Criminal proceedings are possible against some of the people involved with Segoes Services Ltd. and its related entities, it was revealed during a Grand Court hearing to officially wind up the company on Friday.
Justice Priya Levers ordered the official liquidation of Segoes after hearing from counsel for the petitioners and from counsel for the Joint Provisional Liquidators (JPLs) Ken Krys and Christopher Stride of RSM Cayman Islands.
Attorney Peter Broadhurst, representing the petitioners, who were two Segoes investors, presented to the court a number of points contained in the First Confidential Report of the Joint Provisional Liquidators.
The JPL’s report outlined such irregularities as the co-mingling of investor’s funds, the disappearance of more than $2 million of company assets from a bank in Miami, lapsed stockbrokers’ professional indemnity insurance, and incomplete or missing accounting books and records.
At one point during Mr. Broadhurst’s presentation, Justice Levers asked, ‘Are there criminal proceedings in this matter?’
Mr. Broadhurst responded by saying investigations were on-going.
Part of the evidence submitted to the court included an affidavit of Segoes majority owner John Kaweske which makes allegations of misappropriations of company funds against two former employees of the company, its president James Fontanetta and Rebeca Gonzales.
Mr. Kaweske also suggested in the affidavit that Mr. Fontanetta and Ms. Gonzalez had an ‘accomplice’ named Myron Gushlak, a Segoes investor, in a scheme to defraud clients
‘These allegations by Mr. Kaweske must be investigated,’ stated the JPLs report. ‘The JPLs have already commenced this investigation by speaking with potential witnesses and collecting relevant information.’
According to the on-line newsletter KYC Alert, Mr. Kaweske has also filed a Suspicious Activity Report with Cayman’s Financial Reporting Authority in conjunction with Mr. Fontanetta, Ms. Gonzalez and Mr. Gushlak.
Another former Segoes employee, Guilherme Passos, has also said he has been in contact with the Financial Crime Unit of the Royal Cayman Islands Police concerning the business activities of Segoes.
Stuart Diamond, of Diamond Law Associates, who is representing both Mr. Fontanetta and Ms. Gonzalez, indicated his clients did not commit any crimes.
‘There’s only one bad guy here,’ Mr. Diamond said, ‘And he’s been firing from the back of the horse as he left the jurisdiction.’
Mr. Diamond said he met with JPL Ken Krys and Rebeca Gonzales in the United States last week to speak about Segoes matters.
Although the JPL report suggests Ms. Gonzales was a director of one Segoes entity, Segoes Administration Ltd. incorporated in the British Virgin Islands, Ms. Gonzales has said she never even heard of such a company.
‘The JPL’s information was flawed,’ asserted Mr. Diamond. ‘I asked him to produce a single piece of paper that showed she consented to act as a director and he said he could not.’
The JPL’s report indicated that, based on the information currently available, the directors of Segoes must personally share in the shortfall of assets to liabilities.
Mr. Broadhurst said approximately $6 million dollars of Segoes assets had been located, but that there was ‘$14.5 million of liabilities that we know of.’
As a result, the JPLs sought and obtained an injunction against the assets of the directors.
Mr. Diamond said that injunction had not been made against Ms. Gonzales, however.
Speaking about Mr. Kaweske’s claim that his clients had been involved in a conspiracy with Mr. Gushlak to defraud Segoes clients, Mr. Diamond noted that Mr. Gushlak is suing Mr. Fontanetta as well as Mr. Kaweske in the United States with regard to funds invested in Segoes.
‘If there was a conspiracy, do you think Myron Gushlak would be suing James Fontanetta?’ Mr. Diamond asked. ‘What kind of conspiracy is that?’
Mr. Diamond said Mr. Fontanetta would not have been empowered to misappropriate funds as suggested in Mr. Kaweske’s affidavit because he did not have sole signature authority on the Segoes bank accounts.
‘He only had joint signing authority with Mr. Kaweske,’ Mr. Diamond said.
Mr. Kaweske was represented in court on Friday Clyde Allen of Woodward Terry & Co.
Mr. Allen said he also represented Segoes, and as such, contested the petition to put the company into official liquidation.
Instead of official liquidation, Mr. Allen said Segoes wanted to undergo voluntary liquidation, a suggestion with which Justice Levers did not agree.
Mr. Allen then found his own firm at odds with the JPLs over Segoes records and documents and the proceeds of a $90,000 Segoes insurance settlement cheque held by Woodward Terry & Co., despite several requests by the JPLs to hand over those items.
Mr. Allen had told the JPLs that the insurance cheque had been received the week of, but prior to, the order of their appointment, and that, as per a previous arrangement with Mr. Kaweske, his firm’s fees had been deducted from the proceeds of the cheque.
Justice Levers ordered Woodward Terry & Co. to deliver up the proceeds of the insurance cheque ‘forthwith’, and the documents and records belonging to Segoes by 23 May.
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