Giant US fund hit in MFS wind-up
- by: LEO SHANAHAN
- From: The Australian
- December 04, 2012 12:00AM
Leo Shanahan
Reporter
Sydney
https://plus.google.com/101002780902845862590
NEW York-based investment vehicle Fortress Investment, whose board of directors includes Richard Haas, one of the grandees of the US foreign policy set, has had almost $190 million worth of its Australian assets frozen after a complaint by the liquidators of the failed Gold Coast investment group MFS.
The Supreme Court of Queensland last month ruled in favour of the liquidators for MFS -- now called Octaviar -- who had argued that Fortress had received preferential payments from MFS while it was insolvent.
This follows a successful action by liquidators to obtain a "Chapter 15" in a New York court, which would give them the right to pursue Fortress for assets in the US.
Ten thousand investors, mostly elderly, lost about $700m when the MFS-founded Premium Income Fund collapsed in the global financial crisis, with the company now owing $2.4 billion to creditors.
According to the freezing order made by judge David Boddice on November 9, Fortress would be prevented from selling assets or removing property in excess of $190m from Australia.
Fortress in Australia could not be contacted for comment. Fortress, which has $US51bn under management, was co-founded in 1998 by some of the biggest names in US finance, including Robert Kauffman, Randal Nardone and Wesley Edens. Dr Haas, listed on Fortress's website as an independent director, is the president of the Council on Foreign Relations and was a principal adviser to former secretary of state Colin Powell.
Liquidators William Fletcher and Katherine Barnet of Bentleys Corporate Recovery also aim to recover another $19.7m payment made in December 2008 from Octaviar to Fortress, two months after MFS was put in voluntary administration in September 2008.
Interest on the repayments is also being claimed by the liquidators, meaning, if successful, the final return could be more than $210m.
The repayments made by MFS to Fortress between February and December 2008 were funded through the sale of its hospitality arm, Stella, to the private equity CVC Group the same year. In their statement of claim filed against Fortress, the liquidators allege that Fortress "conspired" to receive the preference payment with former Octaviar directors David Anderson and Craig White -- who are also listed as defendants in the case -- despite the firm being in dire straits.
"Between around January and February 2008, Fortress received a large amount of information about the cash position and solvency of OA (Octaviar Administration) and OL (Octaviar Limited), the financial position of the Stella Group (including, but not limited to, inter-company loans), and the CVC proposal and the Stella share sale agreement," they claim. "The plaintiffs contend that Fortress aided, abetted, counselled or procured the contraventions within the means of section 79(a) (of the Corporations Act), has been knowingly concerned in, or party to, the contraventions . . . and, or alternatively, has conspired with Mr Anderson and Mr White to effect the contraventions."
Fortress recently failed in a bid to have the freezing order thrown out in the NSW Supreme Court, arguing it had been "prejudiced" by the terms of the liquidators law suit.
In a judgment late last week, judge Ashley Black rejected the Fortress claim that it had been "prejudiced by loss of memory, loss or documents or the passage of time" as "unsupported by evidence".
OCV
octaviar limited
