The liquidators for Segoes Securities Ltd. asked the Grand Court for direction Monday concerning investors’ funds that had not been co-mingled with other funds.
Attorney Ross McDonough, representing the joint official liquidators Ken Krys and Christopher Stride, explained that some of the funds invested into Segoes should be treated differently than others.
‘There are certain accounts in which the liquidators do not believe there was any co-mingling of funds,’ said Mr. McDonough. ‘These accounts were established prior to the company being purchased by (Segoes owner John) Kaweske in November 2002.’
Instead of having the funds from these non-comingled accounts going into the general liquidation pool, Mr. McDonough said the liquidators proposed to indemnify those account-holders from the costs of the overall liquidation.
‘(The liquidators) want to pay these accounts out (to account holders) once it can be confirmed by accountants that these funds were not in commingled accounts.’
The burden of proof for demonstrating the funds were not commingled would fall on the account holders because of a lack of company records provided by the Segoes directors said Mr. McDonough.
Justice Priya Levers commended the liquidators for proposing the arrangement.
‘It is good that the liquidators came up with this,’ she said. ‘I applaud Mr. Krys for this.’
Gui Passos, the former head of compliance for Segoes who represented himself at the hearing, suggested to the Court that the liquidators had no jurisdiction in the matter in the first place.
‘It is my opinion that these accounts were never with Segoes, but with First Southwest (in the United States),’ he said. ‘Segoes never had control or custody of these accounts. The rightful owners of these accounts should have had access a long time ago.’
Mrs. Levers explained that once the liquidators became involved, they had an obligation to investigate whether the accounts were co-mingled.
‘Unfortunately, the law works slowly, but it is a just law,’ she said.
Mr. Passos said he was aware of how slowly the law worked because he had filed a complaint against Segoes with the Cayman Islands Monetary Authority in September 2004.
Mrs. Levers was surprised to hear that.
‘CIMA will have to answer for that,’ she said. ‘Hopefully, someone will ask them some questions about it.’
The one sticking point concerning the liquidators’ proposal was who was going to pay for their investigation to verify if the accounts were commingled or not.
Mrs. Levers was hesitant to have the non co-mingled account holders pay the costs.
‘I can’t order even $1 to be paid to the liquidators because it’s not my money,’ she said.
‘You have an innocent man who always has said the money is mine, and now we’re saying the money is yours, and asking him to pay fees.’
Mrs. Levers acknowledged, however, that an investigation that would incur costs had to be done by the liquidator and that someone had to pay.
It was suggested that it might be a good business decision by the account holders to agree to pay the costs, if they were reasonable, to get the matter resolved.
Mrs. Levers asked for the opposing attorneys to consider the matter and then to make further submissions on Tuesday. She also said she might put a ceiling on the costs in order to keep them reasonable.
On another point, Mrs. Levers cautioned the attorneys to use prudence when agreeing to represent clients if it might later prove there was a conflict of interest.
‘This happens too much in this jurisdiction,’ she said. ‘I’m trying to set up a manner of transparency and ethics in this court.
‘We have to clean up our act in this jurisdiction.
‘The public must see that we don’t appear to be greedy and grab at everything.’
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