The Royal Court has approved an application from the chief executive of the company – which has had its funds effectively frozen by the States police – for anonymity after hearing that such publicity would cripple the business’s day-to-day operations.
Both the chief executive and the company, which acts as an adviser to a hedge fund, have already been named in civil class actions in the US in which they are alleged to have been involved, along with others, in a series of manipulative share issuance – sales transactions in publicly quoted companies described as ‘a fraudulent course of conduct’.
According to a recently published judgment, the chief executive is a discretionary beneficiary of a Jersey proper law trust which through a wholly-owned BVI company has invested in, and received dividends, from the hedge fund.
Last year, the Jersey administrators of the BVI company filed a suspicious transaction report, following which the States police decided to withhold consent to the normal operation of its accounts.
The chief executive has now applied for this decision, which means the funds are effectively idle and cannot be used for investment or business operations, to be the subject of a judicial review.
Advocate Howard Sharp, acting for the chief officer of the States police, said the chief executive had ‘declined to put forward evidence about the provenance of assets that were suspected to be the proceeds of crime’ and added that the applicant ‘now seeks to bring legal action that he hopes will be a first step in the moving of funds to the possible frustration of any victims and law enforcement agencies’.
However, Advocate William Redgrave, on behalf of the chief executive, said the origins of the funds ‘had never been in doubt’ and were derived from the business of the hedge fund – ‘the very transactions that are challenged in the US class actions’.
The civil suit allegations, which are denied by the chief executive and the company, are being investigated by the US regulatory body, the Securities and Exchange Commission.
Advocate Sharp argued that through the class actions brought against the applicant, the allegations against the chief executive were already in the public domain and added that the first result of a Google search of the man’s name referred to the US fraud lawsuits in which they were involved.
‘The applicant’s case is that because such lawsuits are so common in the US, a reputational damage of this was limited,’ the judgment says.
‘However, to be publicly identified in proceedings in Jersey as being suspected of criminal conduct would have a severe impact upon the applicant, the employees of the applicant’s companies and the investors in the hedge fund.’
In an affidavit filed with the court, the chief executive claims: ‘Not only would my day-to-day business operations be crippled, but my business reputation would be stained immeasurably and future opportunities would be impaired, by any association with supposed criminal activity.
‘Any such publicity could provoke additional baseless lawsuits and more intense scrutiny by regulators. These lawsuits and investigations, no matter how groundless, use significant investor funds and create hardship for my employees and other business relationships.’
The affidavit adds that the chief executive’s family and community ‘would also be harmed significantly by publicity of unfounded links to criminal conduct’.
Commissioner Julian Clyde-Smith, who was sitting alone for the case, ordered that until further order the judicial review hearing would be held in private and that a judgment about the proceedings, which did not identify the chief executive, would be published.
‘I am satisfied that we are not concerned herewith the avoidance of embarrassment on the part of the applicant and certainly not with convenience or expedience,’ the judgment says. ‘In essence, on the facts of this case, I find that the consequences to the applicant are sufficiently severe to justify the displacement of the principle of open justice.’
Commissioner Julian Clyde-Smith was sitting alone for the case.
