Arch Cru Update: progress being made on litigation, mediation and some further recovery for victims

The Arch Cru APPG does not exist anymore, for a variety of legitimate reasons, but Alun Cairns MP and myself have agreed to continue to follow any progress to ensure that MPs and their constituents receive any necessary updates.  

With this in mind, please find below further information on the latest progress:  
Mediation: The mediation process, facilitated by Bill Wood QC, continues, but correctly for a confidential process, there is no public information while that progresses. 
Reporting by the Guernsey Board:

The money invested by UK constituents in mutual funds was in turn invested by the managers of those funds, Arch Financial Products LLP (“Arch”) in the shares of Guernsey companies (“Cells”) listed on the Channel Islands Stock Exchange and also managed by Arch. The assets of those Cells were then invested by Arch in a range of investments, several of which lost, permanently, a great deal of value.  Failures by Arch have since been detailed by the FCA in its Decision Notice of September 2012, and in the judgment of the London High Court on Arch and its CEO delivered in December 2014.  The Guernsey directors were replaced by a new board of directors from 2010 onwards;  there is a recent published statement from Hugh Aldous, Chairman of that new board, which highlights progress made up to July 2015.    
Litigation:

There has been considerable progress. 

In December 2014, in the London High Court, the Guernsey Cells obtained judgment against Arch Financial Products LLP and Mr Robin Farrell personally, with orders for over £24 million in favour of the Cells.   The Court found Arch FP liable for breach of fiduciary duties, breach of contract and negligence and also found Mr Farrell liable for dishonest assistance.  Constituents should not however expect a recovery of that order; Arch has gone into liquidation and Mr Farrell declared bankrupt. 

In January 2015 the Upper Tribunal (Financial Services) upheld the FCA's Decision Notices against Arch FP, Mr Farrell and Mr Addison and thereby confirmed that Mr Farrell and Mr Addison are prohibited from performing any function in relation to any regulated activities on the grounds that they are not fit and proper persons.  It confirmed the fines on them. 

In October 2015 Mr Farrell’s request for leave to appeal against the judgment of the High Court was turned down by the Court of Appeal. 

In December 2015 Mr Farrell was declared bankrupt.   Arch FP is in liquidation. 

Claims against the former directors and administrators proceed and, if there is no successful outcome from current continuing mediation, the case will be heard in Guernsey in 2017. 

It may be recalled that the Cells also secured judgment in the London High Court in 2011 against Mr Koros and his interests, which had received some US$200 million of shareholders’ money, for US$86.8 million.  Judgment against Mr Koros and his interests has been confirmed by the courts in Greece.  Mr Koros says he has no assets. Matters in Greece are complex and may continue until 2018. There are nevertheless recovery prospects ,but if litigation is the way forward, that may take time and be costly.  Therefore, to try to cut through some of that, mediation remains open and active for the remaining Guernsey claims.

The former auditors of the Cells settled out of court almost 18 months ago. 

Guernsey:

In August 2015 the Guernsey Financial Services Commission published its decision against the Cells’ former administrator and its directors who were also directors of the Cells, although that latter role was not examined by the GFSC and is the subject of current litigation.  The GFSC’s decision made serious criticisms of the conduct of the administrator, found that the directors “demonstrated a consistent and serious lack of appropriate competence, judgment and diligence”, prohibits them from holding any position of responsibility in financial services in Guernsey for 5 years and imposed financial penalties.  Since it was from those Guernsey Cells that investors’ money was lost, and the notice of the decision is relatively short, we attach a copy of that decision.  It makes interesting reading. 

Achievement so far:

Although immediate financial rewards from these actions may be limited, the success ought to satisfy shareholders that those responsible for their losses are steadily being brought to book and, although it may be of only moral satisfaction, the cases against Arch and Mr Farrell concluded with robust judgments that have been noted by the industry and its lawyers. The next challenge is securing recovery under insurance policies. 

Assets and potential distributions:

Total assets under management hover around £50m after some further write-downs of illiquid hedge funds and some of the remaining real estate.  Taking into account announced settlements, a little over £190m has been returned to shareholders so far.  A reasonable proportion of the remaining assets should be readily realisable, or are seen to be in due course.  Some investments, now heavily discounted, are likely to remain a problem.  

