BVI Offshore Business: Grey Area

It became known that nearly £100,000 of donations to the UK Party of Liberal Democrats has come from the company Alpha Healthcare – a company owned by  Indian businessmen. This is more than half the cash that the Party has taken in major donations since the beginning of the election campaign.

Alpha Healthcare is controlled by Harberry Investments, which is registered in the British Virgin Islands, and its main shareholders are Indian businessmen Bhanu and Dhruv Choudrie. They are believed to have ‘non-domicile’ status; at the same time, earlier this year the Liberal Democrates strongly criticized donations to the Tories by non-domicile Lord Ashcroft, with his Belize companies, and emphasized their difference from the Tories.

Two more arrests were made in connection with investigation of K1 Group’s activities. According to Dietrich Geuder, the spokesman for the Wuerzburg Prosecutors’ Office, the managing director of the British Virgin Islands-based hedge funds K1 Global Ltd. and K1 Invest Ltd., as well as the managing director of a trustee company were arrested.
Mr. Geuder said that the German investigation has shown that these BVI companies were Ponzi schemes which were not intended to make profits, but through which, as prosecutors suspect, investors lost more than 90 million euros.
The assets of K1 Invest Ltd., one of the two BVI funds believed to be used in a network of investment firms to transfer the money received from reputable banks including  Barclays Plc, JPMorgan Chase & Co. and BNP Paribas SA, were frozen in the end of 2009. Both K1 Invest and K1 Global filed for liquidation.
For some months, K1 Group is at the center of an international criminal probe. European and U.S. authorities are seeking information about whether K1 founder Helmut Kiener, who also managed the funds of the BVI hedge funds, used his business relations to the above-named banks to channel their money to K1 Invest and K1 Global through a net of funds and sham companies.

The Seattle City Employees’ Retirement System (SCERS), the pension fund which is holding $1.6 billion to pay the pensions of 15,000 Seattle city workers, is trying to get back $20 million of its investment money through a several hedge funds in the U.S., Europe, the British Virgin Islands and the Cayman Islands.

In 2003-2004, SCERS invested in Epsilon Global Active Fund II; the Epsilon “feeder fund”, incorporated in BVI and domiciled in Switzerland, was supposed to channel money to a larger fund based in the Cayman Islands. According to the lawsuit filed by SCERS, about 90 per cent of money invested in Epsilon was withdrawn in 2006-2007, and only a liitle more was left except what was invested by retirement system. Also, Epsilon Fund did not produce an audited financial statement for 2008.

According to the recent account statement, SCERS’s investment is worth about $24 million, but the SEC inquiry and the delayed audited financial statement put this sum under suspicion. SCERS Executive Director Carter mentioned in a court filing that the fund “has suffered very significant losses in the past in short periods of time.”

In February, the hedge-fund manager Steven Stevanovich, who is controlling the Epsilon Fund, informed Epsilon investors about the suspension of all payouts, blaming of the halt the SEC investigation into another of his funds, called Westford Special Situations Fund. SCERS officials were not aware that Epsilon money had been channeled into the Westford fund, and, moreover, they rejected Stevanovich’s invitation to invest into the Westford fund. Last month a court in the British Virgin Islands was asked to declare the insolvency of Westford fund.

The Epsilon fund investment is just a small part of the SCERS portfolio, but the rest of the fund has not done well during the last two years.

Gulfside Minerals Ltd. has filed a writ in the District Court of Ulaanbaatar, Mongolia, to cancel the transfer of shares of  ECM LLC, the company holding the Erdenetsogt exploration License, to the British Virgin Islands company Mangreat Group Ltd. In this litigation, Gulfside is seeking to have ninety five percent of ECM now owned by the BVI-registered Mangreat Group returned to Mongolia and offered to Gulfside.

The complaint is based on the fact that Gulfside is a shareholder of ECM, holding 5 percent of its shares, and, under an Agreement of June 17, 2007, it has a right of first refusal to purchase any shares of the company offered for sale by other shareholders. Under an Agreement signed with Monrospromugoli LLC on June 17, 2007, Gulfside has been awarded 5% of ECM shares. In November 2007, the shares were transferred by MRPU for five million dollars, and Gulfside alleges that as a shareholder of ECM it had the right to buy these shares.

Once the court action is initiated, the BVI company will be invited to  the court proceedings as a Respondent.

Two holding companies, British Virgin Islands-based Granvalor Holding Limited and International  Bancorp of Miami, registered in Coral Gables, signed a written agreement with the Federal Reserve Bank of Atlanta, according to which they pledged to devise a plan to support the Bank of Miami, owned by them. The Bank was hurt by loan losses, which brought the net loss of $38.6 million in 2009.

The companies agreed to provide a plan to maintain sufficient capital within 60 days. To conserve capital, the pact restricts the payment of dividends or interest on certain debt without regulatory approval.

The agreement with the Federal Reserve Bank of Atlanta was signed on March 22, while formal agreement with the Bank of Atlanta and the Office of the Comptroller of the Currency was signed on  January 5, 2009. In this regulatory action, the OCC had directed the bank to come up with a strategic plan, to strengthen lending practices, and to hammer out a plan for maintaining adequate capital.

According to regulatory notices, additional funds invested by Granvalor Holding Ltd into the bank in December 2009 increased its stake in the bank from 49 to 60 per cent.