The board of18 Guernsey-listed investment vehicles is suing Arch Financial for £150m over the failing of the £400m Arch cru fund range, according to reports.
The claimants are accusing Arch of failing in its mandate to exercise fundamental care of assets as well as a failure to account for secret profits, according to the Financial Times.
According to the FT, a high court writ issued by the board of directors, claims Arch ignored conflicts of interest by using money from the cells to buy the shares of Arch and cru Investment Management.
The FT says that at least £2m was invested in cru, giving the company a £9m value, although according to the writ the most recent audited accounts disclosed a net value of £8,413.
Arch’s largest deal totalled $167m to finance the conversion of seven oil tankers, which were owned by a Greek shipping yard.
The writ claims these were “old, of very poor quality and in very poor condition” and that the investment was “exceptionally risky”. Further it alleges that a bankruptcy petition was outstanding against Salamis at the time of the investment and that the owner had been involved in three previous shipping ventures, all of which have failed.
The investment resulted in losses of $162m, according to the writ, while Arch made “secret profits” of £1.7m.
Arch chief executive Robin Farrell said Arch and its principals “deeply deny these unfounded allegations in their entirety”. He claimed that any blame for the failure of the funds lay with authorised corporate director Capita, the FSA and the global financial crisis.
Meanwhile, Prime Minister David Cameron has rejected calls from an MP for an independent inquiry into the Arch Cru investment funds scandal.
Cameron acknowledged the difficulties faced by the 20,000 investors in the Arch cru funds but said the Government had “yet to be persuaded” that this was appropriate.