Revealed: All the details of new £158m Arch Cru claim
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In focus: Arch Cru
SPL Guernsey, the manager of the former Arch Cru funds, has launched its third legal action over failings that led to the funds’ suspension in 2009, filing a claim for around £158m in the Royal Court of the Island of Guernsey against the funds’ former administrator and three former directors.
Bordeaux Services (Guernsey) Ltd, which administered the funds from December 2006 until their suspension in March 2009, along with its former director Neal Meader, current director Peter Radford and former Arch director Robert Addison are all accused of breaching their fiduciary duty in relation to investments made by the Arch Cru Guernsey cells.
The particulars of claim filed with the court, seen by FTAdviser, allege that Bordeaux wrongly inflated certain valuations in relation to shares in Arch Financial Products and Cru Financial Management purchased by the cells based solely on valuations provided by Arch itself.
Bordeaux is also accused of failing to ensure that proper consideration to given to various investments at board meetings it was mandated to arrange, as well as of failing to take account of conflicts of interest that arose due to commission payments that were being received by Arch.
Similarly, the three directors are accused of failing to ensure that investments were given due consideration and that conflicts of interest were appropriately managed.
The claim is split into three amounts denominated in sterling, US dollar and euro respectively and is based on alleged breaches in relation to nine umbrella investments made by the cells.
The damages relate to:
• a $350,000 commission payment to Arch in relation to a $7m investment in Danube Delta Fund, managed by Prytania Investment Advisers, for which the firm received a 5 per cent introducer fee;
• £2.7m of losses, plus any related performance fees, relating to purchases of loan notes issued by and shares in Cru Financial Managers, which were revalued on several occasions;
• £6.1m in losses on investments in Arch shares and swap transactions between the cells in relation to these shares;
• $161.8m losses accrued on a number of Greek shipping investments, for which Arch allegedly received unauthorised fees and commissions and which were allegedly outside of the funds’ investment mandate;
• £22.6m losses in relation to Lonscale Ltd, a property development joint venture on which, again, Arch is alleged to have earned unauthorised commissions;
• up to £7.6m in losses against investments into property development company Nice Group, which went into administration in March 2009;
• close to £2.6m and €12,574 in losses on investments into venture funds managed by Noble Fund Managers and loans to parent company Noble Group Holdings;
• losses of approximately $8.9m on an investment into international IFA firm Financial Partners Group relating to a joint venture to market Arch products in Asia; and