Close Brothers (Cayman) Ltd, which was sold to Intertrust
Group Holding SA just weeks ago, is facing a lawsuit for claims of more than
US$22 million as a result of its administration of several local investment
companies that later collapsed.
Joint liquidators Nicholas Freeland and David A.K. Walker
filed a writ in the Grand Court of the Cayman Islands
against Close Brothers (Cayman) and John Sutlic on 29 November, 2010.
The plaintiffs in the matter are named as joint liquidators
of the Grand Island Master Fund Ltd, Grand Island Income Fund, Grand Island
Commodity Trading Fund and Grand Island Commodity Trading Fund II. They were
appointed as such by special resolutions of the Funds’ shareholders, passed on
17 June, 2008, which led to their subsequent appointments as joint liquidators by orders of
the Grand Court
made on 21 July, 2008, bringing the voluntary liquidations under court
statement of claim outlined in the document states that the Close Brothers were
selected as administrators of the said funds on varying dates in 2003 and 2006
“to have general charge of the conduct of the Funds’ affairs and shall conduct
on behalf of the Fund all day-to-day administration correspondence and
businesses of the Fund.”
agreements set out expectations of management, which required Close Brothers by
Law to “perform their duties with reasonable care and skill and in particular
with the degree of care and skill to expected of a professional, competent and
prudent administrator,” according to the writ.
investment and trading of the Funds was carried out by Jamaican National Robert
Christopher Girvan, who was “at all material times” a director of the Funds and
the sole portfolio manager of the investment manager of a company named as
Caribbean Commodities Ltd.
early 2003 until May of 2008, the Funds sustained severe trading losses, which
Close Brothers allegedly failed to learn of or record, according to Mr.
Freeland and Mr. Walker’s writ of summons.
claim goes on to state that as such, Close Brothers “failed to comply with
their own internal procedures”.
unquestioning acceptance of what they were told by Girvan and their unquestioning
acceptance of documents provided by Girvan at face value” is what the claim
maintains “allowed Girvan to cause monies belonging to the Funds to be
transferred into his personal account and to be used for his personal
August Girvan pleaded guilty to 21 counts, which included stealing property
belonging to Grand Island Commodity Trading Fund, namely monies and/or a debt
owed to the value of US$5,172,198; stealing property of Grand Island Commodity
Trading Fund II to a value of US$2,412,906; stealing from Grand Island Income
Fund property to a value of US$535,621, and money laundering among several
result, “…the net asset value statements issued by the Close Brothers in
respect of the funds were incorrect”.
net asset value statements were relied on by the Funds investors when they
placed further subscriptions in the Funds. The statement of claim states that
had the true nature of the trading performance of the Funds been known by
investors, they would not have made additional investments in the Funds.
writ contends that Close Brothers were in breach of their fiduciary duty and in
breach of contract.
states that, “At all material times the first defendant had irreconcilable
conflicts of interest.
promoter of the Funds was Mr. Naul Bodden. He was a director of the Funds and
of the Investment Manager Caribbean Commodities Limited and of another company
named as RCTG, into whose accounts monies belonging to the Funds were
wrongfully transferred by the First Defendant (Close Brothers) or its affiliate
Close Bank (Cayman Limited)” reads the writ.
initals are RCTG.
writ states that Bodden was also a shareholder in Close Brothers before its
sale, prior to discovery and interrogations. Though it is not known whether he
retained a financial interest in Close Brothers.
Brothers “apparently administered and/or prepared accounts for RCTG, a third
party controlled by Naul Bodden and Girvan into whose accounts money belonging
to the Funds was wrongfully transferred by the first defendant (Close Brothers)
or its affiliate bank Close Bank,” according to the statement of claim.
further contends that Close Brothers’ affiliate arm, Close Asset Management
(Cayman) Limited (CAM), was an investor into the Funds,” and that “CAM made
redemptions which were inflated by reason of the incorrect NAVs prepared by
affiliate of Close Brothers, Grand Nominees Ltd, was an investor into the
Funds. That company made redemptions and were also allegedly paid dividends
“which were inflated by reason of the incorrect NAVs prepared by Close
claim states that Close Brothers should have known from the fact that it
prepared financial statements for RCTG that monies transferred to that company
from itself were being commingled with monies of third parties on behalf of
whom two of the directors of RCTG, Girvan and Bodden, were allegedly carrying
on unlicensed investments business, using RCTG as a vehicle for their
alleges that Close Brothers failed to obtained confirmations from ScotiaBank-
contrary to its own procedures on the Funds’ month-end positions and instead
took the word of Girvan, who was an “unknown individual with no qualifications,
who was not a member of any professional body, had no systems, no office
administration or employees, no internal controls, no segregation of duties and
upon whom no competent administrator could reasonably rely on.”
forgeries, incredible explanations for discrepancies and ignoring an express
notice from ScotiaBank that a statement presented to Close Brothers by Girvan
as a genuine Scotia statement was not, were
what the statement of claim refers to as red flags.
no time did Close Brothers inform the other directors of the Funds, the
auditors or the regulatory authorities of the Cayman Islands that it had
received a false Scotia statement from Girvan and had been told by Girvan that
he was using a numbered Swiss bank account with the intention of deceiving the
Canadian financial regulatory authorities,”
2003 and 2008 discrepancies, questions, suspicion and fabricated or forged
documents reigned in matters surrounding the Funds.
second defendant Sutlic was the chief financial officer and director for Close
Brothers. As such, the writ claims he owed duty to exercise care, as well as a
degree of skill to be expected of a professional and a duty to be diligent.
Mr. Sutlic is said to be in
breach of fiduciary duty and his alleged failures are characterised as wilful
misconduct and/or gross negligence in the statement of claim.
It states that “….there is a sum of US$11,779,955.56,
which is due and payable to the plaintiffs by the first and/or second
defendants as being monies wrongfully transferred by Close Brothers to third
party accounts at Scotia.” The document
further states that by way of redemption quarterly distribution which ought not
to have been paid, Close Brothers is liable for a further US$5,103,413.10.
Brothers may also be liable for US$4,667,275.00 for accepting subscriptions
into one of the Funds without cash consideration and in fees, and US$497,866.54
in commissions, fees and other charges.
total amount being sought by the plaintiffs in the writ is US$22,048,509.