Reports and Accounts will be drawn up at 31st March 2016 with a full Chairman’s Statement.  MPs with constituents with losses will receive a copy of that Statement. 

The costs of the legal proceedings undertaken by the Board to bring those responsible to book along with the greatest return to investors, will mean that some of the finance from assets that can be realised will still need to be used.   
However, even though Hugh Aldous tells us that he fears that current legal battles may continue for two or three years (if mediation fails, the claims in Guernsey may continue through 2017, some may go to arbitration and cases in Greece may still be under way in 2018) he still intends that the Board will make a further distribution within the next three to four months.  He, and the Board, are working on first getting shareholders’ representatives to accept a simplification of the existing, unnecessarily complicated and costly structures that hinder efficient distribution.  If that can be achieved, a further pay-out should be achieved in the Spring of 2016. 

We hope this information is helpful and provides a useful update on the continuing work of the Board.  Please be assured that we will continue to follow progress closely. I do stress that any affected constituents have to access information through their individual MP. 

Further info is found here:

http://docdro.id/QoGznmM

http://docdro.id/mx516Zj

Arch Cru Update - a big win in the High Court & an update on financial recovery for victims from APG for Arch Cru Victims

I am now the Chairman of the All Party Group for Arch Cru Victims. The vicitms invested and lost over £400 million. The investments were meant to be secure, non risky. Some investors invested only £5000, others over half a million. I have met many of the Tynedale victims in surgeries and special meetings. Every one is very upset, much poorer and justifiably angry.

They have suffered a lot. As usual, I have done an update to every member of parliament who has a constituent who has suffered a loss - and whose MP has bothered to join the All Party Group. I do stress that All Party Groups are unpaid and entirely self supporting: I, and my small staff in London (2 people) run two All Party Groups - Arch Cru and the All Party Group in support of Air Ambulances. My staff have become quasi experts in both issues as we run these campaigning groups on top of our usual work as an MP, and my work in the Home Office. I owe Charlie and Dan a huge thank you for their efforts down the years.
 
Along with Equitable Life the Arch Cru financial scandal has been the most upsetting issue for me as an MP these last 4 and a half years. Trying to help decent blameless people who have lost all or most of their savings is a thankless task, but one which we have made some progress on. Equitable Life has finally got a variety of government payouts, notwithstanding the recession / shortage of government money after a 20 year wait and successive governments. I am mindful that victims would like more and have met many of them.

My December letter sent to every one of the Arch Cru MPs for forwarding on to their constituents is below:
https://www.scribd.com/doc/250898074/APPG-December-2014-Update

Subsequent to the letter being sent out in mid December I received the brilliant news that Mr Justice
Paul Walker has found for the Administrator of the Cells of the SPL Guernsey ICC in their claim against Arch Financial Products and Mr Robin Farrell. This recovery is part of the several legal claims that are being pursued to get more money back for victims [as referred to in the December 2014 update above]. However, as all lawyers will tell you, judgment is all very good and well, but recovery of the money is what matters to the victims: and that will be a job for 2015. I will update MPs in January with more details. However, for the moment the press release post judgment is here:
https://www.scribd.com/doc/250898067/SPL-Guernsey-ICC-Press-Release

I, for one, do not wish Mr Farrell a happy new year, and will be urging the Administrator to pursue Arch and Mr Farrell for the money, by all means necessary and legal. The judgment is damning against both Arch and Farrell.

"The Cells' claims alleged, as against Arch, breach of fiduciary duty, breach of contract and negligence, and, as against Mr Farrell, dishonest assistance of Arch in breach of its fiduciary duties and inducing breach of contract.
Mr Justice Walker concluded that the claims against Arch and against Mr Farrell succeeded and has made an order for damages, jointly and severally payable by Arch and Mr Farrell, in a sum in excess of £22m, plus interest and costs.
Permission to appeal was refused."

