R (Amro International SA and Another) v The Financial Services Authority & others
| Jurisdiction | England & Wales |
| Judgment Date | 25 August 2009 |
| Neutral Citation | [2009] EWHC 2242 (Admin) |
| Date | 25 August 2009 |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | CO/9131/2009 |
[2009] EWHC 2242 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT
Mr Justice Collins
CO/9131/2009
Mr Andrew Hunter (instructed by Messrs Mishcon de Reya Solicitors) appeared on behalf of the 1st Claimant
Mr Andrew George (instructed by the Financial Services Authority) appeared on behalf of the 1st Defendant
1.1. MR JUSTICE COLLINS: This claim is listed before me as a rolled up hearing. I decided at the outset that it was sensible to grant permission because there was clearly an arguable case. The defendants did not dissent from that. Accordingly, I granted permission. I abridged or avoided all procedural steps thereafter, save that the claimant gave an undertaking to pay the relevant fee, which I believe is £180, which is normally payable on the grant of permission.
2.1. The two claimants are what are described as financing companies which make capital investments in or lend money to businesses. In the case of Amro, the first claimant, it is incorporated in Panama and in the case of Creon, the second claimant, in the British Virgin Islands. Financing is provided in some instances through what are called Special Purpose Vehicles (SPVs) and some 100 or so of these, which are usually companies registered in the Virgin Islands, have been used. A company called Rhino Advisors Incorporated, a New York corporation, has acted as investment adviser for the claimants. Rhino had as an employee until 2002 a Mr Andreas Badian and, until 2003, his brother Thomas. In June 2002, the Securities and Exchange Commission (SEC), the regulatory body in the United States which is concerned with inter alia ensuring that manipulation of trading in stock, and so of the market, is prevented, commenced an investigation into Rhino's activities. In particular, there were allegations of manipulation of shares in companies to which Amro or Creon had made advances on Rhino's advice, the manipulation involving, it was alleged, short selling.
3.1. These investigations resulted in action against Rhino in respect of only one advance to a Pennsylvania company called Sedona in March 2001. In February 2003, proceedings were brought by SEC against Rhino and Thomas Badian. Those were settled by payment of $1 million and submission to an injunction prohibiting them from such activities in the future.
4.1. The investigation continued until 2004 and the SEC then informed Andreas Badian that proceedings would be issued against him in connection with the Sedona transactions. It was not until 3rd April 2006 that the relevant claim was lodged in the United State District Court for the Southern District of New York. This claim was against Andreas Badian and six others, who were said to have been parties to the unlawful short selling arrangements. I shall go into more detail in due course.
5.1. The claim has been managed by the judge of the court and discovery has been an issue. The SEC has had to ask for a number of extensions of time within which they should conclude the necessary discovery process. On 18th February 2009, the judge gave leave for an extension of time for non-expert discovery until 15th August 2009, that being an order which was apparently agreed to by all the parties. But he said, when giving his approval:
“I grant this consent motion and I adopt paragraphs 1 through 4 as my final amended scheduling order. It is extremely unlikely that I will grant any further extensions; this case focuses on events that occurred in 1999 to 2002.”
6.1. On 24th July 2009, a further extension until 31st August was sought by the SEC on the basis that they were having difficulty in being able to obtain a deposition from an individual called Robert Charron and so more time was needed to enable that deposition to be produced. Mr Charron was involved with Rhino. He had in fact made a statement in 2003, no doubt in connection with the original claim against Mr Thomas Badian and Rhino. What Mr Charron stated in that was that Rhino had been formed in January 2000 and had served as the investment adviser for Amro and Creon; indeed, those were its only two clients. He then indicated what Rhino was entitled to receive by way of fees in relation to its dealings. He was himself responsible for incorporating Rhino in January 2000 and was initially the sole director and shareholder. On 14th January 2000, Thomas Badian was elected president and Mr Charron secretary. Two days later he was removed as secretary in favour of Thomas Badian. Andreas was an employee of Rhino between 30th June 2000 and 30th April 2001 and thereafter, from 1st September 2001 until the date of Mr Charron's statement, which was May 2003, he was listed as a trader and Thomas was listed as president from 13th January 2000 until, according to the statement of Mr Martin made in connection with these proceedings recently, the present date, so Thomas Badian remained an investment manager. I was told that by “the present date” was meant when Mr Charron made his statement in 2003.
