London Quantum pension scheme – trustees Dorrixo Alliance (Stephen Ward) toxic investments.
London Quantum is a pension scheme whose trustee was a firm called Dorrixo Alliance run by our old friend Stephen Ward. That name will, of course, send a chill down the spines of many pension scam victims. Since 2010, Ward had been involved – either at the top or the bottom of the pond – in numerous pension scams. He eventually decided to “go straight” and declared that Ark was history – although Ark was far from history for his hundreds of victims who are now facing financial ruin.
Ward’s version of “going straight” was London Quantum. He had learned from the Capita Oak and Westminster scams that the value in getting involved in a pension scam comes from the investment introduction commissions. So he set about building a portfolio for the London Quantum victims which was based purely on how much wonga he could earn – rather than what was right, prudent and appropriate for an occupational pension scheme.
So what were the investments and why weren’t they right for a pension scheme?
The Scheme purchased shares in a unitised currency investment fund which traded in the top ten major currencies. The fund was regulated by the Central Bank of Ireland.
The fund was regulated but according to a regulated investment advisor the fund was inappropriate in terms of risk for the Scheme.
The fund prospectus did not specify a predicted rate of capital growth. However the scheme sponsor had previously stated a predicted return of 12%-15% per annum – an astonishing amount by any stands. But in practice, the fund performed poorly and fell over the period of the investment.
Dalriada Trustees (who replaced Stephen Ward’s Dorrixo Alliance and was appointed by the Pensions Regulator) received advice that, due to the high-risk nature of the fund and, notwithstanding the fall in the value of the investment, the Trustee should exit the fund at the earliest opportunity – irrespective of potentially heavy losses.
In 2014/15, the Scheme purchased nine corporate loan notes. Dolphin specialise in the purchasing of derelict and listed German property. The property is then sold off plan to German investors who take advantage of a specific German tax relief which allows for the recovery of renovation costs through tax allowances when purchasing units within a listed building.
The corporate loan notes were for a period of 5 years with no early exit options. The loans were due to be repaid at various dates between 9 October 2019 to 27 April 2020 depending on when the loans were made.
The loan notes had varied rates of return ranging from 12% to 13.8% per annum. All interest is rolled forward and paid at the end of the 5 year period.
This is an unregulated investment and is high risk in nature. There is no guarantee that the capital and interest will be fully repaid at the end of the relevant 5 year period. Dalriada had received advice that the investment is illiquid and inappropriate for the Scheme and early exit is recommended.
London Quantum One Limited
The Scheme had purchased shares in London Quantum One Limited (“LQOL”). LQOL holds rights to a social media application called VIP Greetings which provides personalised messages with the use of celebrity endorsement. The original trustees paid for the LQOL shares from the scheme funds.
The underlying investment in VIP Greetings was long term and no returns were expected for several years. No early exit options exist and there is no evidence of a secondary market to sell the investment.
The returns from VIP Greeting application are highly speculative. These is no guaranteed minimum return or definitive payment date. Investors hold no security over any physical asset.
A number of valuations in relation to the VIP Greetings investment were received prior to the appointment of Dalriada Trustees. The valuations appeared highly speculative. In addition, the valuations were not made at the time that the Scheme purchased the investment.
Dalriada suspects that the investment holds little, or more likely, no value. They are not confident that any return will be made to the Scheme.
Between 2014 and 2015 the Scheme purportedly invested in 17 car parking spaces in a car park near Glasgow Airport. The investment was offered by Park First Glasgow Limited who lease parking spaces to investors, in this case the London Quantum, and then sub lease the parking space back.
The investor enters a lease for a period of 175 years (the maximum allowed under Scottish law). The parking spaces are then sub-leased back for a period of 6 years. The sub-leases can be terminated by Park First after 2 or 4 years, or at any time with not less than 10 days notice if it has found a substitute sub-tenant.
There is a ‘guaranteed buy back’ policy which outlines under what circumstance Park First will buy back the parking spaces. Park First has full discretion in this regard and is under no obligation to buy back the spaces at any point. In short, there is no guaranteed exit option.
The investment offers a guaranteed rate of return of 8% per annum for the first 2 years. To date payment in line with the 8% return had been received. £27,200 was received in February 2015 and a further £27,200 was received in February 2016. No payment was received for February 2017.