Westminster this week

Busy week in Westminster with the Defence, Health, Scottish and Prime Minister questions the first 3 days this week. We are debating the remaining stages of the Recall Bill, and I am trying to attend the British Racing Parliamentary reception on Tuesday. I have multiple meetings his week on everything from Forestry and Housing in the North, plus discussion of the National Park consultation, where I shall be discussing affordable housing targets, and also the AGM on the All Party Group for Arch Cru victims, where we are getting an update on asset recovery for the victims.  

Key debate in Connaught Fund debacle starts a parliamentary process

Equitable Life, Arch Cru and now Connaught. My time in parliament has featured all too many financial disasters that have decimated the finances of constituents. After 20 years and blighted lives with Equitable Life, and 6 long years of Arch Cru victms trying to get some recompense for a swindle that was not their fault, we again have another relic from the Labour years of light touch regulation, with greedy individuals / crooks depriving honest savers of hard earned reserves and investments.
The Connaught scandal has affected some of my constituents severely. The short debate we held last week tells the tale and full credit to my partner in financial rescue acts, Alun Cairns, MP for the vale of Glamorgan, and my fellow campaigner on Arch Cru. He secured the debate and made his points well. Full debate and my short contribution is here:  http://www.theyworkforyou.com/whall/?id=2014-05-07a.88.0&s=speaker%3A24962#g88.2

Tynedale Business network, Royal Mail, surgeries and school visit today

V early start in Hexham at 7.30 with local small businesses meeting at the Hexham cafe Mrs Miggins this morning, talking about everything from the government help to small businesses, the freezing of fuel duty, and any questions they have to raise .... with the cafe's brilliant bacon butties on the side to get us going.
Then off to meet the team working at the local Royal Mail depot in Hexham before a trip to corbridge   Middle school at 10.15 to talk to the school and discuss the sky sports living for sport campaign. I will be trying to pop by Hexham hospital on the way back into town.

Then before lunch I have long booked in surgeries on the arch cru financial crisis with constituents who have lost money in a terrible financial scandal. We are doing all we can to help them both individually as a constituency MP, and collectively as part of the All Party Group in the House of Commons - which makes up dozens of cross party MPs. There are issues as to whether individuals who have lost money should sue the offending companies or whether they should take the collective agreement that has been negotiated. That is their choice and I will be discussing the options with them.
Afterwards, I have further surgeries on a number of issues. Pleased to say I have a night off Friday evening, but have a busy Saturday and Sunday across the constituency.

Arch Cru - letter to constituents who lost money in this scandal

On Friday, I am having a further meeting with some of my constituents in the Hexham office who have lost money in the Arch Cru financial scandal. I have recently written to all those who have contacted me, over the last 3 years, but have decided to reproduce most of the letter here for completeness, both because I am secretary of the All Party Group for the recovery of funds in Arch Cru, and also to help other MP's / possible victims. For the avoidance of doubt it is my reluctant view - as an MP, and not as a lawyer / advisor - that my constituents do accept the Capita settlement:

Re: Arch Cru Investment Scheme
Further to my letter of the 17th September 2013, in which I promised to write to you following the meeting of the All Party Parliamentary Group on Arch Cru on October 9th, I can now provide an update on the work of the group and that of Hugh Aldous, Chairman of the Board of the Guernsey Cells SPL Private Finance. I apologise for the delay of this reply but I had to wait for the confirmation of a few facts. Unfortunately, as always in this saga, this took longer than anticipated.

The mediation process in Guernsey
As you will all be aware, the mediation process in Guernsey is ongoing. The APPG met in the House of Commons and spoke to the mediator, Bill Woods QC, in June, to try to get an understanding of his hopes and plans. Unfortunately, he was unable to divulge any specific details or indeed, any particular information regarding the parties involved or progress. However, we understand that the legal proceedings are ongoing.

The work of the Board in realising assets
You will see from the table below that along with the Capita offer, some of the total investment of the scheme has already been realised and some is still to be realised. The table shows that the current projection for return of investment is 55% of the entire scheme. Although this figure can change it does highlight the stark fact that full compensation is not going to happen.

