The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Two guardians for the late Sir Jack Hayward’s family trust were allegedly removed so Hannes Babak and Andre Feldman could gain complete control of talks to sell the Grand Bahama Port Authority (GBPA) to the world’s largest asset manager.

Richard DeVries, who together with ex-GBPA chief financial officer, Ian Barry, was removed as a trustee, claims that Messrs Babak and Feldman believed they were “exclusively entitled” to deal with all the trust’s affairs - including the negotiations with the $4.5 trillion BlackRock.

In an affidavit filed with the Supreme Court last Friday, Mr DeVries implies that the duo falsely claimed he and Mr Barry were negotiating a “clearly dangerous and unworkable” deal with BlackRock as a pretext to force their removal (see other article on Page 1B).

He pointed out that Messrs Babak and Feldman immediately picked up ‘where they had left off’ with BlackRock following their removal as trustees.

Tribune Business revealed last year how Messrs Babak and Feldman persuaded the elderly protector for the Hayward trust, Keith Griffiths, to remove Mr DeVries and Mr Barry as trustees.

This left Prometheus Services Ltd, a company that Messrs Babak and Feldman subsequently admitted to owning, as the sole trustee looking after the Hayward trust and its main asset - the 50 per cent equity stake in the GBPA and its Port Group Ltd affiliate.

Now, hitting back, Mr DeVries is implying that Mr Babak and Mr Feldman engineered matters to their advantage such that any purchaser of the Hayward family’s GBPA interest must negotiate with and/or be brought to the table by themselves - to the exclusion of all others.

As a result, the GBPA’s fate - and that of Freeport, its 60,000 residents and the city’s future development - rested very much in the duo’s hands until the Hayward children and grandchildren successfully persuaded the Supreme Court to replace them with Judicial Trustees.

“I make the general comment that Mr Feldman [in his affidavit] appears to consider himself and Mr Babak to be exclusively entitled to deal with all matters of the trust, which I believe is why Mr Babak and Mr Feldman tried to discharge Mr Barry and I as trustees of the trust,” Mr DeVries alleged.

Denying the allegations made against him, Mr DeVries claims he never knew Mr Feldman was a beneficial owner of Prometheus Services until after the latest fight erupted in the Hayward estate.

This was despite Mr Feldman acting as attorney for both Sir Jack’s family trust, and himself and Mr Barry as trustees.

Admitting that he found Mr Feldman’s attitude “strange” prior to discovering this, Mr DeVries alleged: “I have now discovered (by the Feldman affidavit and the recent affidavit of Mr Babak in this matter) that Mr Babak and Mr Feldman have now ultimately orchestrated matters to ensure that they collectively are exclusively entitled to deal with all matters of the trust.”

Mr DeVries claimed that apart from removing himself and Mr Barry, and their control of Prometheus, Mr Babak and Mr Feldman had also persuaded Mr Griffiths to appoint them as co-protectors for Sir Jack’s trust.

He alleged that this had undermined the safeguards built into the trust structure, and further cemented Messrs Babak and Feldman’s grip on the Hayward family assets and GBPA (until Prometheus’ removal by the Supreme Court).

Protectors are typically appointed to watch over trustees, and Mr DeVries’s affidavit implies that the ‘guardians were now watching over the guardians’ in the Hayward trust’s case. In effect, Messrs Babak and Feldman were now watching over themselves.

“By these actions, Mr Babak and Mr Feldman have created the factual situation where they collectively have absolute, certain and irrevocable control of the trust (as they now control both the protector position and the trustee position),” Mr DeVries alleged, “which I believe is wholly contrary to the intention behind the establishment of the protectorship regime (a fiduciary role for the protection of the beneficiaries) in the trust which, unless changed voluntarily, can now only be changed by a court Order doing so.”

Mr DeVries said talks with BlackRock over the GBPA’s sale were at a very early stage when he and Mr Barry were removed, and alleged: “This is evidenced by BlackRock’s willingness to continue progressing the negotiations with Mr Feldman, which appear to have been conducted by Mr Feldman and Mr Babak without the St Georges’ involvement.”

The Canadian barrister claimed this was contrary to the 2010 settlement ending the litigation between the Haywards and St Georges, which committed both sides to work together to sell the GBPA.

