Millions Recovered & New Law in Securities Scam

04/24/2006

US, English and offshore law firms have worked together to bring a landmark receivership case to the Royal Court of Guernsey in a $121m international securities fraud scheme.

DurretteBradshaw PLC, is the US Court appointed receiver of Vavassuer Corp, a company incorporated in the Bahamas to hide money swindled from investors through out the world. DurretteBradshaw, and its receiver Roy Terry, have partnered with Paul Clements of English law firm Rooks Rider and Simon Davies of Ogier, in order to recover some of the assets of Vavasseur.

It is the first time a US receivership of a foreign company has been recognised in Guernsey, setting a precedent for all common law jurisdictions.

Vavasseur was controlled by Terry Dowdell who managed an international fraud scheme which raised as much as $121 million from investors in the United States and Europe through the sale of fictitious securities.

Funds fraudulently obtained from investors were traced to a number of jurisdictions including the US, Channel Islands, the British Virgin Islands and Ireland.

As receiver of the assets Roy Terry of DuretteBradshaw is acting to recover funds owing to investors defrauded in the scheme. He instructed English solicitors Rooks Rider who appointed Ogier to seek recognition in Guernsey of the US receivership order in order to be able to seek recovery of monies lodged in certain bank accounts in Guernsey, which accounts were in the name of Vavasseur.

Receiver Roy Terry notes, “Our appointment order directs that we recover assets wherever they are found. What has made this effort especially complex is the interplay of law from the various jurisdictions. Proceeding in Guernsey has involved not only gaining familiarity with Guernsey law, but also with relevant laws of the US, UK and the Bahamas.”

Under the current state of Guernsey corporate law, the concept of receivership is restricted to a few very specialist fields. In no previous case had the Guernsey courts ever recognised a receiver appointed by a foreign court. In order to do so, the Court relied on applicable English law, which revolved around a somewhat unsatisfactory 1975 English judgment

“This judgment is a clear demonstration that the Royal Court of Guernsey will not tolerate those who attempt to misuse the financial services industry in Guernsey for illegal or improper purposes. As a result, the receivers of Vavasseur will be able to provide a more substantial recovery to the true victims of the fraud. It is to be hoped that the legal obstacles that the Royal Court was able to overcome will lead to other common law jurisdictions taking the same modern approach to comparable cases. The decision will be welcomed by legal and insolvency practitioners alike and it is to be hoped that the decision will set a new international standard which is likely to be upheld for years to come,” points out Simon Davies of Ogier.

Paul Clements, Head of Dispute Resolution at Rooks Rider, commented that “this was a highly complex factual situation in an area of great legal uncertainty and complexity. Despite the political consensus amongst western governments since 9/11, that asset tracing in criminal cases should be made easier, most legal systems have historically put real obstacles in the way of asset recovery. It is in this, vital, area, that this case has achieved such a breakthrough.”

For more please see article in Virginia Lawyers Weekly:
4-24-06 VA Lawyers Weekly.pdf