View more on these topics

Connaught: It could take 2 years to determine Ucis losses

mike davies connaught chairman
Mike Davies

It could take up to two years to determine the full losses on the £118m Connaught Income Series 1 fund and return money to investors, according to Connaught chairman Mike Davies.

Last week, Money Marketing revealed investors in the suspended fund could be facing losses of 50 per cent. Independent advisers Duff and Phelps presented investors with an outline of potential losses after revealing that £105m of the £118m assets from the Series 1 fund had been used to fund Tiuta’s lending book. Duff and Phelps predicts Connaught stands to recover between £46.5m and £53.2m of the £105m.

Duff and Phelps has written to Tiuta, calling on it to honour a guarantee to fund any losses on the Series 1 fund. Tiuta is refusing to comment on whether it recognises the validity of the guarantee.

Connaught chairman Mike Davies says: “It is not possible to crystallise what losses there might be until all the monies are returned to the fund, which is a process that could take up to two years. Everyone at Connaught Asset Management is providing assistance to administrator BDO to ensure we can recover as much money as possible for investors from the loan books of Series 1.”

Davies is pointing investors to an online investor group for updates on the situation.

He adds: “There are further meetings taking place next month and Duff & Phelps has already set up an online official investor group. It is in the process of sending log-in and password details to all relevant IFAs and investors and we would urge those concerned to use this resource for detailed information and updates.”

A Connaught investor, who wishes to remain anonymous, says: “It will take a lot longer to understand the true position of the fund and realise the capital than we would have liked. Of course, there may still be claims brought against a number of the professional services firms and against the directors and they may take even longer than two years.”

Investment Quorum chief executive Lee Robertson says: “It is a big ask to expect a private investor to wait two years before they can access their money. How can anyone plan on that basis?”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. Another supposed low-risk, asset backed UCIS goes belly up. When will people ever learn?

  2. Staggered that Davies is opening his mouth at all on this subject bearing in mind that he and his co-Directors are responsible for this fiasco. He will be delighted if it took 2 years to wind this down as it means more fat fees for him. He should have no involvement on-going whatsoever with this fund. And yes, there is a website for Investors and Advisers – http://www.connaughtactiongroup.com – which is where you will get the truth about what has gone on, not from some online investor group which he has undoubtedly influenced.

    D&P need to get their fingers out and getting moving on this and focus on action agaisnt the real culprits.

  3. How many more of these schemes are out there? Where was the FSA? What is safe?
    Answer – with the current regime – NOTHING!

  4. How wonderful to hear the expert pontifications from Mike Davies – a self appointed expert on the recovery of his clients’ funds. It is a great shame that he did not take such an interest in the way they were invested. It seems the investors have lost a large share of their stakes in this safe ponzi scheme. How much did Mike Davies and his cohorts make in their fees? The administrators and FSA would do well to investigate Mike Davies and his old colleagues at Tiuta.

  5. connaughtactiongroup 23rd August 2012 at 12:29 pm

    Does the FSA bear direct responsibility for the loss of tens of millions of pounds in a ponzi scheme?

    Dear Lord Turner,

    Tuita/Blue Gate Captal/Capita/BDO

    The FSA regulates all of the above-mentioned firms and yet tens of
    millions of pounds have been lost in a ponzi scheme in which they were
    involved to a greater or lesser extent. The chief culpit appears to be
    Tiuta which appears to have stolen millions from the Connaught Income
    Fund Series 1. The Fund was originally called the Guaranteed Low Risk
    Income Fund. We doubt that the irony is not missed on you. It is
    extraordinary that Tiuta is to this day still authorised and regulated
    by the FSA and yet the regulator has not stepped in to intervene.

    It now transpires that many investors put money into the ponzi scheme
    after the former CEO of Tiuta gave evidence of the extent of fraud at
    Tiuta to the FSA in March 2011. We ask in this letter whether there is
    any reason to suspect corruption of the processes of the FSA to
    explain why the FSA did not intervene. We should stress that
    corruption in its widest sense means that the normal processes at the
    FSA have not been followed.

    The allegation made by the Action Group against Lorraine Wadhams, the
    supervisor of Tiuta at the FSA, has not been refuted by the FSA. It is
    that she worked with Mike Davies who had pivotal roles both at Tiuta
    and Connaught. She had previously worked as Head of Operations whilst
    Mike Davies was Compliance Officer at Infinity Mortgages. It is most
    extraordinary that this fact did not lead Ms Wadhams to stand aside
    from regulating Tiuta. What is the impropriety of regulating someone
    with whom you have worked? Well, the main issue is whether the FSA’s
    normal processes have been followed or was some extra latitude allowed
    for the alledgedly criminal enterprise at Tiuta. One would normally
    expect that a report of a serious fraud involving 60 or more allegedly
    bogus loans from the CEO of a regulated company to the FSA would lead
    to vigorous regulatory action by the FSA. The fact that the FSA failed
    to act after it had been alerted means that new investors were allowed
    to invest in the ponzi scheme. This is little short of a scandal.

    At the meeting with investors on 13 August, Mr Davies referred to Ms
    Wadhams as “my contact” at the FSA. This gave the impression that Mr
    Davies has influence over the FSA i.e. that he is untouchable. We need
    a full investigation into this relationship and whether Ms Wadhams has
    relied unduly on mis- information from Mike Davies.

    We question whether Ms Wadhams has acted in accordance with the FSA’s
    own code on conduct for employees. When tens of millions have gone
    missing we are entitled to demand whether there has been corruption.

