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Week two of Naked Capitalism’s series on Carbon Neutral Investments and other carbon credit scams

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Naked Capitalism’s series about Carbon Neutral Investments and other carbon credit scams continued last week. The stories just get better and better.

As I noted in my previous post about Naked Capitalism’s series, REDD-Monitor occasionally receives comments asking how someone who trained as an architect, has an MSc in Forestry, and 20 years experience as an environmentalist can write about carbon credits as an investment. Here’s yet another comment along these lines:

I would appreciate if you could explain why you feel it is not a good investment. What is your background? Do you operate in the financial market? I ask not to offend but I would like professional opinions of all on this as I am still tempted to do things in the carbon market in the future.

Of course you shouldn’t just believe me when I write that carbon credits are not suitable as investments. So here’s a short reading list: a press release from the Insolvency Service; a warning from the Financial Conduct Authority; and a presentation to the City of London Police by Andrew Ager, ex-head of carbon and emissions at Bache Commodities.

Naked Capitalism’s series on carbon credits can be added to the reading list. Unlike me, Yves Smith, who runs the Naked Capitalism blog, works in the financial services industry. I’ll let her explain who she is:

Although I believe ideas should stand on their own merit, rather than on their author’s credentials, I also recognize that readers want some assurance that they are not quoting a 13 year old or a dog. I have undergraduate and graduate degrees from Harvard. I have been working in and around the financial services industry since 1980 and have had over 40 articles published in venues such as The New York Times, Institutional Investor, The Daily Deal, U.S. Banker, Bank Mergers & Acquisitions, The Conference Board Magazine, BRW Magazine (Australia), and Boss Magazine (Australian Financial Review).

She’s also written a book about the financial meltdown, and has worked at Goldman Sachs, McKinsey & Co and Sumitomo Bank.

Richard Smith, who wrote the series on Naked Capitalism, is “a London-based capital markets IT consultant”. It’s reasonable to assume that he knows a thing or two about finance as well.

    4 November 2013: McLaren F1 & Jenson Button One Minute, Boiler Room Scams the Next: the Remarkable Double Life of Carbon Neutral Investments, Limited, (CNI)

    Smith takes a look at some of the companies that are buying carbon credits from Carbon Neutral Investments Limited: Make-A-Wish Foundation® UK; McLaren Mercedes Formula 1 team; and The Main Event International. And he notes that Financial Conduct Authority has put out a warning against Carbon Neutral Investments. And then there’s the record of Thomas Knifton, an ex-company director at Carbon Neutral Investments. FT Alphaville reported on one of his previous ventures, Montague Pitman, under the headline “Little Bucket Shop of Horrors”. Another report, on Citywire, explains how the FSA managed to miss another dodgy company that Knifton worked at, called Wills & Co.

    5 November 2013: Why is Google Censoring Search Results to Nix Warnings Just Like Ones Issued by a UK Regulator?

    No information on four REDD-Monitor posts about Advanced Global Trading appears in google.co.uk search results. (That’s not the case for google.co.id search results, though.) The reason for this is a legal compaint from Beale and Company LLP to Google. In an open letter to google.co.uk, Smith first points out that on 4 June 2013, Advanced Global Trading lost its trading licence.

    Then he explains that AGT was a company that sold carbon credits as investments and that it was associated with Carbon Neutral Investments Limited. The Financial Conduct Authority has put out warnings against buying carbon credits as investments and against Carbon Neutral Investments (which has changed its name to Gemmax Solutions).

    Smith points out that,

    the allegations made both in the posts, and especially by the commenters, are somewhat more colourful than, but entirely consistent with, and supported by, the FCA’s warnings.

    So, google.co.uk should either reinstate the REDD-Monitor search results, or remove the FCA warnings from its search results. “The second choice would be an idiotic mistake”, Smith adds.

    6 November 2013: The Lotus Formula 1 Team, Its Embarrassing Partner, Advanced Global Trading of Dubai, and Carbon Neutral Investments

    Advanced Global Trading has a deal going with the Lotus Formula 1 Team. In August 2013, REDD-Monitor sent some questions to the Lotus F1 Team, but so far they have declined to reply.

    Smith highlights just how dodgy a company Advanced Global Trading is (or was) and notes that Lotus F1 team is “scrabbling around for funding”. If AGT has “folded its tents and departed into the night (all indicators point that way)”, then Lotus F1 Team has lost a sponsor. Any payments from AGT came from “imprudently invested life savings of several hundred naive and reckless small retail investors”. Or, AGT may have sold large numbers of overpriced carbon credits to Lotus F1 Team and in return got the AGT logo displayed on its cars. “Nice work,” Smith comments.

    P.S. On 11 November 2013, Naked Capitalism pointed out that four days after the post on Naked Capitalism, AGT is no longer listed on Lotus F1 Team’s website as an Official Team Partner. Naked Capitalism 1, REDD-Monitor 0.

