Segoes Services Ltd.’s owner, John Kaweske Jr., was declared in contempt of court on Friday by Chief Justice Anthony Smellie for failing to disclose information about his assets as he was compelled to do by an earlier court order.
However, an attempt by the attorney for Segoes’ joint liquidators Ken Krys and Christopher Stride to have Mr. Kaweske committed to prison for contempt of a Mareva injunction issued on 10 May was denied by the Chief Justice.
Mr. Kaweske was not present in court, but was represented by attorney Clyde Allen.
Segoes, a locally incorporated investment company that was put into official liquidation on 20 May, has a deficit to creditors estimated by the liquidators to be between US$15 million to US$25 million. Several instances of fraudulent activities by Segoes’ directors have been alleged.
The liquidators were able to put injunctions on many of the company’s assets worldwide, and on the assets of its directors, which included Mr. Kaweske.
In a court order of 2 September, Mr. Kaweske was given 21 days to provide documents concerning his assets.
Attorney for the plaintiffs James Leabeater said Mr. Kaweske’s attorney had admitted that Mr. Kaweske was in fact served with the order and that he had not complied with it.
Chief Justice Smellie declared Mr. Kaweske in contempt, but since the order had not been made with a penal endorsement at the time, Mr. Kaweske faces only an undisclosed fine for the offence.
The court order and Mareva injunction of 10 May did have a penal endorsement, and Mr. Leabeater argued Mr. Kaweske should be committed to prison for contempt for ignoring that order.
Mr. Kaweske had been ordered not dispose of or diminish any of his assets in our out of the Cayman Islands, through himself or through others.
The 10 May court order also instructed Mr. Kaweske to disclose information about his assets.
Mr. Kaweske complied with the order with an affidavit filed on 19 July; however Mr. Leabeater said the information provided was inadequate. Subsequently, the 2 September court order was sought and granted for further information.
Had Mr. Leabeater been able to prove Mr. Kaweske disobeyed the Mareva injunction, Mr. Kaweske faced committal to prison.
Mr. Leabeater argued Mr. Kaweske participated in the attempted sale of the property known as Raleigh Harbour Apartment 4, which was purchased with Segoes assets in November 2003, and held in a trust company called Valour Trust.
There was some dispute over who the beneficial owner of the Raleigh Harbour property was and whether Mr. Kaweske himself had participated in the attempted sale after the date of the Mareva injunction.
Although an offer sheet was signed by Valour Trust’s current trustee, Kaweske’s wife Camila Ueoka, the deal was not finalised.
Mr. Leabeater argued there was proof beyond reasonable doubt that Mr. Kaweske was the owner and that he had been involved personally with the attempt to sell the property.
Mr. Allen argued that the evidence showed that Mr. Kaweske’s involvement with the sale, which he said was limited to Mr. Kaweske introduction Mrs. Ueoka to his realtors, all pre-dated the 10 May order.
He also argued Mr. Kaweske had no interest in the property in any case.
Chief Justice Smellie found the evidence was not beyond reasonable doubt, partially because the actions were taken by Mrs. Ueoka and not by Mr. Kaweske.
‘I am not satisfied for the standard of proof to justify imprisonment,’ Mr. Smellie said.
On another Segoes matter, however, Mr. Smellie announced his decision in a hearing that had taken place the previous week in chambers which dealt with, among other things, who was the beneficial owner of the Raleigh Harbour property.
Mr. Allen had argued that the beneficiary of the trust was Mr. Kaweske’s nephew Daniel Grundy, who is a mentally challenged young boy.
However, it was disclosed during Friday’s proceedings that attorney Peter Broadhurst, who had represented Kaweske during the purchase of the Raleigh Harbour property and who was once the trustee of Valour Trust, had stated in an affidavit that Mr. Kaweske was the beneficial owner of the property.
Mr. Smellie said he would grant a summary judgement that would allow the joint liquidators to gain control of the Raleigh Harbour property.
The summary judgement also gave the joint liquidators claim to US$100,000 that Segoes had transferred into an account in Brazil in the name of Mrs. Ueoka, and to 1,495.3580 shares of Paradigm Global Fund I Ltd., worth approximately US$1.5 million, to Highland Consulting.
Liquidator Ken Krys said the judgement could mean Segoes creditors will see some of their investment money back.
‘Once we’re able to recover on these debts, we’ll be in a good position to make at least an initial distribution to account holders,’ he said.