    We also question the role of BDO which knew in January 2011 that Tiuta
    was insolvent and about the 60 bogus loans. Under FSA principle 11, it
    is meant to inform the FSA of any information which it would
    anticipate that the FSA would wish to be notified about. It was meant
    to report monthly to the FSA. We question whether BDO made proper
    reports to the FSA and whether it was compromised because it was
    hoping to be appointed to the lucrative role of administrator of Tiuta
    and was indeed appointed to the role of administrator of Tiuta
    International in July 2012.

    One wonders what the point of regulation is when everyone involved is
    out to enrich themselves with little care for investors. The two
    operators of the scheme, Capita and Blue Gate failed to exercise
    proper controls over the spending of cash belonging to the Fund or
    repayment of monies to the Fund. Similarly, Connaught failed to do so.
    With all of these parties with their snouts in the trough, they could
    at least have safeguarded the assets of investors. Furthermore, we
    understand that Capita and Blue Gate approved the investment
    memorandum as a financial promotion and yet failed to ensure that
    Connaught and Tiuta followed the promises as to how money was to be
    invested.

    The Tiuta saga is emblematic of the failure of regulation in Britain.
    There were multiple failures by many parties, not least by the FSA
    which could and should have intervened. We demand an investigation
    into Ms Wadhams. It is critical that investors know why the FSA failed
    in its basic duty to protect investors.

    Yours sincerely

    The Connaught Action Group

  6. connaughtactiongroup 23rd August 2012 at 12:52 pm

    Does the FSA bear direct responsibility for the loss of tens of millions of pounds in a ponzi scheme?

    Dear Lord Turner,

    Tuita/Blue Gate Captal/Capita/BDO

    The FSA regulates all of the above-mentioned firms and yet tens of
    millions of pounds have been lost in a ponzi scheme in which they were
    involved to a greater or lesser extent. The chief culpit appears to be
    Tiuta which appears to have stolen millions from the Connaught Income
    Fund Series 1. The Fund was originally called the Guaranteed Low Risk
    Income Fund. We doubt that the irony is not missed on you. It is
    extraordinary that Tiuta is to this day still authorised and regulated
    by the FSA and yet the regulator has not stepped in to intervene.

    It now transpires that many investors put money into the ponzi scheme
    after the former CEO of Tiuta gave evidence of the extent of fraud at
    Tiuta to the FSA in March 2011. We ask in this letter whether there is
    any reason to suspect corruption of the processes of the FSA to
    explain why the FSA did not intervene. We should stress that
    corruption in its widest sense means that the normal processes at the
    FSA have not been followed.

    The allegation made by the Action Group against Lorraine Wadhams, the
    supervisor of Tiuta at the FSA, has not been refuted by the FSA. It is
    that she worked with Mike Davies who had pivotal roles both at Tiuta
    and Connaught. She had previously worked as Head of Operations whilst
    Mike Davies was Compliance Officer at Infinity Mortgages. It is most
    extraordinary that this fact did not lead Ms Wadhams to stand aside
    from regulating Tiuta. What is the impropriety of regulating someone
    with whom you have worked? Well, the main issue is whether the FSA’s
    normal processes have been followed or was some extra latitude allowed
    for the alledgedly criminal enterprise at Tiuta. One would normally
    expect that a report of a serious fraud involving 60 or more allegedly
    bogus loans from the CEO of a regulated company to the FSA would lead
    to vigorous regulatory action by the FSA. The fact that the FSA failed
    to act after it had been alerted means that new investors were allowed
    to invest in the ponzi scheme. This is little short of a scandal.

    At the meeting with investors on 13 August, Mr Davies referred to Ms
    Wadhams as “my contact” at the FSA. This gave the impression that Mr
    Davies has influence over the FSA i.e. that he is untouchable. We need
    a full investigation into this relationship and whether Ms Wadhams has
    relied unduly on mis- information from Mike Davies.

    We question whether Ms Wadhams has acted in accordance with the FSA’s
    own code on conduct for employees. When tens of millions have gone
    missing we are entitled to demand whether there has been corruption.

    We also question the role of BDO which knew in January 2011 that Tiuta
    was insolvent and about the 60 bogus loans. Under FSA principle 11, it
    is meant to inform the FSA of any information which it would
    anticipate that the FSA would wish to be notified about. It was meant
    to report monthly to the FSA. We question whether BDO made proper
    reports to the FSA and whether it was compromised because it was
    hoping to be appointed to the lucrative role of administrator of Tiuta
    and was indeed appointed to the role of administrator of Tiuta
    International in July 2012.

    One wonders what the point of regulation is when everyone involved is
    out to enrich themselves with little care for investors. The two
    operators of the scheme, Capita and Blue Gate failed to exercise
    proper controls over the spending of cash belonging to the Fund or
    repayment of monies to the Fund. Similarly, Connaught failed to do so.
    With all of these parties with their snouts in the trough, they could
    at least have safeguarded the assets of investors. Furthermore, we
    understand that Capita and Blue Gate approved the investment
    memorandum as a financial promotion and yet failed to ensure that
    Connaught and Tiuta followed the promises as to how money was to be
    invested.

    The Tiuta saga is emblematic of the failure of regulation in Britain.
    There were multiple failures by many parties, not least by the FSA
    which could and should have intervened. We demand an investigation
    into Ms Wadhams. It is critical that investors know why the FSA failed
    in its basic duty to protect investors.

    Yours sincerely

    The Connaught Action Group

  7. @Steve, couldn’t agree more, I saw this fund marketed on LinkedIn as an alternative to cash.

    @Nick, the FSA have started to take action with yesterday’s announcement, too late in my view, but it’s a start

Leave a comment