    7 November 2013: Newcastle United FC, Bloodhound SSC, Glitz, Glam and Police Raids: a Last Look at the Remarkable Double Life of Carbon Neutral Investments Limited (CNI)

    More of Carbon Neutral Investment’s corporate partners: Newcastle United, “the world’s first ‘carbon positive’ football club”; Bloodhound, the Land Speed Record team; Paulie Malignaggi, the world’s first carbon neutral boxer; Pomp, a London restaurant; Amber Lounge, “the World’s most exclusive Grand Prix after party”; and more – here’s the full list.

    Smith concludes,

    So there we are: on the one hand, schmoozing the rich and famous on the Formula 1 circuit, and on the other, providing custody, clearing and payment services (whatever those might be), to nasty little boiler rooms, while the FCA looks on and wrings its hands. Such is Carbon Neutral Investments.

    8 November 2013: The UK Insolvency Service’s Oddly-Timed Carbon Scams Press Release Highlights Its Own Slow Response

    Smith takes a look at a 6 November 2013 press release from the UK’s Insolvency Service. The press release is very reassuring. The headline reads, “Carbon credit scams targeted as 19 companies shut down”. Carbon credit scams are nasty, but the authorities are on the case.

    As Smith explains it’s actually not reassuring at all. One of the companies closed down is Anglo-Capital Partners. I wrote about them in March 2013. Seven months later, the company went into liquidation on public interest grounds after an investigation by the Insolvency Service. So far, so good (if a little slow). But one of the director, John Oakes, is also director of a company called Oswald Bradshaw, which also sells carbon credits as investments. It was also on Carbon Neutral Investments’ List of Clearing Members. A commenter on REDD-Monitor explained how he bought carbon credits through Oswald Bradshaw and made out a cheque payable to Carbon Neutral Investments. He complained to Action Fraud in January 2013. So far, though, Insolvency Service has not closed down Oswald Bradshaw.

    Smith has his own list of around 90 carbon credit scam companies. In September 2013, an FCA spokesperson told Reuters Point Carbon that the FCA has opened enquiries into 183 firms accused of cold-calling and coercing vulnerable investors to buy carbon credits.

    There are a lot of these firms out there. Putting 19 in liquidation over a 15-month period may be better than nothing, but it’s hardly scratching the surface, especially when the directors of the companies can just move on to new firms and new scams.

 

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  1. Shaming the companies we know who have used CNI as their ‘partner’ to offset their carbon footprint is a good tactic. After all they are doing it for PR purposes. Write and ask if they realise that their ‘partner’ has been a wholesaler (supplier) to a large number of brokers who have conned vulnerable people out of their life savings.

  2. @Mike – 1. Carbon Neutral Investments no longer exists as a company, it is now called Opus Capital, nor are the aforementioned ‘partners’, ‘partners’ of Carbon Neutral Investments, so the article and your point are superfluous.

    2. Carbon Neutral Investments was never a wholesaler to any brokerage, so you point is simply not true. Mr Lang is aware of thus, but choses to not correct you on this matter. It provided clearing and settlement services; in the same way that a stock brokerage does for stock purchases.

    @chrislang The response of @mike is a perfect example of what your posts actually do; create misinterpretations and false conclusions. Sterling work again Chris; you bastion of the truth you.

  3. So Carbon Neutral Investments sold its clearing and settlement business to Gemmax, its offsetting practise to CNI and renamed what was left of itself as Opus.

    It was not strictly speaking a wholesaler, as it did not own any credits, but it had the links between the Suppliers and the many Brokers it serviced, who sold credits as investments using wildly false claims.

    Are you suggesting that Carbon Neutral Investments were some kind of innocent party in this scam? Or did they know exactly what was happening, but chose to continue servicing the many brokers for financial gain? They may not have been legally liable for fraud or misrepresentation but morally, ethically??

    So Joe, what do you have to say about that, oh wielder of the sword of truth?

  4. Joe: I believe Mike was using the term ‘partner’ in the colloquial sense, i.e. ‘a company working with another company’ rather than the strictest ‘business’ definition of the word. As you seem to know something about Carbon Neutral Investments and their involvment in voluntary carbon credit transactions, maybe you could expand on exactly what “clearing and settlement services” actually entails? At some point credits worth 50p were marked up to £4 and above, and then sold on to private individuals. At what point was this markup applied – before or after CNI had provided its “clearing and settlement” services?

  5. On Naked Capitalism Gemmax are quoted as ‘The service provided by Gemmax Solutions guarantees a delivery versus payment mechanism ensuring cash is exchanged for an asset.’

    Well I paid for credits in a specified project and have been allocated credits in an entirely different project. This, according to Carbon Neutral Investments was due to an error by their supplier. Gemmax have informed me in writing that ‘… the responsibility for ensuring that your product is delivered as agreed falls to your brokerage…’. Some guarantee.

    Gemmax are FCA authorised as a Small Payment Institution. If this doesn’t give any protection for non-delivery against payment, exactly what use is this authorisation?