From the statement of the Board Chairman, Hugh Aldous, it is clear that although some progress is being made in disposing of the assets of the Guernsey Cells, the rate of that has slowed. This indicates the less liquid nature. In addition, the majority of the remaining assets are illiquid and a solution is being considered for dealing with these in some equitable form. The APPG will press for options to be developed to allow for a form of trading to take place of the remaining assets, after all liquid holdings have been disposed of to maximise the investor return.

The table below shows how the portfolio of cells and assets has changed over the last year:
As of July 2013 (£m)
Net Investment  463
Funds realised thus far 133.5
Capita settlement 54
Remains to be realised 65
Total  257.5
Percentage of Original Investment 55

The other APPG officers and I met with Hugh Aldous in early October. Most of Hugh’s update to that meeting can be seen in his attached Chairman’s statement. To summarise as he saw it, the negative side of the process was that most of the proceedings are under strict confidentiality agreements, which makes our work hard and the ability to update investors even harder. However, the positives were that the mediation process continues and that no single party has yet withdrawn from the mediation process, which suggests that all parties realise they are at fault to differing degrees, have a case to answer, and will not get off scot free. Hugh told us that they all wish to settle in some form.

The Capita offer
I realise that the deadline for the offer of compensation from Capita is imminent and that you will be making a decision shortly - if you have not already. The recent main focus of the APPG has been on the negotiated settlement, involving all parties, in Guernsey. This is an ongoing and confidential process and the APPG is continuing to press for options to be developed and explored.
I cannot specifically advise you on whether to accept the Capita settlement, although you know my views that this is an offer you should accept. I say this not as an advisor, but as an observer, and your MP. Two things seem obvious: firstly, that the deadline will not be extended again and, secondly, that the parties will not make clear the basis of the agreement before the current December deadline.

The APPG will be meeting again in January and hope to have an update on any further progress before Christmas. I will write again with that update.
Yours ever,

Guy Opperman
MP for Hexham
NB: I should add that if there are any of my constituents who have not contacted me on this issue but wish to do so then they should not hesistate to call either office, although Charlie in the London office is the chief point of contact. My apologies but I am not allowed to help non constituents. They should contact their own MP.

Westminster this week

Four days in Westminster this week, then heading north on Friday to open the Trinity Court Housing Project of ISOS, and appear on the Sunday Politics in the North East on BBC1. The Westminster week features a private meeting with the Business Minister Michael Fallon today, Justice Questions on the issue of prison reform tomorrow plus further debate on the Lobbying Bill this week. I also have meetings with Richard Benyon, the Agriculture Minister and the key officers of the APG on Arch Cru are having a meeting with Hugh Aldous, the man charged with the task of recovering as many of the losers money as is possible in this sorry saga. I will try and get called at PMQs on Wednesday.
On the issue of the Lobbying Bill it is still being revised and I welcome all the emails I have received. On this occasion I have not gone through all the 38 Degrees legal advice or responded piecemeal as the Bill is constantly changing in Committee and debate, which is what happens on all Bills - a fact that seems to pass by the 38 degrees organisation. We spend days responding to the 38 degrees campaigns, and will send out the full response at the conclusion of the Bill process, but the key point is this:
The registration and spending limits apply to all third parties that incur controlled expenditure. Charities and any other third parties, will only be required to register and then comply with the spending limits, if they are undertaking activities that can reasonably be regarded as intended to promote or procure the electoral success of a party or candidate.
The Bill, put simply, requires those who want to influence the outcome at a General Election to be transparent in doing so, while preserving the freedom to speak out on issues which Civil Society has always enjoyed in this country.

Bear in mind my campaign budget in Hexham at the last election was around £10,000 - the figure is restricted by law, and the expenditure very tightly controlled and fully transparent. A similar rule applies for county council elections. Any third party charity or campaign group can outspend the
candidate by many times. I do not consider such very limited regulation of third party, charities, and campaign groups to be wrong.
Making this process more transparent is a good thing in my view. As I say, I read all the emails and will happily respond to individual voters and the actual 38 Degrees team - who now will interestingly not reply to my letters - but it is my intention to vote for the Bill.