Monday 2 July 2012

EXCLUSIVE: Soul Patts snared in fraud fracas

A subsidiary of Washington H Soul Pattinson (WHSP) allegedly provided "dishonest assistance" to a $130 million pension fund fraud committed at the height of the global financial crisis.

Sydney-based Pitt Capital Partners (PCP), a corporate advisory firm owned by WHSP and Soul Patts Private Equity was recently added to a list of defendants in a recovery action launched in the British courts by Independent Trustee Services (ITS). 

The UK pensions regulator installed ITS as administrator of nine British pension funds after their investments were liquidated and much of the proceeds siphoned off through a network of companies and trusts in Gibraltar, Hong Kong, Jersey, Switzerland and the British Virgin Islands.

According to court documents obtained by SiN, PCP was paid more than $365,000 between July 2007 and November 2008 by entities associated with accused fraudster Tony Morris and others. Mr Morris, who has denied charges of theft, conspiracy to defraud and aiding and abetting fraud, is currently on trial in London's Southwark Crown Court.

He is accused of controlling the pension fund trustees and arranging for the liquidation and disbursement of the funds' investments. Mr Morris was tracked to a cliff-top mansion in Palm Beach in 2010 and extradited to Britain in March 2011. His trial continues.

PCP is facing allegations of civil breaches including charges of common law conspiracy and dishonest assistance for its role in the distribution of the funds. The civil matter, which is scheduled to be heard in October, is seeking to claw back up to $25 million. PCP's chairman Robert Millner, who is also chairman of WHSP, declined to comment.

A judgement handed down in the chancery division of the High Court of England and Wales (HCEW) in 2010 made multiple references to PCP.

It named several former employees including managing director, Christopher Photakis, who died suddenly of a heart attack on the seventh of August, 2007, former executive director Michael Robert Pash, and former staffer James Notaras, who was described in the judgement as "extremely junior".

The three were identified as having dealt with Multiple and Unilateral Financial Futures or MUFF, an entity incorporated in the British Virgin Islands and ultimately controlled by Tony Morris.

Justice Peter Young of the HCEW said PCP provided term sheet documentation and other due diligence to support a series of proposed unsecured bond issues MUFF had devised to satisfy regulatory requirements governing investments held by entities connected to the impacted pension funds.

"Mr Notaras who formally moved from Pitt to MUFF ...... on 29th February 2008, already had the benefit of a trust fund set up by Mr Morris for him and his family and was extremely junior, Justice Young said.

"He was going to do the Term Sheets for these investments. That was supposed to set out what was happening to the Impacted Schemes’ money and the returns and security (if any) to be offered.

"A Term Sheet which bore the electronic signature of Mr Pash (of Pitt) set out the revised terms of the funding for Cerberus. Pitt assert that there is no record on their systems of this document. Mr Pash said he cannot recall drafting it and Pitt say there is no copy of it on their systems."

Neither Michael Pash or James Notaras are listed as defendants in the civil case and there is no indication of their being involved in any wrongdoing.

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