. The Baker Tilly Gomez accountant said Leadenhall was owed $3.458 million, both loan principal and interest, by some seven debtors. Proposals and counter-proposals were going back and forth between himself and a Canadian company, Nuvo, to settle the latter's outstanding loan balance. "Subject to court approval, I agreed for Nuvo, to pay the proceeds from the sale of their property, located at 1405 Denision Street, Markham, Ontario, against their outstanding balance," Mr Gomez said. "Even after the application of this payment there will be a shortfall which the bank will be compelled to write-off." Another problem lay in Leadenhall's off-balance assets being held by Caledonia Corporate Management, the former Bahamas-based broker that collapsed in early 2009 with a $25 million 'black hole'. "We had commenced investigation with Caledonia pertaining to assets which were inadvertently transferred from the bank's HSBC portfolio to one of Leadenhall's clients who also held off-balance sheet assets at HSBC, which was distributed by a court order dated March 13, 2006," Mr Gomez said. "The bank [Leadenhall] at that time held adequate funds on behalf of that client to recover funds." Mr Gomez said he was talking to Caledonia's liquidator, Deloitte & Touche (Bahamas) partner Anthony Kikivarakis, to resolve the matter. Mr Gomez also revealed that a mortgage that Leadenhall held in trust for a group of investors in Whale Cay, the Berry Islands, had been transferred to the Private Trust Corporation. The mortgages had been held in trust for America Investment Properties and Peter Casola Jnr, as security for the loans to Whale Cay Group, because the investors had initially failed to obtain approval for foreigners to own Bahamian land. That approval was eventually forthcoming last year. Mr Gomez said Vanguard Car Rental had also been added to Leadenhall's creditor list for an amount worth $600,000.