A little less than two hours after REDD-Monitor’s post yesterday about the Financial Conduct Authority’s High Court win against Capital Alternatives, I received an email from Paul Quade of City Road Communications, a public relations firm in London.
Quade was concerned that I hadn’t contacted Capital Alternatives for a comment. He didn’t seem concerned that I also hadn’t contacted any of the other 15 defendants, or anyone at the FCA. But I guess none of them are paying him to provide public relations services.
Quade also seems worried that I didn’t mention that Andrew Penman works at The Mirror. In his hurry, Quade seems to have overlooked the fact that I provided a link to the article that Penman wrote (in The Mirror). Oh well. I’ve inserted the words “at The Mirror” into yesterday’s post. But why Capital Alternatives would pay a public relations firm to pick up that sort of detail is beyond me. Purely coincidentally, Paul Quade worked for the Mirror Group Newspapers in the 1980s.
Quade points out that the Judge did not use the word “fraud” in his ruling. Neither did I in my two posts about Capital Alternatives, except when I quoted from African Land’s website. This post also wouldn’t have mentioned fraud, had Quade not brought it up. I wonder why Quade and Capital Alternatives keep talking about fraud?
Quade sent me a copy of the 112-page draft ruling from the High Court and cherry picked four pages of it “for a fairer and more balanced report of the case”. I’ve not uploaded this document, because there’s a notice at the top of it explaining that “This draft is confidential to the parties and their legal representatives”.
(The case reference is HC13F02624. I’d suggest that anyone wanting this or any other court documents should apply to the High Court.)
Now here’s the funny thing. In addition to being a director of City Road Communications, since November 2013, Paul Quade has also been the director of a company called Rough Diamond Trading Ltd. Here’s the company website – nothing suspicious there, of course, it’s just the website of a company trying to sell diamonds to retail investors:
Rough Diamond Trading’s website was registered by Independent Investor Services Ltd. One of the directors of Independent Investor Services is Marcia Hargous. She is also a director of Capital Alternatives and African Land.
Another of Paul Quade’s companies is Omni Earth Ltd. As far as I can tell, the company hasn’t got a website yet, just a Facebook page (so far with only one “like”). More interesting is one of the other directors of the company. Step forward, Kenneth Scott.
Scott is the sole director of a company called Crest Commodities.
In April 2013, someone calling themselves “Gearld” left a comment on The Mirror‘s website, following an article by Andrew Penman about African Land.
Gearld explains that he had first invested with a company called Room to Invest. (Directors of this company include several of the defendants in the FCA High Court case – Richard Henstock, Renwick Haddow and Marcia Hargous). Then he had “switched” his investment to a Brazil carbon project, and then to African Land. Now Capital Alternatives had phoned him asking him to pay more and switch his investment from African Land to a palm oil project. He asked whether the palm oil project was a scam. “This is beginning to sound like a Ponzi scheme,” he wrote.
And then it gets really interesting:
A month ago i had some one from a company called crest commodities called me trying to sell me palm oil, i never registered with them which is a bit strange how they had my details. Are they too part of this scam owned by renwick haddow and marcia hargous.
At this point, I think it’s relevant to point out that the FCA case against Capital Alternatives and the other 15 defendants was that they were running unauthorised collective investment schemes. It’s also relevant to quote, once again, Judge Nicolas Strauss QC’s ruling in the High Court:
“I declare that all the schemes under consideration are, and have been since their inception, collective investment schemes within the meaning of Financial Services and Markets Act.”
Here’s Quade’s email, followed by the statement from Capital Alternatives that Quade asked REDD-Monitor to post. I’ve googled several excerpts from Capital Alternatives’ statement, but couldn’t find it anywhere on the internet. I’m looking forward to Quade telling me which “other press have had the courtesy to print” this nonsense.
From: Paul Quade email@example.com
Date: 5 March 2014 16:58
Subject: FCA wins court case
Interesting that apart from quoting from African Land’s website your journalist did not have the courtesy to contact Capital Alternatives for a comment.