This is an unregulated investment. Park First operate the car parking space on behalf of the investor for an annual fee. The parking spaces generate income which is ultimately passed back to the investor each year.
Dalriada received advice that the investment was illiquid and inappropriate for the Scheme and early exit was recommended.
Dalriada have tried to recover the monies paid to Park First arguing that the legal documentation was never fully completed by the previous trustee and that the contracts were ineffective. Park First has rejected this request and is insisting that the contracts are valid and that there is no scope for Dalriada to be refunded.
On 20 August 2013 the Scheme invested in an unsecured loan note issued by the law firm Malletts Solicitors Limited.
The loan note had an investment period of 6 years with an obligation for the note holder to redeem 25% of the note per annum after year 2. No early exit options existed.
The loan note purported to return 8% per annum payable half yearly.
Interest or redemption payment have not been made by Mallets. To date the Scheme should have received payments totalling £3,280.00 as per the contractual documentation.
Loan notes have been issued by Mallets in an attempt to raise funding for an internal ‘legal hub’ project. The loan note was unsecured.
Dalriada contacted Malletts to obtain additional information in relation to the investment. Mallets have refused to explain how the Scheme came to be invested with them and have only provided minimum details
Dalriada had received advice that the investment is illiquid and inappropriate for the Scheme and early exit is recommended. They sent Malletts a number of formal requests to exit the investment however Malletts did not respond.
Malletts Solicitors Limited went in liquidation on 11 November 2016. Dalriada submitted a proof of debt respect of the loan note but the fact it has gone into liquidation suggests prospects of recovery are poor.
On 31 January 2015 the Scheme invested in a corporate bond with Colonial Capital Group Plc. Colonial operates in the distressed US social housing market and have issued a number of bonds.
The corporate bond is for a period of 3 years. No early exit options exist. The bond has a fixed return of 12% per annum. Interest will be rolled forward and paid at the end of the 3 year investment period.
This is an unregulated investment. Dalriada has received advice that the investment is illiquid and inappropriate for the Scheme and early exit is recommended.
Dalriada sent Colonial a formal request to exit the investment. Colonial responded and confirmed that an early exit was not available as Colonial may only redeem all or part of the bonds on a pro rata basis for all investors. It would therefore not be possible to facilitate an early exit for the Scheme.
Colonial Capital Group Plc was then placed into administration on 8 March 2017. Dalriada has issued a proof of debt in relation to the corporate bond but, again, the fact the company has gone into administration suggests prospects of recovery are unpromising.
The investment is in hotel rooms in a hotel development by The Resort Group. The hotel has recently been completed in Cape Verde and investors purchase a right to benefit from the profits and interests of specific pieces of the development. Investors do not own the land nor do they have a charge over it. An investor has simply a right to share in any profit generated from the hotel rooms.
The investment could not be exited prior to completion of the hotel rooms. Now that these have been completed they can be sold on the secondary market.
Before completion of the hotel rooms a guaranteed return is paid. After completion the return is based on room occupancy. The expected returns have been paid to the Scheme.
This is an unregulated investment. Dalriada has received advice that the investment is illiquid and inappropriate for the Scheme and early exit is recommended.
The Resort Group offered to repay the amount transferred to it by the Scheme. That offer was to release one plot every two months from 31 October 2016 subject to completion of legal agreements. Dalriada agreed to this offer and signed the agreements in December 2016.
The Reforestation Group Limited
The purported nature of this investment is that the Scheme has purchased ‘land rights’ to 21 plots of Brazilian farm land that is to be used for growing eucalyptus trees. The investment term is 21 years as it covers three cycles of seven years, which is the projected time period to grow and harvest the trees. The investment purportedly offers returns of 28-32% compounded over each seven year cycle.
The crop cycle of the eucalyptus tree is seven years. Accordingly, with the investment being made in 2014, the first return on any of the Land Rights Agreements (”LRA”) would not be realised until around 2021.
The estimated return after 7 years is £19,000 per hectare, which is a 90% return. There are a number of issues with this development which Dalriada finds concerning and are being investigated.
Dalriada has received advice that the investment is illiquid and inappropriate for the Scheme and early exit is recommended.
Dalriada, through the Scheme’s legal advisers, has written to Reforestation to seek further details regarding this investment and to seek justification for the apparent high level of returns promised.
