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Auditors could not verify FBI bait broker’s $1.5m

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Guy Gentile

• Little to recover from Guy Gentile’s Mintbroker wind-up

• Liquidators wait on ‘books’ as interact with Davis & Co

• PM legal win key to firm’s Bahamas exit before elected

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Auditors for a Bahamas broker/dealer once used as ‘bait’ by the FBI refused to give its last accounts a clean bill of health because they were unable to verify the existence of $1.5m held with other financial institutions.

This, and BDO Bahamas’ inability to confirm a $1.2m “adjustment” to realised losses on investments, are among the disclosures made by the Supreme Court-appointed liquidators for Mintbroker International, the former Swiss America Securities business headed by its colourful principal, Guy Gentile.

Igal Wizman and Eleanor Fisher, the EY accountants and partners, in their first report on the liquidation also reveal they have been unable to obtain all Mintbroker’s financial records and books despite regular interaction with the Prime Minister’s former law firm, which acted as its legal adviser in the battle to resist the Securities Commission’s enforcement efforts.

There are no suggestions that Davis & Co has failed to co-operate with the liquidators or done anything wrong, but the EY duo reported encountering difficulties in accessing electronic data and log-in/password details provided by the Bahamian law firm on Mr Gentile and Mintbroker’s behalf.

The August 31, 2022, report to the Supreme Court, which has been obtained by Tribune Business, reveals that there is little left for Mr Wiszman and Ms Fisher to liquidate after Mr Gentile - assisted by Philip Davis KC before he became prime minister - bought enough time to voluntarily wind-up Mintbroker himself and remove all its assets from The Bahamas.

Tribune Business previously reported how Mr Davis, who was then-Opposition leader, acting on Mr Gentile’s behalf filed a successful Judicial Review challenge that thwarted the Securities Commission’s regulatory efforts. Then-Supreme Court justice, Ruth Bowe-Darville, made a September 23, 2019, ruling “vacating” all the regulator’s orders and directives, which “fully disabled the Commission from further investigation into” Mintbroker’s activities.

There is no suggestion that Mr Davis did anything wrong and, instead, he was simply acting for a client to the best of his legal ability. However, the Mintbroker liquidators’ reveal how critical the legal delay was as the broker/dealer’s assets were reduced from $64.773m at end-June 2019 to just $33,489 by year-end, as Mr Gentile wound-up the business itself and departed The Bahamas.

Mintbroker’s net equity over the same timeframe fell from $24.239m to just $33,489m, with liabilities - according to the management accounts - dropping from $40.534m to zero over the same six-month period. Questions are also likely to be asked as to why sterner enforcement action was not taken sooner, as Mr Gentile and his company had not prepared audited financial statements since 2016 and even then those were “qualified” by BDO Bahamas.

“The last prepared audited financial statements included a qualified audit opinion as the company did not respond to confirmation requests in relation to balances held totaling approximately $1.5m with financial institutions,” the EY accountants reported, highlighting a regulatory ‘red flag’. 

“Therefore, BDO were unable to satisfy themselves as to the accuracy of these balances. In addition, BDO were also unable to confirm an adjustment totalling $1.2m included within realised loss on investment.” The EY duo also described “points of interest” in the audited financials involving several related party transactions connected to entities seemingly owned and/or controlled by Mr Gentile.

Sums (receivables) due from related parties totalled $2.99m, of which $2.62m was connected to a company owned by Mr Gentile that held real estate in Paradise Island’s Ocean Club Estates. And the liquidators also noted that Mintbroker, under its previous Swiss America Securities moniker, had entered into “a service agreement” with the similarly-named Swiss America Group on December 31, 2015.

“SAG provided consultancy services in the areas of technology, marketing support and advice on business strategy for $400,000 per month. The balance owed to SAG as at December 31, 2016, totalled $3.5m,” Mr Wizman and Ms Fisher reported.

The only successful asset recovery to-date has been $750,000 from the Ocean Club Estates investment, which could not be removed from The Bahamas since it is an immovable asset. Summarising the effect of Mr Gentile’s voluntary winding-up, the liquidators added: “There were no material, readily realisable assets available to meet the costs of the liquidation and make distributions to the creditors of the company.

“The [liquidators] did not identify any cash or investments held by the company at the time of the liquidators’ appointment. As part of further investigations into the company’ affairs, the liquidators identified a potential claim against a company named 104 Ocean Club Ltd.”