Equally you make no mention of the fact that Andrew Penman works or did work for the Daily Mirror. Furthermore in no part of his judgement did the on Judge use the word “fraud”.
I’m attaching a statement from Ca[ital Alternatives which other press have had the courtesy to print. I am hoping as a serious online publication that you will do the same. I’m also attaching the full judgement and you may care to look at pages 22 where the judge dismisses a prosecution witness as “unreliable” and pages 41,42,43 for a fairer and more balanced report of the case.
Statement in response to the High Court Ruling
“The FCA only won this preliminary issue trial only on the basis of a narrow legal interpretation of the FSMA. The FCA lost on every significant issue of fact. The Learned Judge, Mr Nicholas Strauss QC, had no hesitation in granting our application for permission to appeal. The hearing before the Court of Appeal will likely take place later this year. The Judge also looks set to compensate the defendants (by exercising his discretion in relation to legal costs) for the unfortunate way in which the FCA conducted both the case and the prior investigation.
The FCA’s conduct of this matter has, in our view, been deeply disappointing and wholly unbecoming of a public body. Despite having never visited the farm in Africa or the rainforests in Brazil or Australia, and despite having never interviewed Mr McKendrick, the FCA believed these products and investments to be a sham from the outset. They have no doubt been motivated, or cajoled into action, by a small minority group of disgruntled investors. The judgment gives no credence whatsoever to such claims. On the contrary, the products and the places they enrich (i.e. the developed world) have been shown to be absolutely genuine. One particular investor, Ms Botto, gave evidence at the trial to confirm the positive work that AL and CAL have done and the good returns that she has received.
Marcia Hargous and Robert McKendrick were found to be truthful straightforward witnesses. Some of the FCA’s witnesses were not credited with the same praise.
Technical highlights from the judgment:
a. The Court accepted there was force in the criticisms that the FCA had no evidence to support the allegation that the farming on Yoni Farm was a pretence. Over 3 years the FCA had not been to Yoni Farm and had not interviewed Mr McKendrick (paragraph 55).
b. There was an “unfortunate hiatus of about 15 months between June 2011 and September 2012 in which the FCA had insufficient resources to pursue its investigations so leaving the future of an operating farm in doubt over for an unnecessarily long period” (paragraph 55).
c. The Court rejected Mr McFarlane’s evidence and was satisfied that the position is “as African Land states” (paragraph 56).
d. The Court rejected Mr Thorp’s view that pooling arises where there is no separate sale of the rice (paragraph 58).
e. The Court rejected the FCA’s case that there was pooling as there were standard deductions for milling and general expenses (paragraph 59).
f. The Court rejected the FCA’s case that there was no individual allocation of income at Yoni Farm (paragraph 96). The Court had “no hesitation” in accepting Mr McKendrick’s account on the issue (paagraph 111).
g. The Court rejected the FCA’s case that the money paid by the investors was also part of the property within the meaning of section 235(3)(b) (paragraph 158).
h. The Court rejected the FCA’s case that there was pooling on the basis there were standard deductions for expenses (paragraph 162).
i. The Court accepted that the guidance given by the perimeter guidance team (to the effect that if income is paid to investors from their separate property that is enough to take a scheme outside both section 235(3) (a) and 3(b)) and upon which the Defendants relied was inconsistent with the FCA’s argument in the litigation (paragraph 193).
j. The Court accepted Mr McNee’s evidence that ACCUs were to be attributable to individual plots (paragraph 251).
k. The Court rejected the FCA’s submission that the award of the total number of ACCUs attributable to the forest area meant that profits were pooled (paragraph 256).
l. The Court rejected the FCA’s submission that section 235(3) (a) was satisfied because refunds could only be made out of the proceeds of contributions (paragraph 257).
m. The Court rejected the FCA’s submission that in relation to the CCC schemes in Brazil and Sierra Leone it was the intention of Ms Hargous (or any of D1-D8) to share the VCU’s rateably between investors (paragraph 270).”