Frederic Marino, former chief executive of FM Capital Partners (FMCP), and Yoshiki Ohmura, his associate and former senior executive at Bank Julius Baer, have been convicted of fraud in the UK High Court.
The court found that Marino and Ohmura acted dishonestly when receiving secret commissions and paying bribes of over US$25m in connection with a portfolio of assets owned by the Libya Africa Investment Portfolio (LAP), a Libyan sovereign wealth fund.
At the time, FMCP was managing LAP's assets, but Marino defrauded FMCP by conspiring with Ohmura to divert funds away to offshore companies and accounts (in Monaco, Cayman, Seychelles and Dubai) they controlled personally over four years starting in 2009, according to the court. The court found that Marino 'papered up'payments via contracts with Ohmura and their respective companies. 'They used the stolen money to fund lavish lifestyles,' stated the ruling.
The overarching claim was conspiracy to injure and included two major strands. The first related to a series of large investments made by LAP in certain structured financial products offered by Julius Baer and known by their acronyms (GAIN, AMFC+, TRAC and TRAC+). The initial investment in GAIN was $125m. Further tranches of LAP money (previously held at Union Bank Privee) were also invested in GAIN in October 2009 (around $48.5m); and in AMFC+ in May 2010 (around $70m); before both GAIN and AMFC+ were unwound and the assets re-invested in TRAC in November 2010. TRAC was replaced by TRAC+ in October 2011.
In relation to the Julius Baer notes, payments of more than $8.5m were made by Gam Structured Investment (Gam), the bank's investment arm, to Ironfly and Leopard, the source of the funds being money invested by LAP, according to the ruling. 'Of this sum, more than $1m was paid to companies owned by Ohmura, the founder and general director of GAM until late July 2009, and subsequently a trader on his own account,' stated the ruling. These companies were Cayman Island-based Conquest Capital (now dissolved) and Switzerland-based Conquest Financial Partners.
The second major strand of the alleged conspiracy involved payments made to Conquest, Ironfly and Leopard arising from a series of at least 14 one-off, shorter term trades in structured products using LAP's money. These 'secret commissions' payments amounted to over $7.5m. 'Consequently, as well as the claim in conspiracy, claims were made against Marino and Ohmura on the basis of dishonest assistance, knowing receipt and bribery; and claims were also made against Marino for breach of his duties as a director,' stated the court. 'There are also proprietary claims against each.'
After discovering the wrongdoing in 2014, FMCP dismissed Marino for gross misconduct and launched the wide-ranging claims to recover the misappropriated funds, later obtaining a worldwide freezing order over Marino's assets. The court found that Marino and Ohmura had used their positions to gain commissions on long-term investments and shorter structured trades, and then failed to disclose their actions to the company that Marino founded, effectively depriving the fund of the money.
FMCP's lawyers contended that there was 'no sensible commercial rationale' behind the structured product trades and that their corruption 'was motivated by and resulted in their personal enrichment on a grand scale'.
Marino was involved in derivatives, initially at Rabobank and later at Merrill Lynch, Bear Stearns and at JP Morgan, following the Bear Stearns merger with JP Morgan and was responsible for the marketing and sales of structured notes. Ohmura was global head of structured investments group at Julius Baer between 2004 and 2009, and founder of Gam, which was incorporated in Guernsey. Ohmura was a specialist in the design and technical structuring side of structured products business.
It is unclear how much FMCP will be able to recover from Marino and Ohmura, but the company has claimed equitable compensation from both. Further submissions are expected at a later hearing in July.
Click in the link to read the full judgment.
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