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Delighted Defence – 25 Feb 2014

Member: Nifa

Forensic accountants working on behalf of property tycoons Vincent and Robert Tchenguiz will no doubt be delighted following a Court of Appeal ruling that liquidators working for the Serious Fraud Office (SFO) must disclose documents relating to a record £300m claim brought by the brothers against the SFO.  The brothers’ defence team have alleged for years that the documents produced by the liquidators gave the SFO “misleading and inaccurate” information that started a flawed criminal investigation, costing them more than £2.5bn and damaging their reputation, as well as leading to their arrest in March 2011.

The liquidators had argued that the five reports they prepared as liquidators of Oscatello, an investment vehicle of Robert Tchenguiz, were covered by litigation privilege and should therefore not be disclosed.  However, the Appeal Court judges ruled that the reports are “plainly relevant” to the case which the claimants wish to put forward meaning that the Tchenguiz brothers’ defence team, including their forensic accountants will now be able to do a complete investigation of the documents in their attempt to prove that the SFO case was indeed based on the misleading and inaccurate information they have long claimed.

Following the ruling, Vincent Tchenguiz said that the SFO’s blind faith in the reports led to warrants being obtained to search their homes and office, while Robert Tchenguiz added that their defence team can now find out exactly what led to the SFO bringing a case against them.  Given the undoubtedly complex nature of what they will find in the documents, the Tchenguiz’s forensic accountancy team will not only be able to make sense of the information but will also be able to use it to paint a clear picture of the facts when the brothers’ case against the SFO comes to court in October.

Disclosure of the liquidators’ reports is a matter of grave concern for insolvency practitioners.  Until recently, insolvency practitioners were able to report on possible wrongdoing by former directors in the confidence that any suspicions that they might raise would be privileged and could not be disclosed.  This encouraged insolvency practitioners to report any concerns about the behaviour of directors even if no hard evidence was available.  It would then be down to the prosecuting authorities to decide whether or not to investigate those concerns.  Now that there is a risk that an insolvency practitioners’ report might be disclosed, there is likely to be far more reluctance to report suspicious transactions, which cannot be in the public interest.

Author: Roger Isaacs, 25 February 2014

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