Dubai: A group of Dubai-based investors who claimed to have lost $17 million (Dh62.43 million) are filing a police complaint against the fund management company they invested with and the financial adviser who introduced them to the fund.
Out of the 27 identified investors who put their money into the Montague Morgan Slade (MMS) 1095 Fund, five individuals have filed complaints at Al Rafaa Police Station against Stephen White, the owner of financial advisory firm Expat Solutions and various representatives of MMS in police case numbers 1833/2010 filed by Colin Jobe and 1835/2010 filed by Guy Coghlan and 19/2011 filed by Martin Baerschmidt, while other police case numbers are still being processed.
Jobe and Coghlan are also undertaking legal action against MMS in the US.
However, Dubai Police has not yet issued a warrant of arrest against the defendants, they have not been charged, and the case has not gone to UAE courts.
The prosecution is currently reviewing the case and completing investigations before making a decision on whether to transfer the case to Interpol, according to Jobe.
The prosecutor reviewing the case declined to comment but sources in the prosecutor's office confirmed that the case is under review.
Jobe, 61, a British expat and managing director of car rental Diamondlease, and his daughter Melonie together deposited a total of Dh1.8 million in the MMS Private Clients 1095 fund in 2008 and 2009 through a series of bank cheques paid to the MMS Private Clients FZE account in Mashreq Bank, he said in his police statements, a copy of which was obtained by Gulf News.
"In April 2008 I had a telephone call from Mr Stephen White who said he was a pension specialist with his own company in Dubai and could advise me on better investments to protect my money during the recession. I met White during April and May 2008 several times and he offered me an investment scheme through his company Expat Solutions where my capital would be guaranteed if I invested in it for three years in a private clients fund called the Montague Morgan Slade 1095 for which he was the UAE authorised agent," said Jobe.
Troubles began when Jobe requested a partial redemption of his funds, which he was allowed to do after one year from thestart of the fund, in September 2009 for the sum of $105, 770, he said.
In March 2010, Jobe told White he would go to the police if the money was not paid back and on July 28 Jobe told him he wanted to terminate the investment and withdraw all his money, he said. "He acknowledged my e-mail but still I have not received any money."
Coghlan, a British expat and managing director of PremierFirst Marketing Enterprises, found himself in a similar situation.
As Coghlan's financial adviser, White, along with the Middle East sales director of MMS Gordon Spedding, encouraged him to invest his savings in the MMS 1095 Fund, he said in the police report.
Coghlan invested a total of $269,000 with the MMS 1095 fund and has also been waiting for a year for his redemption payment, he said.
Repeated attempts by Gulf News to reach White for comment found him residing in the Czech Republic. After several phone calls, voice mails, a text message and e-mail to White, he called from a number in Prague on April 7.
Speaking of the allegations brought against him in the claimants' police statement, White said: "This is ridiculous, the investors are aware of the fact that MMS have their monies as they gave them the money in the first place. Expat Solutions was purely an introducer... At no point did Expat Solutions hold any client monies. All monies are with MMS and once all the legal issues are resolved and monies can flow again, we are told redemption requests will be processed," he said in an e-mail to Gulf News.
Documents provided by the investors show a bank transfer from Denis Edward Davis, one of the investors in the MMS 1095 Fund, of €77,500 into the bank account of Emirates FX, a company owned by White, in February 2009 upon White's request. This was after an e-mail from White promising Davis a "great opportunity to get a 30 per cent gain on a trade," he said in a copy of the e-mail sent to Gulf News.
For now, the fate of the investors' life savings is still hanging. "We are doing our best to get accurate information from MMS and have been told that redemption requests will be processed shortly," White said.
Meanwhile, a group of about 20 investors has set up the MMS Investors Group (MMSIS) to litigate both in Dubai and in New York. They are calling on the police and prosecutors to bring the case to Interpol.
Speaking of his departure from Dubai to Prague in May last year, White said: "Unfortunately, due to the actions of an investor in early 2010 who arranged for me to be arrested by Dubai CID, I spent five hours at the police station to answer my case. I was completely exonerated as clearly monies were with MMS and there absolutely was no impropriety, there was no foundation to the complaint and no charges were filed. However, this demonstrated to me that until the issues were resolved, strategically it was too difficult to remain in the UAE. We could however and remain to this day committed to press MMS for the safe return of clients monies from outside the UAE."
Gulf News' attempts to verify that White left the country last year, revealed that he abandoned his company and employees and left without paying his rent.
Devina Gracia De La Cruz, White's secretary at Expat Solutions, said she quit her job in August 2010.
"When I left the company, because I decided not to continue anymore, it was actually almost shut down because [White] was not coming to Dubai any-more," she said. "I didn't have the chance to submit the resignation because he was not in the country."
De la Cruz said other employees and herself waited for White in vain. Attempts to reach him about either renewing her visa or giving her separation pay were unsuccessful.
Another legal issue that the investors raised is the lack of appropriate company licensing. Stephen White said MMS (Montague Morgan Slade) was not registered with the DIFC or the Central Bank and that it had offshore regulations.
The free zone does not have specific regulations in place so that it can deal with fraudulent activity among its registered companies, an AFZA (Ajman Free Zone Authority) official said.
If a client was defrauded by a company within AFZA, they should tell the free zone and send a letter to the company with the complaint. If the company responds to AFZA and justifies their case, it can be resolved with the customer. If there is a bigger legal issue then it goes to court. In case of fraud allegations, the free zone complains to the police. "This happened many times to us," said Maryam Falknaz, a leasing and licensing officer at AFZA. She confirmed that MMS Private Clients was closed since July 2010 and failed to renew its licence which was then cancelled by the free zone.
MMS set up in the Hamriyah Free Zone, according to the Jitendra Consulting Group, a business advisory that help them set up shop there.
Addressing the issue of jurisdiction and responsibility for company activity, Steve Gregory of Managing Partner of Holborn Assets said: "Legitimate funds will have registration in a jurisdiction that may or may not offer investor protection. The prospectus will show if the fund is regulated and by whom. Regulated funds carry investor protection of up to $65,000 in the event of fraud. A registered fund might not be a regulated fund. Experienced investor funds, sometimes known as sophisticated investor funds, usually demand a minimum of $100,000 contribution and carry no investor protection. They are not permitted to be sold to the general public. Both regulated and experienced investor funds will declare who audits the fund, who the custodian is [custodians hold the assets] who manages the fund [an experienced fund management group hopefully] and who administers it. Without these safeguards the fund is not actually a fund."