The EY duo said their investigations established that Mr Gentile was the company’s shareholder and director, and that it had been created to own and hold a lot in the ultra high-end Paradise Island community. They added that the $2.62m owed to Mintbroker was interest free and there was no deadline or fixed repayment terms.

“The company’s 2016 audited financials reflect that 104 Ocean Club Ltd. owed the company $2.62m, and 104 Ocean Club Ltd was reflected as a related party of the company on the basis of common ownership. As noted in the audited financials, the balance due was interest free with no fixed term of repayment,” the liquidators’ Supreme Court report added.

Mr Gentile had guaranteed repayment of the outstanding sum on December 19, 2017, with the document also valuing the property at $3.5m. He subsequently provided a Board resolution dated April 14, 2020, where Mintbroker’s directors had agreed to settle the debt owed “against outstanding payables due to Mintbroker Group”.

The EY accountants then had to intervene via legal action to prevent Mr Gentile liquidating his Bahamian real estate. “During the period of their investigation, the [liquidators] were made aware that the property was listed for sale,” the report revealed. “In order to protect the company’s potential claim to the property, on April 8, 2020, the liquidators applied for interim relief from the court in order to preserve and maintain the company’s potential financial interest in the property.”

The Supreme Court granted a freezing injunction to prevent any sale, but a deal was worked out with Mr Gentile after an acceptable offer to purchase Ocean Club Estates was made in July 2021 that resulted in “a confidential settlement” between all sides.

“The settlement agreement was executed on March 31, 2021, and sanctioned by the court on June 8, 2022. The effect of the settlement agreement was to, amongst other things, pay $750,000 to the estate in full and final settlement of all claims against the defendants. On June 23, 2022, the court ordered that the Lot 104 action be discontinued. On August 5, 2022, the liquidators received the net sum of $749,565.30 (which was reduced by bank charges).”

That represents their only successful recovery to-date. Creditor claims against Mintbroker initially totalled $3.045m, of which $2.671m or 87.8 percent came from “a party related to Mr Gentile”. That was ultimately withdrawn, leaving $324,322 in outstanding claims - of which $324,115 is from the Securities Commission itself.

“The official liquidators do not appear to be in possession of all of the company’s books and records despite requests made to Davis & Co, the former registered agent, the former director and employees, and a service provider by the name of ASC Management that facilitated accounting services for the company,” the EY accountants added.

They reported challenges in accessing Google drive links provided by Davis & Co to access some of Mintbroker’s records electronically, and engaged in “extensive correspondence” with the law firm - in which the Prime Minister is inactive - to obtain other documents.

Mr Gentile enjoyed a somewhat colourful stay in the Bahamas, with Tribune Business reporting in 2016 how he and his broker/dealer, based in the Elizabeth on Bay Plaza on Bay Street, were allegedly used as “bait” by the Federal Bureau of Investigations (FBI) to help snare numerous international securities fraudsters.

Mr Gentile claimed that he and his Bahamian businesses were “forced” to play key roles in undercover ‘sting’ operations targeting criminals earning millions of dollars from market manipulation scams.

Their participation even extended to the ‘bugging’, both by video and sound, of Swiss-America’s Bahamian head office in a successful bid to gain evidence against a Canadian fraudster who subsequently pleaded guilty to the charges against him.

He also attracted international media coverage after his Russian-born, model girlfriend, Kristina Kuchma, 24, in a fit of rage drove his Mercedes S400 hybrid into the pool at his Ocean Club home after he ended their 18-month relationship by text and allegedly reneged on a promise to provide $50,000 for one of her business ventures.

Comments

Proguing 2 years ago

A little tip for the regulators. Any company that uses the name “Swiss” with no tie to Switzerland is a big red flag. We had Suisse Security Bank & Trust owned by Mr. Harajchi aka the Sheik, which ended up just like Swiss-America.

We also had Banakor Swisse, a boiler room on Bay Street across from Junkanoo Beach.

realfreethinker 2 years ago

How come certain law firm always seem to the firm of record for these shady companies?

Proguing 2 years ago

The shady companies will tend to gravitate around the politically connected law firms, thinking that they could be protected in some way. So that could be another red flag.

ThisIsOurs 2 years ago

I remember walking into a store at Elizabeth on Bay. I really just wanted change for the parking lot so I bought some pastry. The store was empty but there were two white men with heads together at the back speaking quietly. The pastry was really stale and I just got the impression that this was no coffee shop. But I could be wrong!!

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