The Supreme Court of Philippines in its resolution denied the P6.2-billion compromise agreement between government-owned Philippine National Construction Corporation (PNCC) and Radstock Securities, Ltd., a British Virgin Islands-registered firm with HK office address. Under the agreement, PNCC agreed to assign to the BVI company all its rights and interest over a 10-hectare prime property which has transfer value of only P3.82 billion, as well as other prime properties. Also, the agreement binds the PNCC to give up in favor of Radstock 50% of PNCC’s 6% share in the gross revenue of the Manila North Tollways Corporation, with net value of P1.2 billion, and to cede 20% of its outstanding capital stock with the assigned value of shares at P713 million to Radstock.
According to the ruling of the high court as of December 2009, the contract violates the Section of the Constitution banning the release of public funds without a legislated appropriation. In the 90-page consolidated decision issued last year, the high court pointed out that the compromise agreement would have cost the Philippines government billions in terms of prime real estate properties.
Radstock Securities, Ltd. appealed to the high court saying that the PNCC was still a private corporation even if it was a government-owned or controlled. Radstock denied there was a violation of the constitutional ban. However, the high court threw out BVI company’s appeal, saying no arguments were raised that would warrant a reversal of its earlier decision of December 2009.
The credit obligation of PNCC was assigned on January 10, 2001 by Marubeni Corporation to Radstock, and after the due date demands for payment were made to PNCC by Marubeni and Radstock, PNCC failed and refused to pay the obligation. Then, Radstock filed suit against PNCC for the sum of money and damages.
The Saudi property tycoon Ali Al Faraj, who bought a controlling stake of the Portsmouth club through the BVI-registered company Falcondrone Ltd, and was found not to have enough resources to rescue the club, now was forced to hand over the ownership after defaulting on loans owed to HK-based businessman on February 4.
Balram Chainrai had exercised a clause in a loan agreement with Arab businessman that in case of not timely payment he would take over Al-Faraj’s 90 per cent ownership of the Portsmouth. However, his takeover may be challenged by the British lawyer Mark Jacob, appointed to the board by Al-Faraj, who argues that neither party complied with the loan agreement.
By words of Chainrai, he is exercising the loan agreement to secure the future of the club and “to stop people who are recklessly trying to ruin the club”. He said that he was looking for a new investor to take over the club, to support and develop the club.
The club itself confirmed the change of ownership. In the club statement it is said that the security arrangement with the BVI company was based on documents drawn up by law firm, owned by Jacob, as part of the original draw down of the loan, depositing with Mr. Chanrai the original share certificate and a signed share transfer with open date in favor of Mr. Chanrai, which could be dated and exercised in the event of default on the terms of the loan agreement.
The ARP Growth Fund, managed by Trio Capital Limited, has invested $52 million through the British Virgin Islands in a fund of hedge funds. Trio Capital’s administrators (the accounting group PPB), which are investigating company’s managed investment schemes, were not able to establish the value of this investment. The investment vehicle of the fund, Professional Pensions ARP Ltd, which is also based in the British Virgin Islands, uses a HK-based Empyreal Holdings as its investment manager.
Earlier, administrators and regulators could not find out details about $118 million investments made by another Trio Capital managed fund, Astarra Strategic, through another British Virgin Islands-registered company EMA International.
There is the uncertainty with the major investment of ARP Growth Fund because of negotiations on a confidentiality agreement requested by the BVI-registered Professional Pensions ARP. Even once the existence of the assets is established, it is very difficult to value investments in hedge funds including the Denholm Hall Russia Arbitrage Fund Class A, the Alpstar Secured Bank Loan Fund and the Fairfield Ludgate Hill Asian Arbitrage Fund.
Professional Pensions has applied for BVI approval for winding up the fund, raising the prospect of hard-to sell hedge fund assets being sold at discount. By words of Philip York, a director of Empyreal Holdings, the money, which was invested in a series of hedge funds, was now held by JPMorgan due to its takeover of Bear Stearns, - the company which in 2005 entered an agreement with Professional Pensions Fund. This agreement was known as a “total return swap”, under which the investors benefit from a “synthetic” exposure to a basket of hedge funds while JPMorgan holds the assets. Mr. York also said they had provided to ASIC all the information supporting the existence of those assets, and also that they have provided PPB with all the documents they have in relation to the valuations and shareholdings.
The Financial Services Authority (UK) is going to challenge a last year ruling in favour of BVI and Panama-based companies which said the FSA overstepped its powers by carrying out a request from the Securities and Exchange Commission (US) to recover documents.
The case relates to SEC investigation into Rhino, the NY-based investment adviser, when the SEC asked the FSA to recover 20 boxes of correspondence created over almost ten years and held by the London accountant Goodman Jones, which the SEC said might be relevant to its investigation. His accountancy firm held documents on behalf of two companies - the British Virgin Islands-based Creon Management and Panama-based financing company Amro International. There was no SEC investigation concerning these Panama and BVI companies, also they were not party to any SEC action. These two companies won a legal challenge against the FSA, saying it was “acting unlawfully in agreeing to appoint inspectors … to obtain the documents”.
In the opinion of the head of banking, finance and regulatory litigation at Allen & Overy Calum Burnett, the current case would help clarify the powers of the FSA to seek information on behalf of another regulator.
There is a memorandum of understanding between the Financial Services Authority and the Securities and Exchange Commission to exchange supervisory information and a history of close co-operation.