The board of Guernsey-listed investment vehicles pursuing Arch Financial through a £150m legal action have filed a separate claim against Arch chief executive Robin Farrell for damages of £20m.
The board filed its original claim against Arch in January, alleging breaches of duty in the way Arch managed the investment portfolio of the cell companies between July 2007 and November 2009. It also alleged Arch failed to account for “substantial secret profits”. Arch was the fund manager behind the Arch cru range, which was suspended in March 2009 and prompted an additional £38m in Financial Services Compensation Scheme levies on investment and pensions advisers earlier this month.
Costs of compensating Arch cru investors also contributed to the £60m FSCS interim levy for 2011/12 on investment advisers in March, and the £33m annual levy on investment advisers budgeted for 2012/13.
Six of the 18 Guernsey cell companies that launched the original claim filed a supplementary particulars of claim document against Farrell last month.
The latest claim, seen by Money Marketing, relates to investments by the cell companies in Lonscale agreed by Arch and introduced by a company called Foundations Capital, incorporated in the British Virgin Islands. Lonscale was used as the investment vehicle to acquire Club Easy Group, which owned and operated student accommodation.
The claim alleges Farrell “dishonestly assisted” Arch in breaching its duty to act in the best interests of the cells by arranging for Arch and Foundations Capital to each receive £3m as part of the Club Easy deal, funded by the cells.
Farrell denies the claims. He says: “The claim is not prompted by any new factual revelation and is in our view a cynical attempt to cause reputational damage.”