ABC Alpha Business Centres UK Limited
The investment consists of 11 Bonds over three different series and made between 27 October 2014 and 15 May 2015. The Bonds mature after four years from issue but can be redeemed early after three years (upon six months’ notice) or otherwise with ‘the express consent of the directors of ABC Alpha Business Centres Limited’.
Investment returns depend on the series of the Bond and range from 8.11% to 8.25% with and additional bonus if the Bonds are not redeemed early.
In relation to the two series of Bonds, the Scheme has elected not to have ‘rolled up’ interest. This means that interest is due and payable to the Scheme on a quarterly basis. These payments were made until Q4 2016 but stopped when ABC Alpha Business Centres UK Limited and ABC Alpha Business Centres VI UK Limited went into administration on 20 January 2017.
The Bonds are corporate bonds in ANC UK Limited. ABC UK Limited is the capital raising vehicle for the investments. ABC UK Limited is wholly owned by a United Arab Emirates (UAE) entity, ABC LLC. ABC LLC owns and operates the investment portfolio of real estate investments.
ABC LLC is wholly owned by another UAE entity, the Property Store. The Property Store purportedly provides security of 200% of the value of the invested funds.
Dalriada has received advice that the investment is illiquid and inappropriate for the Scheme and early exit is recommended. An offer was made to buy back the Bonds subject to a 10% reduction. As noted above, interest payments stopped, and the offer was withdrawn when ABC Alpha Business Centres UK Limited, and ABC Alpha Business Centres VI UK Limited, were put into administration on 20 January 2017. Dalriada has prepared a proof of debt in relation to the investment but, as with others above, there is a risk that recovery prospects will be poor.
This unregulated investment consists of a “lease” on 7 car parking spaces in a new office development in Dubai taken out between 1 October 2014 and 17 April 2015. Under the Operator’s Agreement, there is 5 years guaranteed rental income
The Scheme is liable to pay the car park operator, The Property Store, 10% of any income greater than the guaranteed rental income. Once the guaranteed income period comes to an end the Scheme must pay The Property Store 10% of any income that is received from the car parking spaces.
The guaranteed rental income is paid monthly. It had been paid on time up to Q4 2016 when an issue with car park operator meant payments were stopped.
All of the car parking spaces that the Scheme has leased are located at Churchill Towers, Dubai. NCP Ltd owns the freehold of these car parking spaces. The contractual position is not clear due to incomplete documentation however it would appear that the investment operates as follows:
NCP Ltd owns the freehold and has assigned full commercial rights over the car park spaces to Horizon Properties SA; Horizon Properties SA has granted the Scheme a 99 year lease over each of the seven car park spaces; the Scheme has entered into an Operator’s Agreement with The Property Store with no set term for each of the seven car parking spaces.
Dalriada has received advice that the investment is illiquid and inappropriate for the Scheme and early exit is recommended.
An offer was made to buy back the car parking spaces subject to a 10% reduction. The £189,000.00 investment would return £170,100.00 plus the income received (£13,165.20 – 6.97% return). The offer was within a range that might have been acceptable however before it could be accepted Best Asset Management Limited removed the offer from the table. Dalriada is corresponding with Best in relation to the options for the investment.
So, in other words, a load of old rubbish. But then what would you expect from Stephen Ward who has destroyed thousands of victims’ life savings since 2010. He may be a highly qualified “pensions expert”, and the author of the Tolley’s Pensions Taxation Manual, but that doesn’t mean that he should ever be allowed anywhere near people’s pension savings.
The other questions that should be asked are:
- why did HMRC allow the pension scheme to operate in the full knowledge that Stephen Ward was the trustee?
- why has FCA-registered Gerard Associates, who were “advising” the victims not been removed from the register and sanctioned?
- why did the ceding providers (including the trustee of the Police Pension Scheme) not do their due diligence and question the transfer requests?
Mr Ward is still active in the pension’s market, running an EU branch office of another company. You need to do more digging!
Just polishing my spade now…:)
The suggestion that this individual is still actively involved in advice on pensions is deeply worrying.
There were not only the liberation schemes you mention, there was wholesale conveyor belt type pension busting until HMRC closed down that route via places like New Zealand. Many decent final salary pensions, from the private sector and index linked public sector pensions, were cashed in with no view to ongoing planning for the future and no proper analysis of what would be lost.
Any operation employing, or pension product companies working with him, should be avoided.