7.1. Mr Charron responded to the question asking him to identify all persons or entities that “are or have been investors in, shareholders of, partners in or owners of Amro or Creon”, that the sole shareholder of Creon was Neil Galloway and the shareholders were two individuals called Pablo J Espino and Adelina M de Estribi respectively. However, in the course of his statement in 2003 it is right to note that Mr Charron had said as follows:
“We have inferred from questions raised by the Staff that there may be a concern about the source of funds for Amro and Creon. In fact an overseas family trust in which Thomas Badian has a beneficial interest, provided funding of $13.8 million for Amro and Creon from an overseas account that he controls. All money held by Amro and Creon came either from the initial $13.8 million loan from the family trust or from the proceeds of financing transactions and trading activities by Amro and Creon at the direction of Rhino.”
Thus there was available to the SEC from an early stage some indication that the Badians through a family trust, or certainly Thomas Badian through a family trust, may have had some interest in Amro and Creon. However, as we shall see, that is not a matter that was specifically raised in the claim which was made by the SEC in April of 2006.
8.1. On 24th July of this year, the SEC wrote to the FSA, who is the first named defendant in this claim, asking for assistance in producing documents from a London firm of accountants, Goodman Jones, who were said to have documents relevant to SEC's claim. Goodman Jones acted for the claimants and had had some documents relating to deals involving Rhino. In due course, the request was made to Goodman Jones. I will come to that shortly. The request for assistance by the SEC was by letter of 24th July 2009. It set out the description of the claim and the complaint made and what it sought were the following documents:
“All documents that relate to Rhino Advisers Inc, ('Rhino'), Amro International SA ('Amro'), Creon Management SA ('Creon') and/or their Special Purpose Vehicles, identified in Exhibit A to this letter [that is to say the hundred or so firms] for the earlier of the dates of Amro's incorporation or January 1, 2000 through the present, including, but not limited to:
(a) All documents that reflect the legal and/or beneficial owners, and the persons who funded and/or directed their activities;
(b) All memorandum or correspondence related to Rhino, Amro, Creon and/or their Special Purpose Vehicles; and
(c) Bank, brokerage and/or depository accounts records of the Amro and/or Creon and/or their Special Purpose Vehicles (including, but not limited to opening account documents, monthly account statements, cancelled cheque, deposit slips, and/or wire transfers) in which any of them or persons affiliated with them had signatory or trading authority and/or in which any of them had a legal or beneficial interest.”
Effectively, that covered virtually all documents relating to Creon or Amro or Rhino which may have been in the possession of Goodman Jones between January 2000 and July 2009, a period of some nine and a half years. I was told that the volume of such documents was some 20 boxes and it is obviously an exceedingly wide request.
9.1. Following the request, there was some communication with the SEC because the FSA were not originally satisfied that the documents that were requested fell within the scope of the claim which was being made by the SEC and thus they wondered whether it would be appropriate for them to agree to obtain them or to ensure that they were obtained. They received responses which satisfied them that they were. Obviously it will be necessary to go into that in due course but, to take the narrative on, Goodman Jones were asked first whether they would be able to produce the relevant documents within the short timescale that was demanded because it was said that they must be produced by 15th August because of the likelihood, as was then thought, that the judge would not extend time further. They agreed that, although there was a large volume of documents, it would be possible physically for them to be produced within that short timescale. They were further asked whether they would voluntarily produce the documents. That inevitably they refused because clearly the documents that...
To continue reading
Request your trial
-
R (Amro International SA and Another) v The Financial Services Authority & others
...EWCA Civ 123 [2009] EWHC 2242 (Admin)" class="content__heading content__heading--depth1"> [2010] EWCA Civ 123 [2009] EWHC 2242 (Admin) IN THE HIGH COURT OF JUSTICE COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM THE ADMINISTRATIVE COURT Mr Justice Before: The President of the Queen's Bench ......