In response to the comprehensive summary I posted yesterday, further questions were posed by investors. Once again, I am indebted to James Smith for his eloquent and accurate answers.
I have taken the liberty of posting his comment below for all to see.
The £20.9 million figure is derived from the preliminary order made by the High Court in March 2013 (see link below). This figure would normally be revisited at a formal “quantum hearing” and could be increased (or possibly decreased) but would be nullified if the Defendants won in the Supreme Court and the original judgement was overturned.
It is reasonable to conclude that the figure is a best estimate derived from the documents obtained by the Court or FCA. These could include published and internal accounts, statements of assets, bank account and credit card statements and land registry records which would show the consideration paid for the land by investors. I would expect the figure to be reasonably accurate. Remember this is a gross figure (i.e. it does not take into account the associated costs incurred by the Defendants).
You have asked a number of questions:
1. Where is the money now?
The High Court would have required the Defendants to disclose all of their assets when seeking a global freezing order. No doubt the FCA would have employed forensic accountants to follow the audit trail. I understand that the land was paid for by bank transfers, cheques and by credit card. It would therefore be relatively easy to confirm the gross sales figures and the identify the destination to which those receipts were original paid. Modern anti-money laundering regulations make it very difficult to extract and hide significant sums but not impossible. It would be a serious criminal offence if the Defendants failed to made full disclosure of their assets.
2. How has it been used?
I would speculate that a large proportion of the sales receipts would have been expended in the costs of running the business and therefore no longer exist, some would have been spent on assets such as land banks (which are now probably close to worthless) and the balance would have been extracted as profits by the Defendants. My previous post suggested that is quite likely that any net profits received by the Defendants could subsequently have been largely expended on living expenses and legal fees over the last four years.
3. By whose authority has the money been used?
Obviously until the original freezing order in 2012 the business and owners were free to spend the monies as they saw fit. The £20.9 million figure related to gross sales over a six year period. A high proportion of this money would have been spent on legitimate business activities before the freezing order (purchase of land, administration costs, premises, commissions, taxes etc) and I would suggest that a further significant sum could have been spent by the owners on their lifestyle during the same period. It is therefore probable that only a small proportion of the gross sales would have existed at the time of the freezing order and much of this could have been reinvested in land banks that would now have little real value.
After the freezing order the Defendants would have been restricted in their use of any residual funds, however, they would have been permitted their basic living costs and would have been allowed to fund their defence against the Civil and Criminal actions. I would anticipate that those costs would have run into several £millions.
4. Are there any accounts for us to see?
There are published accounts available at Companies House for two of the six Defendants – Asset Land Investment Plc and Equity Service (London) Limited (see links).
Asset Land Investment Plc’s last published accounts at 31/12/2010 showed that its net balance sheet position (i.e. value of net assets) was £76,705. Its total turnover until this date from its incorporation was £4,563,016. Equity Services (London) Limited was dissolved on 17 May 2014. Its last published accounts showed a negative balance sheet (i.e. it had no value). There does not appear to be any public record of Asset LI Inc’s accounts which is not surprising as it is a Panamanian company.
In the event that the original High Court ruling is not overturned by the Supreme Court I would anticipate that the FCA will appoint Insolvency Practitioners to liquidate Asset Land Investment Plc and to bankrupt the two individuals who have not already settled (Susan Siggins has reached a settlement). The accounts would then become available. However, there is little that can probably be done about the Panamanian company.
5. £20.9m is referred to below. Accountability is important. Who is overseeing this large sum and getting the best value for expenditure?
As stated previously, the £20.9m is an estimate of investors’ gross investment. It is unlikely that more than a small fraction of this exists in the form of cash. The Defendants’ assets have been frozen but would have been allowed access to funds to pay for their defence and basic living costs. No one would be managing any remaining assets until the original court order is confirmed.
As also stated previously, the FCA would have incurred very substantial costs in undertaking the investigation and court actions and there will be more substantial costs in tracing and liquidating assets so after these costs are recovered it is unlikely that there would be anything left to distribute to investors.
Investors might be interested that there are many other high profile legal cases waiting on the outcome of the Supreme Court decision. As this is a major test case I would conclude that the FCA have pulled out all the stops and not spared any legal expense to win the case. If they are successful in may well be a pyrrhic victory for the Asset land investors.