The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Creditors of Mohammed Harajchi’s long-defunct Suisse Security Bank & Trust will “soon” receive their first payout, equivalent to 10 per cent of their total claim, following two key Supreme Court decisions.

Acting Justice Ian Winder, in a May 27, 2014, Order, ruled that claims by Suisse Security depositors “shall not be automatically” accepted and paid by the liquidator because a key provision in the new Companies Liquidation Rules did not apply to this particular winding-up.

The court backed assertion’s by Raymond Winder, the Deloitte & Touche (Bahamas) managing partner and Suisse Security liquidator, that Order 16, Rule 7 did not apply because the bank’s accounting and record-keeping were so bad.

Under Order 16, Rule 7, the only time depositors at insolvent Bahamas-based banks are now required to submit a ‘proof of debt’ is if the liquidator believes the institution’s account records are “unreliable” - a description that fits the Suisse Security case.

“A number of depositors that applied, the balances they were claiming were different from what the bank had in its records,” Mr Winder told Tribune Business.

“Those disagreements went back and forth. We had a number of people who applied who did not have deposit balances, and for others the amounts they were claiming did not agree with the bank’s records.”

Mr Winder said a key factor in some of the discrepancies was that Suisse Security had instructed depositors to place funds with two International Business Companies (IBCs), Suisse Security Investments and Suisse Security Holdings, rather than the bank. These monies ‘topped up’ deposit levels at the bank as necessary.

“That created a challenge,” Mr Winder said. “If they hadn’t created those two front companies, it would have been a lot easier. Things were not as clear as they ought to have been.

“Notwithstanding that, we will be declaring a 10 per cent dividend any time soon. We’ve already gone through the process of court approval and so forth. We are making sure only those individuals who we have been able to verify and agree their claim will be paid.”

This impending dividend payment represents the first recovery for Suisse Security and Mr Harajchi’s creditors since the bank was placed into voluntary liquidation in 2001 - some 13 years ago.

Mr Winder became the official liquidator some four years later, and he yesterday said returns to Suisse Security creditors could “potentially be very attractive” if he is able to recover the funds the bank’s ownership and management transferred from the two IBCs, and out of the Bahamas, before he could bring them under his control.

Mr Winder’s last report to the Supreme Court, in 2011, said creditors were still staring at a collective $19.217 million “potential loss”.

The main reason they continue to face such a sizeable ‘black hole’ is because he has been unable to recover the $17.717 million from the two IBCs.

Yet Mr Winder still has a Supreme Court injunction preventing Mr Harajchi from selling his Paradise Island-based real estate assets.

These include 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 is still engaged in something of a ‘Mexican stand-off’ with the Harajchis, and yesterday said he was “still pursuing” the $17.717 million - both via the real estate liens “and some other things we’re looking at”.

The Deloitte & Touche executive said Justice Winder’s May 27 Order meant he also did not have to set aside funds for future claims by Suisse Security depositors, although those able to subsequently prove their claims would receive any dividends missed out on.

And, in an earlier May 19, 2014, Order, Justice Winder ruled that Suisse Security depositors who paid their monies into the IBCs would be accepted as creditors, provided these transactions happened prior to the liquidation.