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End of the Rainbow

The closer you fly to the sun, the more chance you have of being burnt. No one knows this more than Ivan Massow, whose business has gone bust amid bitter acrimony and conflicting accounts.

On October 5, Massow Rainbow Group went into receivership. Accompanied by recriminations and Byzantine complexity, Mas-sow let it be known that he had managed to buy back his business. Not surprisingly, accounts of what happened, and his firm&#39s demise, differ according to who you ask.

First, some background. Massow was a DBS member until last year in the form of Ivan Massow and Associates. He had carved out a lucrative niche, marketing financial services at gay men, many of whom have been discriminated against by providers.

Its successor, Massow Rainbow Financial Serv-ices, received substantial backing – £1m – from venture capitalists Catalyst. As part of an expansion policy, it merged last year with Rainbow, a rival gay-specialist firm headed by Louis Letourneau.

The new firm, Massow Rainbow Group, had Let-ourneau as its managing director, leaving Massow as non-executive chairman. No money changed hands but Letourneau was given a 25 per cent equity stake.

Massow&#39s description of the events that lead up to the collapse of Massow Rainbow is as follows.

A board meeting was arranged for October 3 at which Massow had expected to hear that a rescue package was about to go ahead. The terms of the deal, as understood by Massow, were as follows. He would put £400,000 into the company and Catalyst would put up £600,000.

Massow says the board waited with nervous anticipation for Catalyst executive chairman Rodney Schwartz. According to Massow he arrived late and proceeded to read from a script, saying he would not answer any questions.

Massow says: “The new offer was only £600,000 – and mainly my money. This did not leave us with enough to clear the PIA capital adequacy rules. The board had no alternative but to stop trading.

“The firm had permission from the PIA to carry on trading as it had a plan to put it out of the breach. But now the directors were scared of being personally liable.”

Catalyst executive chairman Rod Schwartz rejects Massow&#39s account as “completely incorrect”.

He says he is extremely disappointed and frustrated by events and says: “I turned up at the board meeting to put money in as agreed, ready to invest more if necessary.”

Schwartz says Catalyst worked hard to solve the company&#39s problems, inc-luding working on a management buyout that would exclude Massow and trying to place it with another IFA business. He is unwilling to specify which, but Massow claims Towry Law was interested in buying the company. Towry Law will only confirm that they met.

As a result of Massow Rainbow going bust, Schw-artz points out that Catalyst has probably lost its entire investment, adding it is also owed money loaned for legal fees.

The receivers were cal-led in by Barclays Bank. Later the same day, the receiver, Richard Toone of Begbies Traynor, issued a statement: “The certainty of the offer presented by Mr Ivan Massow was attractive, given the nature of the environment in which the business operated and the dangers of employees leaving if the future of the business was not assured.”

In fact, the client list was bought by Sarah Killick, a friend and former emp-loyee of Massow on Mas-sow&#39s behalf. Massow says he was hampered by not having an off-the-shelf company in place but wanted to preserve the name and secure employees&#39 jobs.

Killick was an RI with Harben Financial Services and had set up a company – Felix Financial – to practice as an appointed representative.

Massow says: “Basically the receiver said whoever was able to clinch the deal that Friday to ensure the firm was trading on the next Monday would get the business. We were in their offices until 10pm that Friday to secure the deal. Bids were coming in by phone, including from Cat-alyst and Towry Law.”

Massow says the new firm has licensed his name and retained him as a consultant, where he will deal with marketing. It has bought Massow Rainbow&#39s client list, known to contain some very high-profile figures. The amount paid for the client list is enough to pay off the creditors, bel-ieves Massow.

The regulator has been in close contact with the firm but has been surprisingly helpful, according to Massow: “We are in discussion seven times a day, seven days a week.”

At this stage, shareholders – such as Massow Rain-bow director Fania Stoney, a long-time associate of Massow – seem to have lost their entire investments, leaving them bitterly disappointed.

Massow has been stung by suggestions of sharp practice, saying: “I was a non-executive director and have a right to buy back the company with my name over the door. It was not a ditch and switch.”

Another shareholder, who does not want to be named, thinks both Mas-sow and Catalyst were eng-aged in an aggressive game of brinkmanship.

He suggests Catalyst&#39s offer was smaller than expected and claims the decision to stop trading was taken too quickly. He says Letourneau had made the board well aware of the problems.

He, like Letourneau, was horrified by an ad in the gay press which reads: “Ivan Mas-sow is now back. Having carelessly left his business in the hands of another, Ivan Mas-sow is now back in charge and happy to confirm that it is business as usual.”

For Letourneau, the advert is a prime example of why he could not work with Massow. He believes he has been made a scapegoat and questions who has benefited from what has happened.

Like fellow shareholders, he remains in the dark about what is going happening. And while Letour-neau intends to continue as an IFA, one thing he is sure of is that in his future career he will not seek out the media spotlight.


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