Mr DeVries then dismissed Mr Feldman’s assertion that he and Mr Babak, and the knowledge they had accumulated, were essential to maximising the benefits of any GBPA sale for Sir Jack’s descendants.

He described the duo as “useful resources, nothing more”, and added: “They are not integral to any sales process, as Mr Feldman states.

“Notwithstanding Mr Feldman’s lengthy history with the trust, I did not agree that Mr Feldman had to be ‘directly involved’ in the negotiations for the sale of [GBPA] as attorney for the trust, especially as I believe Mr Feldman has no significant experience respecting either corporate financings or significant sale and purchase transactions.”

Disclosing that he had been the principal in three transactions with Goldman Sachs, the investment bank, Mr DeVries also rebutted Mr Feldman’s complaints that he was given “limited information” on the BlackRock deal.

“Mr Feldman was the trustees’ attorney,” he alleged. “Prometheus, Mr Barry and I were the clients. Clients do not have a duty to report to their attorney, and I certainly did not believe I needed to report to Mr Feldman.”

Mr Feldman, in a November 5, 2015, affidavit, “rejected” accusations by the Hayward children and grandchildren that he had acted “improperly”, or that there had been any ‘self-dealing’, in helping to remove Messrs DeVries and Barry.

Yet he also confirmed: “Mr Babak and I each beneficially own one of the two corporate directors of Prometheus, and we are together the beneficial owners of Prometheus.”

Mr Feldman also conceded that Mr Babak and himself are the “ultimate controllers” of Prometheus.

Mr DeVries, meanwhile, also alleged that despite acting for the Hayward Trust, Mr Feldman never told himself or Mr Barry that he had agreed to represent another prospective GBPA purchaser in its transaction.

This was the bid from UK-based Highgrove Securities, backed by Kell Ryan, a member of the family that founded Ireland’s well-known Ryanair airline.

Documents attached to Mr DeVries’s affidavit include an October 19, 2014, ‘engagement letter’ seemingly drawn up by Mr Feldman and signed by Highgrove Securities’ managing partner, Simon Whittley.

The letter, addressed to Mr Whittley, confirms that Mr Feldman wanted to act as its legal advisor over “a suggested financing” to the Hayward family trust plus “the recent and related matters concerning the sale of Port Group Ltd (Grand Bahama Port Authority) and/or its assets”.

The ‘engagement’ agreement also contained a clause acknowledging that Mr Feldman both represented Sir Jack and the trustees, and asking Highgrove to “waive any claim as to conflict of interest on my [Mr Feldman’s] part”.

Mr DeVries is alleging that Mr Feldman, who was seemingly set to represent two different parties in the same deal, never told him of this arrangement despite also serving as the Hayward trust’s attorney.

“I note that Mr Feldman inserted clause 15 of the agreement, under which the potential investor or purchaser, waived any conflict under which Mr Feldman might labour under due to his representing the trustees of the trust and Sir Jack personally,” Mr DeVries alleged.

“I confirm that Mr Feldman never revealed this agreement to me or, to my knowledge, to Mr Barry. Had he done so, Mr Barry and I would have taken steps to ensure that Mr Feldman ceased to act on behalf of the trust.

“This agreement raises a very serious potential conflict of interest of Mr Feldman with the interests of the trust.”

Tribune Business previously revealed that Messrs DeVries and Barry were removed as trustees because Mr Babak, and Mr Feldman, felt they were negotiating “silly deals” to sell the GBPA/Port Group Ltd involving a price, and purchase structure, that was not in the Hayward trust’s best interests.

Mr Feldman alleged that the Hayward family had not allowed Prometheus to explain its position, while Mr Babak denied that he intervened to prevent the BlackRock deal from happening because it did not suit his interests.

Mr Babak said that despite the initial offer from BlackRock, the $4.5 trillion asset manager that is the world’s largest private equity firm, significantly undervaluing the Hayward trust’s GBPA stake, he would still have realised his $20 million entitlement under the 2010 settlement that ended litigation with the St George family.

“It was not in the interests of the beneficiaries of the trust for that sale to go ahead,” Mr Babak had alleged in an earlier affidavit.